Background: On May 19th, 2000, termination of further development of UFT was announced (details). Accepting a prior invitation to address a joint meeting of UFT user groups sponsored by the RUG of Arlington, Mr. Armstrong appeared at the joint meeting on May 30 at the National Genealogical Conference.
Meeting of UFT/ROOTS Users sponsored by the RUG of Arlington, VA, May
31, 2000 at the National Genealogical Society Conference in Providence,
Dick Cleaveland: I'm Dick Cleaveland, and I welcome you all to this ad hoc meeting. Iíd like to introduce some other people. Just sitting down here and about to stand up again is Ken Macomber, President of our existing ROOTS Users Group of Arlington, VA. Theresa Reed, Vice President, sheís past President. Thatís about the only officers we have here. Iíd like to know how many people here are from the Arlington group. Raise hands. OK.
Anybody from the west coast here? Portland? Yeah! Where
are you from? Walnut Creek, CA. Somebody over here? Seattle.
Portland RUG? Massachusetts! Anybody here who arenít members?
You might consider it depending upon how things are going, of course. [Laughter]
How many people here started with ROOTS III, IV, or V? Moving back. How about ROOTS M?
I have a message from Howard Nurse. I sent him a note. He says ďThanks, Dick. I will always have fond memories of our great customers and the good times we had, and Iím proud of what we did collectively to advance the state of the art of genealogy and genealogical computing. It is satisfying to see many of the ideas which first appeared in COMMSOFT products finally making their way in the current software. Please give everyone my best and let them know how much we miss them all.Ē Right now Howard, to the best of my understanding, is working with databases in FM stations, something entirely different from genealogy software. [Later: I was wrong: Howard is chairing the Board Of Diectors for a local FM station, and working on a new separate project not associated with genealogy. Sorry, Howard!]
OK. The situation we find ourselves in right now is that Genealogy.com, the holder of Ultimate Family Tree, has elected to cease further development of UFT even though there are some outstanding bugs in the program. Incidently, right next to that Viewgraf machine there is a stack of papers which have a list of the outstanding bugs that Iím aware of. I know thereís more, but I donít have access to the whole list, of course. Weíll be talking about them. They said they will continue support for the coming year. Iím not at all certain about the definition of support. We will have a discussion - but first of all, weíll have a Genealogy.com representative here. In fact, the president is with us tonight, and after discussion of the next presentation, weíll discuss a little bit about what RUG plans to do as an organization given that you as individuals also have a decision to make about whether you want to stay with UFT or transition to some other program, or both, I guess. And then, later on, weíll have a representative of the forerunning alternative program, TMG, come in and describe what he knows about the current status of data transfer between UFT data and the TMG data. And then after that weíll talk a little about what RUG is planning to do from an organizational standpoint. Our organization. I know some other organizations are in the same boat and have suggested to me that they will probably go through the same process that we are going to go through.
So without further adoo, I think Iíll introduce Mr. Rob Armstrong, president of Genealogy.com who is here to bring good words to us.
Robert Armstrong: Thank you for being here tonight. I wish it could have been under better circumstances, but I am here to try to talk a little bit about a couple of different things. First of all, I do want to talk a little bit about the decision that we made and try to give you all a little bit of background of what led to that decision. I want you all to know that it was an extremely difficult decision for us and not one that was made arbitrarily or made on a very short moments notice. Itís been a decision that we have been looking at and contemplating in terms of the direction of UFT and where we were going with it for as long as Genealogy.com which was previously the Banner Blue Division of Mattel, which was previously the Banner Blue Division of The Learning Company, which was previously the Banner Blue Division of Broderbund, as long as we have been involved with Ultimate Family Tree.
I want to start off with a little bit of an analogy. Iím a big sports fan. I listen to a lot of Sports talk radio. Sports-talk radio is dominated by people who want to suggest what a sports team ought to do in order to make itself into a better sports team, and that can be very lively and very entertaining discussions. I know personally, Iíve got seven or eight suggestions for what the Utah Jazz can do to make itself into a better basketball team. But one of the things that they always say in Sports talk radio is that the thing that will kill a talk radio audience in a very short period of time is to start talking about the salary cap, because people remember number one find it very boring. Itís not a very interesting topic. It gets in the way. It is very problematic in terms of doing the things that youíd like to be able to do. What I want to do is talk a little bit about some of the business that has gone on behind Ultimate Family Tree to help you all understand what led us to a very difficult business decision in terms of making the decision to not continue forward. Hopefully so that youíll have some context for understanding what we did. I hope it doesnít come across as being too boring in the context of talking about the salary cap because I think the history is interesting, but still I think it is important for you to understand that.
The first thing that you might find interesting is that the original decision to acquire Palladium which at the time owned Ultimate Family Tree was not initiated or driven from the genealogy division of what at that time was The Learning Company. It was actually a decision that was initiated and undertaken by the management of the Learning Company. They did consult with the genealogy division of The Learning Company about the acquisition but it was neither our initiative nor was it our decision to make that acquisition. There are a lot of reasons why we at that time were actually pretty content to continue to compete with Palladium in terms of the selling of Ultimate Family Tree. Part of the reason for that is because at that time Ultimate Family Tree was not being sold at retail in a way that was sustainable and profitable. And we knew that. We could see that, based upon what we could see that Palladium was doing. Now I want to explain both of those two aspects to it because a lot of people were not that familiar with the dynamics of the software business particularly at retail. So you can understand the conundrum that Palladium faced.
In order for a product to be carried in a store like Samís Club, or Costco, or CompUSA, that product has to sell a certain number of units per store per week. That is referred to as the hurdle rate. So, you either make the hurdle rate and you stay in, or you miss the hurdle rate and youíre out. Itís that simple. Thatís why a lot of times if you shop at Costco, I do personally, if you shop at Costco, youíll see products that appear and then, also, theyíre gone, and the reason why theyíre gone is that they were not meeting the hurdle rate. So Costco will give products a chance. Theyíll bring them in, and they do that, by the way, on a special deal where Costco gets a very good price on the units, theyíll bring it in, theyíll sell it, if it sustains the hurdle rate, then it continues. If it doesnít sustain the hurdle rate, then it disappears very quietly. And so, when you see a product like that, you generally know, - you now know that thatís what is going on. Itís being tested. You also remember that during that period of time when Palladium was involved, routinely Ultimate Family Tree was being sold for a list price of $49.99 with a $40.00 or a $45.00, or in some cases a $50.00 rebate being associated with it. Now, Iím here to tell you that I ran the math through, and for a $49.99 product with a $40.00 rebate on it, the software manufacturer loses $8.00 a unit. OK. You lose $8.00 a unit. Now, who makes money? The store. So the storeís very happy, - they love this, because they get paid their money but we pay them their money, then we pay you back money. So as a manufacturer of software, youíre losing money on every unit that you sell.
The other problem that was going on is, - this is adding details that some people may not want to know and some people might, is that if you have an ad that runs in the Sunday circular that advertises a particular product, like CompUSA in most major metropolitan areas, the Sunday circular will have some products that are listed. As a software manufacturer you pay to be listed in there. CompUSA doesnít make the decision this is a hot product, weíre going to list it. You pay them money, they put you in there. You donít pay them money, youíre not in there. So that costs you more money which means you lose more money per unit. The other thing that most people donít know is that at a software store at the end of the aisles are the endcaps. You donít get on the endcap because youíre doing well. You get on the endcaps because you pay for that. So as a software manufacturer, if you want to be on the endcap, you pay for that. Now you do that because it gets you more visibility and it moves units, and you know we do those kinds of things. If you remember back to that period of time, Palladium was doing all of that stuff. A lot of that stuff on a regular basis, - $50.00 rebate, on endcaps, in Sunday circular. Youíre losing a lot of money on everything youíve ever sold.
Now the choice was, and the alternative that Palladium had at that point was to say, OK, weíll stop all of that. Weíll scale back. We donít have to stop completely. Weíll scale back so that we can make money. The problem was that every time they did that, you can see it -- thereís a company called PC Data. They publish unit sales. You can see their PCData data [?]. The product could not sustain itself at the hurdle rate it needed to, without losing money. So Palladium was in a box. They had to decide: would they keep selling it losing money on every unit or do we drop that and then weíre going to be kicked out of places like CompUSA, Costco and so on, and so forth.
And then they had another problem. This was further complicated because this was right at the time, youíll remember back, that Sierra had picked up Generations and was starting to push that. So now all of a sudden, - put yourself in the shoes of a buyer, youíre the CompUSA buyer, youíve got the Banner Blue Division of at that point The Learning Company walking in with Family Treemaker, youíve got Generations - Sierra people walking in with Generations, youíve got Ultimate Family Tree walking in from Palladium. Youíre playing these people off against each other because most of these stores made the decision they only wanted to carry two different brands. So youíre playing these people off against each other. Youíre getting really good deals. Itís really really tough. The hurdle rates are high, - pushing the hurdle rates up. So this was a very difficult position to be in. Either that Ė this is certainly a lot of the factors that led Palladium to be in a position where they had to sell. They had to do something. The business, particularly the genealogy business, their business was not sustainable and not profitable. So the folks in The Learning Company management made the decision to acquire Palladium. In that context, they gave the Banner Blue Division of the Learning Company responsibility for Ultimate Family Tree. So, we got responsibility for the product.
I remember very clearly some of the first meetings we had with Palladium people and I can tell you in good conscience that we were the only group that took over a group within Palladium that did not in effect lay off the entire group. We kept most of the employees on board. They were working at that time line of 32 bit version of Ultimate Family Tree. They were developing a new 32 bit version. We came in, we met with those people, we wanted to see what they were doing, where they were going with the code base - they were deep into the development process. They were supposedly within a month of the release of the first beta. They were making great progress on it. They were a couple of hundred thousand dollars over budget on the development costs. It was running months behind schedule. But they were convinced that were past all that, it was now on schedule. We looked at the product. It was very exciting. There were a lot of differences in the U.I. That concerned me. Because I was worried about how you all would react to that, with the U.I being changed. But it did move them off the FoxBASE sixteen bit code base, which was great and that was very, very valuable. But the problem was, we agreed to it, we carried the cost of doing it, we carried the employees to push that forward; we ran that development for four months. At the end of that four month period of time we were suppose to be at beta, at the end of the first month. At the end of that four month period of time, we still were not at beta. I sat down with the development team, which were all Palladium employees, and said. ďJust tell me when is it going to be done? I just need to know when is it going to be done?Ē Couldnít define that, were not sure, the deal that was cut was done with the developer, who was doing the developer work, put a lot of financial burden on the developer. For overruns, the developer didnít carry all of the burden for overruns, but he carried a lot of the burdens for overruns. We were deep into overruns. He saying that he was going to go out of business, couldnít support the overruns that were occurring. So we stepped back and said itís just not going to happen. It canít happen financially for us to get this product across the finish line. In the projections that are there in terms of sale for the product, we would not be able to make money. And so again we are a business - I donít apologize for that - our goal is to make money for our share holders as well as serve the interest of our customers. We had a difficult decision to make, we gave it a run but it just didnít come together. And we ultimately had to make the decision that we had to kill that 32 bit version.
Now the problem was that at that point in time we continued the massive marketing support for the product in terms of rebating, end caps and so forth, because we wanted to keep the product alive in the interim. We wanted to make that happen, because we wanted to substitute the 32 bit version when it got done. When the 32 bit version got killed we had to step back and say, ďO.K. now we got to make this product be its own product. Itís got to be on itís own. There is no 32 bit version coming, so we have to do something that can keep the product alive. Because I want you all to know, it has never been my desire to not in my interest why in the world would I want to kill a product that has a great user base that has been very loyal to it. We tried like crazy to come with a way.
So weíve got another product called Family Origins. Family Origins very successful product that has been very successful for us. Itís not sold retail. The way that Family Origins sustains itself is by itís upgrades. They release upgrades. The user base supports those upgrades in a very strong and significant sort of way, and that has allowed Family Origins to thrive, even though it is not sold retail. We tried to pursue that path. I sat down with the folks we still had on board from Palladium and I said, I want you guys to define a nice release, a nice upgrade thatís got good basic functionality in it. I want you to fix a lot of bugs, because we knew there were a lot of bugs in the code base that we inherited from palladium. So I want you to fix a lot of bugs I want you to add some nice features, I want you to put that together, and I want to sell that as an upgrade. So, they went about that, they did that, and they released it. Unfortunately, the upgrade sold very poorly. Finally, we stepped back and said this not going to work.
