The company was formed earlier this year by Funsoft of Germany, a multimedia publisher and distributor, and Britain's Total Home Entertainment, which is part of the John Menzies retailing group.
Funsoft UK supplies retailers with a range of CD-Rom products, including games and educational titles.
Together, the two Funsoft companies will address up to 65 per cent of the European market. And Alan Taylor, Funsoft UK's managing director, said the company intends to close a deal within a few weeks in France to bring in another distributor. The company is also aiming to provide pan-European licensing arrangements for software publishers, relying on Funsoft's German experience as a licensee for major software labels such as Time Warner, Lucas Arts and Novalogic.
"The market is not exploding yet, but it will," Mr Taylor said.
The CD-Rom market is still in its infancy in the UK. But independent analysts suggest it could grow exponentially over the course of the coming year. There were 500,000 CD-Rom players in UK households at the end of 1994; this is expected to rise to as many as 3m by the end of 1995.
There are an additional 2m CD-Rom drives in continental European homes.
Despite rosy prospects for hardware sales, some retailers are still wary. The game cartridge market, where demand plummeted in late 1994, left many retailers with excess stock.
Japanese manufacturers such as Nintendo and Sega announced they would soon be launching new consoles using more advanced software, leading customers to hold off making purchases of existing technology and titles. Sega and Sony have already launched CD-based game machines in Japan, and will bring them to the UK in September. Nintendo is launching a 64-bit cartridge- based console by the end of the year.
"We have to do some educating among retailers who were hurt by the game cartridge problems," Mr Taylor said.
Distributors such as Funsoft supply both specialist and general retail outlets, in what is still a very fragmented market. The specialist game shops such as Future Zone (owned by the ailing Rhino retail company) compete with electronics shops such as Dixons and music stores such as Virgin and HMV.
Funsoft has been working with retailers to help them develop multimedia selling techniques. These include providing special displays and demonstration PCs with CD-Rom drives to allow customers to try out multimedia titles.
Taking in games, educational CD-Roms, and children's interactive titles, the market for PC-based CD-Rom software is expected to be worth as much as £280m in 1995, rising to as much as £1.57bn by 2000.