Mattel's acquisition of The Learning Company

In 1999, toy company Mattel would expand to the software educational market by purchasing The Learning Company for $3.8 billion, which ended up with one of the worst acquisitions of all time. Within one year of the purchase, The Learning Company lost $206 million. By 2000, Mattel was losing $1.5 million a day and its stock price kept dropping. The Learning Company was sold by the end of 2000, but Mattel was forced to lay off 10 percent of its employees in order to cut costs.

Background
In 1996, toy company Mattel founded Mattel Media as a way to expand to the software and video game market. On December 13, 1998, American toy company Mattel announced that it would acquire the American software company The Learning Company (TLC) for $3.8 billion. TLC was well-known for its educational titles such as Reader Rabbit, The Oregon Trail, and Carmen Sandiego; as well as games such as Myst and Prince of Persia. The purchase included TLC's publishers such as Creative Wonders, SoftKey, Mindscape, Palladium Interactive, and Broderbund.

On May 7, 1999, shareholders of Mattel and TLC voted to approve the merger. The merger was completed on May 13, 1999, and TLC was moved under the renamed Mattel Interactive (ex-Mattel Media) division of Mattel.

Mattel had lost $82.4 million in the year of 1998 because of several problems with the acquisition, including a loss of a key distribution deal and a high return of unsold products from retailers. Mattel was estimated to have lost as much as $3.6 billion from its purchase.

In the fourth quarter of 1999, Mattel reported a loss of $184 million, reportedly due to poor sales and inventory problems. Michael Perik and Kevin O'Leary, the co-founders and heads of TLC, left the company that year.

Aftermath
In May 2000, Mattel announced to sell off TLC, and in September, they sold them, alongside the assets of Mattel Interactive to The Gores Group. In April 2001, Gores reported that it had turned a profit on TLC within 75 days of its acquisition. Instead of acquiring the company with cash, Alec Gores, the company's founder, agreed to give Mattel 50% of any profits and part of any sale of TLC.

In 2001, TLC sold Mindscape to former TLC executive Jean-Pierre Nordman. The company also sold its gaming division GAME Studios (including Red Orb Entertainment, Myst, Prince of Persia, and Petz, alongside other ex-Mattel Interactive assets) to Ubisoft. Gores subsequently sold most of the other holdings – including the edutainment series and the brand name The Learning Company – to Irish company Riverdeep Interactive Learning, which later became Houghton Mifflin Harcourt.

After this move, Mattel would go on to simply license their IPs to other publishers, including Vivendi's Knowledge Adventure for some of the female-focused franchises like Barbie, and THQ for Hot Wheels.

In 2021, HMH sold its book division, as well as some of TLC's educational game IP's (Reader Rabbit, Carmen Sandiego, and Oregon Trail), to HarperCollins.