Homing In : PC Makers Think They’re Closer to Better-Selling Home Computer
Ask Susan McDonough why she recently plunked down more than $2,000 for a home computer, and she talks about her daughter. “We have a 9-year-old, and computers are the wave of the future,” says the San Francisco City Hall aide. “We want her to know how to do it.”
That’s just the sort of attitude that Apple Computer, IBM, Philips, Tandy and a host of other electronics firms are hoping to exploit as they launch their latest campaign to tap the tantalizing but elusive home computer market.
After several largely unsuccessful attempts to sell to consumers, personal computer vendors think that they’ve finally found the right formula: powerful but relatively inexpensive systems that are sold through mass merchants and targeted at families like the McDonoughs.
Apple, which today unveils its Performa line of consumer-oriented Macintosh computers, estimates that there are 7 million households with children in America that can afford a computer but haven’t bought one.
PC suppliers aren’t alone in trying to tap scarce consumer dollars this fall. Tandy Corp. and Philips N.V., convinced that many families don’t want a full-blown PC, are marketing $700 computers that plug into a television set and play “edutainment” programs--combining entertainment and education programs--on compact disks.
Sony this week will launch a hand-held device, code-named Bookman, that plays another type of compact disk. Kodak is peddling a new photo CD system for displaying conventional photographs on a TV set. Video game vendors Sega, Nintendo and Turbo Technologies are counting on new compact disk technology to expand their already strong presence in the living room.
And competition and recession aside, PC companies still face a fundamental dilemma as they try to woo consumers: Most of the things that computers do well are things that are done in the office, not in the living room.
“This is still not the home computer market that people thought would develop in the 1980s,” says Tim Bajarin, vice president of Creative Strategies, a market research firm. Computer companies back then assumed that people would buy PCs for entertainment or vaguely defined organizational tasks but instead they bought Nintendo machines.
“The application that would drive the computer into the home was never invented,” notes Bajarin. Now, he says, PC companies have recognized that home computer use is really an extension of what people do at school or the office.
The current wave of home computer introductions highlights some of the lessons that the industry has learned. For starters, the new products feature full-function machines based on the same components as most office PCs, rather than stripped-down models that use yesterday’s technology in order to keep prices low.
The Macintosh Performas, for example, have special software features designed to appeal to families and first-time buyers, but the three models in the new line are essentially identical to the existing Mac Classic II, Mac LC ii and Mac II ci.
Similarly, IBM’s new PS/1 computers, introduced last week, include powerful 386 and 486 microprocessors, large-capacity hard-disk drives, expansion slots and other key features of business computers. They also come with built-in software designed to make them easy to use for computer novices.
“People look at buying computers as an investment, and they don’t want something that’s already out of date,” says John Baker, vice president of Broderbund, a consumer software publisher in Novato. Despite lots of market research, he said, the industry still doesn’t have a precise understanding of the way in which people use home computers, though “there’s clearly a strong interest in software for young children.”
Apple, IBM, Compaq and others are also counting on new retail channels to reach new audiences. Rather than relying on traditional computer stores, they’re looking to consumer electronics outlets such as Circuit City and Silo, office warehouse stores such as Staples and mass-merchandising outlets such as Sears and Montgomery Ward.
“We want (the Performas) to be available where the consumer shops,” says Keith Fox, vice president of consumer markets for Apple USA.
Yet some industry executives say dressing up PCs in consumer packages and selling them in mass channels is far less important than price. And the cost of PCs has come down sharply due to the industry’s ongoing price war.
“It’s great that they’re getting into consumer channels--that should have happened a long time ago--but let’s get real: What matters here is price,” says Scott Cook, president of Intuit Software, a supplier of personal finance software.
Many industry executives and analysts acknowledge that despite appearances, the new consumer PCs aren’t really consumer products in the traditional sense. At $900 and up, they’re still too expensive and they lack the single, obvious function that defines electronics mainstays like VCRs, CD players, TV sets and camcorders.
Tandy and Philips are trying to bridge the computer/consumer electronics divide with their new disk-playing machines. They’ve gone to great lengths to hide a computer in a consumer package, replacing the keyboard with a remote control device and marketing the systems not as computers, but as extensions to the TV set.
Both the Philips CDI system and the Tandy VIS machine offer access to a range of entertainment and education software. Programs include golf games, music videos, story-telling programs for small children and museum tours, displaying full-color images of the exhibits and enabling the viewer to choose which museum hallway they want to “walk down.”
But retailers and software publishers say CDI has been slow to catch on since it was introduced last fall. And most observers agree that the new VIS system faces a similarly tough road.
For $700, consumers who want education programs might find it worthwhile to spend a little more and buy a real PC. And consumers looking for entertainment might be satisfied with a $100 game machine from Sega or Nintendo.
For Susan McDonough, though, the decision wasn’t too complicated. She used an Apple Macintosh at work and liked it. And she wanted her daughter to have access to a real computer.
Besides, having a PC at home also meant that she and her husband could use it for word processing and other tasks.
Most analysts believe that there won’t be a sudden boom in home computer sales but rather incremental growth that builds on the existing demand for “home office” systems and perhaps gets a little boost from intensified concerns about education.
“In the past, people were kidding themselves about being able to throw products out there and move them into the home,” says Harry Henry, vice president of the research firm Computer Intelligence. “Vendors are smarter today. But given where the economy is, it will still be very slow.”
New Choices for Consumers
Personal computer suppliers are making a renewed effort to appeal to non-business buyers. But video game suppliers and other consumer electronics companies have their own ideas about what consumers want in their living rooms.
*Apple Performa ($1,250-$2,500): Consumer-oriented Macintosh computers, some with CD-ROM drives. Comment: Long-awaited products aimed to help Apple fulfill its old promise of providing PCs for the masses.
*IBM PS/1, Compaq Prolinea, Dell Dimension and others ($900-$2,800): Low-cost personal computers that are sold through mass-market retailers. Many feature built-in software and other ease-of-use features. Comment: PC firms are cutting prices and turning to mass-market retailers to sustain growth. But prices remain high for many consumers.
*Tandy Sensation and other “Multimedia” PCs ($1,800-$3,000): PCs that feature sound, color graphics and CD-ROM drives which enable them to play a new multimedia computer programs. Comment: Microsoft-led effort to create a standard for multimedia PCs has bogged down. But Tandy and others are pushing ahead.
*Tandy Video Information System ($700): Plugs into a TV set and plays special CD-ROM disks containing entertainment and education programs. Comment: Special Microsoft sofware system should make it easy to develop programs for the VIS. Zenith will also sell the machine.
*Philips Compact Disk-Interactive ($700): Plugs into a TV set and plays special CD-ROM disks with entertainment and education programs. Comment: Price and lack of good software has kept sales at a crawl since the pioneering product was introduced last year.
*Kodak Photo CD ($350-500): Allows pictures taken with any camera to be put onto a compact disk and then viewed on a TV set. