Insider Q&A: Rosetta Stone CEO on reading, language learning

Rosetta Stone, the Arlington, Virginia-based business known for selling foreign language CDs, is now teaching reading in U.S. schools and revamping its core language business. CEO John Hass talked about the changes with The Associated Press. The interview has been edited for clarity and length.

Q: Rosetta Stone's language courses are widely known. What else does the company do?

A: While we are best known for teaching people a second language and have been doing that for 26 years now, we have a business (Lexia Learning) that we acquired about five years ago that teaches children in K-12 schools, principally in the U.S., to read. That's become the really, really important part of our business.

Q: You have changed your traditional language learning business. Tell me how.

A: We had to change to be where learners are. The way they learn today, they are primarily on a mobile device — it could be their phone, it could be their iPad. Just a few years ago, we were primarily offering language learning through box sets of CDs. If you go back to 2014, we sold about 750,000 CDs. This quarter, we are out of that business. Our offering today is through the web and through apps. It allows us to price the business in the way customers need. So if somebody's looking to refresh a language that they're familiar with for a trip, they could buy a three-month subscription. Or somebody who's looking to become conversational or more fluent in a second language can buy a two-year subscription. As we continually improve the product, we can push those benefits out to learners, which you could never do when it was just a box of CDs. Now the software product is continually being improved.

Q: The stock market has been tumbling lately. Are you worried about the economy?

A: We see the same signs — whether you're looking at the equity markets or the credit markets — as others do. The benefit that we have across the business is that teaching a kid to read, while not impervious to an economic downturn, we think it will hold up very well. (For the language business), we often see even in an economic downturn that people go back to school, they go back to trying to improve to make themselves more marketable to employers.

Q: President Trump's trade policies seem designed to bring businesses back to the United States and reduce reliance on global supply chains. Are you worried that the inward focus will reduce demand for language learning?

A: It's certainly relevant longer term. Personally, I think it's going to be very hard to ultimately disrupt those supply chains. We've become so enmeshed with each other. Our real advantage is helping people outside the U.S. learn English. To the extent (U.S. policy makes) that less attractive, that creates less opportunity for us over time.