HEADBONE'S CONNECTED TO THE CD-ROM MARKET.

Byline: Thomas W. Haines Seattle Times

Competition is fierce in the world of CD-ROM ``edutainment'' software, where start-ups go head-to-head with the likes of Microsoft and Disney to create multimedia products for children.

But at Headbone Interactive, which has grown from a handful of people in the corner of a Capitol Hill studio to more than 20 filling an entire building floor, they're as confident as ever that a younger company can dominate the market.

``Our goal has been to be the Disney of the 21st century,'' said Headbone President Susan Lammers.

Company officials are hoping more than $4.2 million in outside financing will help get them there.

In a deal announced last week, Headbone sold some company ownership to three venture-capital groups. One of the groups, Applied Technology, includes as a partner Nicholas Negroponte, founder of the Massachusetts Institute of Technology's decade-old Media Laboratory.

The financing comes as Headbone attempts to build on the critical success of its early products. The company has five CD-ROM titles that chronicle the adventures of the GiggleBone Gang and young Elroy and his trusty mutt, Blue. Headbone expects to launch three new titles by the end of the year.

The key, Lammers said, is to create strong, memorable characters and a story that is entertaining and educational.

With the help of different media - animated video, photography, audio - packed onto one CD-ROM, the products let kids learn as they interact with Headbone's characters.

``We want kids to learn about real life and how the world works,'' Lammers said.

So far, companies big and small have struggled to create viable educational multimedia products for the marketplace. While a series or title may receive acclaim from reviewers, it's often difficult to create a dominant presence among the mass of choices that crowd store shelves.

Recently, for example, stock in Edmark Corp. has dropped sharply, as sales for the 25-year-old Seattle-based educational software company have failed to meet analysts' expectations.

Multimedia companies have also had to contend with the expansion of the Internet, where software is often given away for free.

This spring, Headbone put an interactive Elroy adventure on its site on the World Wide Web (http://www.headbone.com). But Lammers said she's confident the Internet will serve only to promote CD-ROM products that customers will then buy at a store.

Lammers would not detail Headbone's sales performance or financial standing. In May, the company teamed sales efforts with Broderbund Software Inc., which will handle all North American retail-distribution rights for Headbone CD-ROMs.

Headbone's Capitol Hill office is staffed largely with a younger generation that itself has grown up with the evolving media experience of MTV and personal computers.

Employee mountain bikes line one end of the hallway. A clothes washer and dryer are available for folks who want to do some chores while they work. The only space enclosed by doors is a small conference room.

The goal, Lammers said, is to create an environment with the energy and creativity of the arts and music communities that surround Headbone's office.

In the long-term, Headbone is betting CD-ROM technology and the personal computers that support it will one-day be the standard learning medium for children everywhere.

The company already has product deals in 15 countries. Elroy and other Headbone characters speak German, and should be fluent in Korean and Japanese within the next several months.