Rosetta Stone 2009 Annual Report Download - page 11

Table of Contents
web-based service offering that includes socialization features and dedicated language conversation coaches.
Increase Our Focus on Sizeable Non-U.S. Markets. We generated approximately 8% of our revenue in 2009 from sales outside the United States.
According to the Nielsen survey, over 90% of the $83 billion spent in 2007 on consumer language learning products and services was spent outside the United
States. We therefore believe that there is a significant opportunity for us to expand our business internationally utilizing many of the successful marketing and
distribution strategies we have used in the United States. We have established subsidiaries in the United Kingdom, Japan and Germany as well as a branch
office in South Korea to develop our international business. In addition, we are exploring opportunities to expand our presence in Asia, Europe and South
America. Because our solutions do not rely upon translation from the target language into the learner's native language, they require only modest localization
to be used by learners from other native language backgrounds, and thus we believe that we can efficiently scale our business internationally.
Products and Services
We offer language learning solutions in 31 languages under the Rosetta Stone brand. Each language currently has up to five levels, with each consecutive
level representing a higher level of proficiency. We sell each level as a standalone unit, although we offer a price incentive to customers to purchase all
available levels of a language as a bundle, where that option is available. In August 2007, we released our Version 3 solution for ten of our best selling
languages. We released an additional four languages in Version 3 in March 2008 and we released an additional seven languages in Version 3 in September
2008. In May 2009, we released Levels 4 and 5 in English (US) and Spanish (Latin America) as well as an additional four languages in Version 3. In July
2009, we released Rosetta Stone TOTALe, our new web-based service offering that includes a component of dedicated language conversation coaching. In
November 2009, we released Levels 4 and 5 in 4 additional languages in Version 3. As of December 31, 2009, all Version 3 languages are sold with Audio
Companion and all Version 3 languages, except for Latin, are available with Rosetta Stone TOTALeweb-based services.
We have four different editions: personal, enterprise, classroom and home school. Each edition utilizes the same core software product, but includes
different ancillary features as follows:
Personal Edition—This edition is targeted to individual consumers and contains the core software product we use for all editions.
Enterprise Edition—This edition is targeted to businesses, armed forces, government organizations and not-for-profit entities and can
accommodate organizations of any size, from individual learners to entire global organizations. This edition includes management tools that
provide easy-to-use administrative and reporting functionality. These tools deliver easy-to-read reports and graphs that track learner activity,
progress and scores, thereby providing organizations with key information they need to measure return on their language learning investment.
Classroom Edition—This edition is targeted to language programs in primary, secondary and higher education settings and is scalable to
accommodate a variety of implementations, from individual schools to district-wide programs and universities. The classroom edition is designed
to be incorporated into a teacher's overall language-learning curriculum, complementing in-class teaching and enabling individualized self-paced
learning outside the classroom. The classroom edition includes a learner management tool, the Rosetta Stone Manager, which provides easy-to-
use administrative and reporting functionality. This tool enables teachers to plan lessons and generate reports and graphs that track student and
classroom activity, progress and scores.
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