JERUSALEM — In the mid-'90s, dozens of local software companies were making CD-ROMs for home entertainment, but most of them disappeared suddenly, as if someone had hit the delete button.

Most of those remaining managed to survive because they met user demand for high quality.

One such company is Compedia, Israel's largest private software producer of children's "edutainment," which is keeping its production down to three or four new titles a year in an attempt to ensure quality.

Its latest release is based on the children's stories of noted Israeli author David Grossman, whose novels and nonfiction works for adults are bestsellers worldwide.

"The market has matured," says Gil Ilutowich, managing director for product development of Compedia. "Today, if you make a mistake on a piece of software, a million dollars have gone down the drain."

Israel's "edutainment" software market, growing at an annual rate of 25 percent, now totals $5 million, and Compedia boasts selling a quarter of that to Israeli households and educational institutions.

Sales are not limited to the domestic market. The firm recently signed a distribution agreement with Brighter Child, a U.S. toy company that sells more than $1 billion a year.

Compedia also made a deal with another U.S. firm, Henson Productions, which has the rights to the Muppets. In a $5 million to $10 million deal, Compedia's Baby Gordi software series for preschool children will be adapted for the global market using the Muppet puppets and will hit stores in September.

Compedia, which began in 1987 with a single computer, was a partnership among Ilutowich, Shai Neiman and Ilan Goldberg. Based in Ramat Gan with a marketing office in Phoenix, Ariz., it has 37 staffers, many of them Russian immigrants.

The company has just released its most advanced piece of software, Harpatkaot Itamar Basafari (Itamar's Safari Adventures), in which it invested two years of work and $1 million. In March, the disk was reviewed in the Jerusalem Post's "Disk-covery" software column, where it earned the maximum five-star rating.

Since its founding, Compedia has sold two million CD-ROMs in 35 countries around the world — including several hundred thousand in Israel.

The Itamar disk, which uses millions of color tones instead of the conventional 256 colors to make the animation much richer, was based on the animals and activities at the nearby Ramat Gan Safari.

It introduces children to the fascinating world of animals and teaches them about their environment, food, reproduction and offspring.

Based on Grossman's Itamar series, the program has been translated into more than 20 languages (including Arabic and Japanese) for export to dozens of countries. The program is the fifth in the series, featuring a red-headed boy hero who appeals to children because of his imagination and variety of adventures.

"The Japanese view redheads as very strange, so the hero in the Japanese version has black hair," Ilutowich said. The programs are sold through a third party, in France, to most Muslim and Arab countries, including Malaysia and the Persian Gulf, with the child hero's name changed to Atmar. In the English version, Itamar retains his red hair, but his name becomes Timmy.

Among the marketing companies abroad are TDK (Japan), Samsung (Korea), Publishing Times (Singapore) and Vitex (the United States and Hong Kong).

Despite the fact that the company has attributed much of its success to its boy hero, Compedia didn't neglect members of the other sex.

The software company is developing a program specifically for girls ages 9 to 16 on the theme of relationships, with a character named Julia as the leader of a band of girls. They go back, as if by time machine, into the '60s, where they meet their parents as teenagers. The program will be put on the market in three to six months.