The problem we had at that point in time, I am giving you some chronology here, is that about that point in time, we finished the negotiations that as the Banner Blue division, the genealogy division of Mattel to spin out. We became a separate entity called genealogy.com. Mattel remains an investment of ours, but nobody is a majority owner and we are focused on the internet. Now, I want to make sure that everybody here understands that in my opinion, that change had no bearing on the decision about UFT. The challenge that UFT faced was that we were struggling to find a profitable, sustainable business model that we could continue to pursue with it, in order to keep it going. The problem is that in the process of spinning out of Mattel our ownership, relationship, and so on and so forth.... Dick made the comment that we are the owners of UFT. It is not that simple. We have a lot of contractual relationships back to Mattel. Mattel has some ownership rights, some ownership levels in some of these products, as well as us having some ownership rights and levels on some of these products and so the situation became complicated. For example, even at this point, it is important for you all to understand, that genealogy.com does not sell Family Tree Maker retail. Family Tree Maker is sold retail by Mattel interactive. They have the right to do that. I do not have the right to do that. I do not have the right to sell Ultimate Family Tree at retail. Mattel interactive has the right to sell Ultimate Family Tree retail. That is part of the deal we cut with them when we came out of them to become a separate company. So now all of a sudden, the relationship over Ultimate Family Tree became more complicated, because we were now in a contractual situation with a separate third party that had to agree with us in terms of what we wanted to do. We have gone about the process of working through that.
I think it is important for all of you to understand that throughout this period of time, up until we spun out, that a lot of the functions related to the support of Ultimate Family Tree were being performed, not by personnel related to the Banner Blue division of the Learning Company, but by Mattel employees. That included most technical support, all product fulfillment, all customer service issues. Very often Mattel was using employees, who frankly knew nothing about genealogy, knew nothing about Ultimate Family Tree, knew nothing about Family Tree Maker, knew nothing about any of these products. The way that you do support in those kinds of environments for example, is very often you have employees who are basically looking things up on a screen. If they can get the answer off the screen, they can give you the answer, if they donít get the answer off the screen, then they try to refer you to someplace else, they try to get your answer. All of that support, all of that activity was going on inside of Mattel. It was very disappointing to me, during that time period, to see the way a lot of customers got handled, cause they didnít get the answers that they needed. I donít want to jump too far ahead, but I want to tell you all that we have taken steps as a company since we got outside of Mattel to get out of that environment, and Iíll talk about that in a minute.
But that was one of the big, big challenges that we had. After the spin out, we remained with the contractual obligations - Iíve talk about the fact that Mattel still has the decisions of what to carry. As an example of that, even though we have made the decision to not continue to development on Ultimate Family Tree, Mattel has the right, and has made the decision that theyíre going to continue to sell Ultimate Family Tree for some period of time. Thatís their decision. They can make that decision, and thatís fine. Now personally, I donít think - I donít have a lot of problems with that decision for a couple of reasons. The first is that I happen to think Ultimate Family tree is a very good product. I think someone who buys it can get a lot of value out of it. A lot of people believe that the way that Ultimate Family Tree goes about the process of doing genealogy is a better way to do it than the way that for example Family Tree Maker goes about it, and in that context, people who buy that product I think can get a lot of value out of it. Itís also true that an awful lot of products that are sold at retail today, the developer has no intention of upgrading anyway. If you walk up and down the store and look on the shelves in CompUSA, youíre not going to know that. Because in many instances those developers donít come out and make a statement to effect that we made a statement here. They just stop development on it. And it just sits there and sells, and sells and sells. So thatís kind of the nature of what happens. And in that regard, I think that somebody who buys Ultimate Family Tree today is getting a great program that they can get a lot of value out of and can do a lot of good work in terms of their genealogy.
