The Learning Co. CEO praises cheap PCs and DVDs

CHICAGO -- Consumer software makers should be jumping for joy over the falling price of hardware and the increasing popularity of DVDs -- but the promise of Internet distribution still presents challenges.

Those were some of the messages from Kevin O'Leary, CEO of The Learning Co. (NYSE:TLC), the world's second-largest consumer software maker, at the Software Publishers Association annual meeting here. "Every time there's a change in pricing in the hardware, we should get excited," said O'Leary, who predicted a "bloodbath" this fall as computer makers battle it out over prices. O'Leary thinks prices for a PC with a 14-inch monitor will fall to $600 in the coming months. "It's a marvelous thing that's about to occur," he said.

DVD market may drive profits
Low-cost will make PCs more accessible to consumers, who in turn will buy more software, O'Leary said. He cited Forrester Research figures showing that the average household income for current PC owners is $50,000; yet, those intending to buy a PC have an income of just $27,000.

O'Leary also predicted more consolidation in the industry and increased government regulation if the industry doesn't monitor itself properly.

'Every time there's a change in pricing in the hardware, we should get excited.' -- Kevin O'Leary, CEO of The Learning Co.

He's eyeing the DVD market as one of the biggest profit drivers in coming months. He said software makers should look for opportunities to bundle or promote their products along with popular titles. For example, he said, a company could create a campaign where characters from one game pop up on the screen while the child is using a different product.

Credit card and a mother
"To unlock it all you need is your credit card and your mother," O'Leary said. In the future, O'Leary said Internet distribution of software -- a highlight of the SPA conference -- is promising, but it's not practical on a widespread basis yet. "We've had a significant challenge making our products Internet-ready. It's not cheap."