Another area where our relationship with Mattel has changed is that when we first came out of Mattel we continued to rely on them for those services I mentioned earlier simply because we didnít have them ourselves, particularly order fulfilment, customer service, and technical support. We have just in the month of May, switched all of those issues out of Mattel. So it used to be when you picked up the phone and called customer service person, you were in effect talking to a Mattel employee even if you were talking about Ultimate Family Tree or one of the data CDís or one of our on-line products. Today when you call that number, and speak to somebody, if you are calling the right number, which is the number we have always published, you should now be reaching the employee who is working under our direction. And we believe that this is going to enormously improve technical support. We believe that it is going to enormously improve customer service, order fulfillment, those kids of issues. They should all get a lot better. Now we will ask your patience. We have hired a lot of people in the last month and a half to get them on board up to come up speed and we are training them like crazy. Because we had to replace all the people from Mattel who used to do this for us and so we have a lot of people that are learning, but I believe you will see the support of UFT get much better in the course of the next few months. Our intention is to support this product as long as there is a meaningful customer base out there using it. This may be surprising to some people in here, but I am not anxious to lose you people as customers. You are very good customers. We appreciate you as customers, we want to try and serve your interests as customers, but we have to do that in the context of the overall business equation which includes customers of other products, customers of our on-line products and our shareholders as well.
Couple of more things and then I will take questions from you all. We did recently reach an agreement with Mattel which allowed us to make this announcement. Which is why we have gone ahead a made this announcement. In a lot of ways in making this announcement, I personally have a lot of concerns. My first concern that a lot people would, to a certain degree, misinterpret the ramifications of the announcement. Clearly this doesnít make a product that is working on your hard drive not work. To the extent that itís there, itís working, and I know in many cases a lot of you have entered not just thousands, but tens of thousands of people, that product continues to work. We will continue to support you in that product. What I am glad to see developing on the message boards - it know it will surprise a lot of you - but I read them - what I am glad to see is that there is a train of thought developing on the message boards about a studied considered approach to ďWhere should I go?Ē - ďWhat should be my next steps?Ē - ďWhere should I go?Ē I enjoyed reading a posting by a fellow who talked about the fact he uses four different programs. He switches back and forth because each of them has their strengths and their weaknesses and that works for him, and thatís great. We knew in making this decision that a lot of you would switch to other products. We knew very well that probably most of you will not switch to a product like Family Tree Maker. It doesnít work the way you are used to working. You are going to look for a product that is works the way you like to work. We knew that going into it. We still felt it was better to get the news out, to make it available, than necessarily not make it available. We were frustrated that it took us so long to be in a position to make the announcement as it did.
Let me conclude my introductory remarks by just saying, I hope that you helps you understand a little bit better where we are coming from. I know doesnít make it any easier of the decision that you agree with. I am not here to get you all to believe that we did the absolutely right thing. We are trying to do the right thing. We are people. We make mistakes. I think we have done the right thing here for all the interests we have to serve, although I know thatís very difficult for all of you. We did make the offer of extending two free months of genealogylibrary.com for anybody who is an UFT user. I know it some cases that is not of value to people. We tried to do something that we thought was of value to you, in order to say ďThank you very much for being a customer of ours.Ē We do appreciate the business that you have given us.
There have been other questions, very briefly. There have been questions about the UFT web site. It is our intention to maintain that web site indefinitely. Rhondaís Column and Myraís Columns are still going to be there; we are going to maintain that. We are going to maintain the user home pages. We have no desire or interest to cease that.
So our intention is to carry forward in terms of the support. There has been a question about how long that support will last - that support will last as long as there is meaningful customer use of the product out there. We have no intention or desire to put you all in a position in which we are just walking away from you. We want to try and keep you as customers to the extent that we can, even in line with the decision we have had to make. I will close by making the comment, I do believe that the future of genealogy is on the Internet. And we are very focused on trying to bring not just a variety of data resources to the Internet, but a variety of different tools and capabilities that will help you all do your genealogy as efficiently and as effectively as you can in an on-line roll, because that is where I believe the world has gotten. So to that end we hope that we will be able continue to provide you with all sorts resources, both data as well as tools and capabilities that will assist you in being able to arrange your genealogy.
I do want to take questions from the floor.
[To continue with the question and answer period, go here.]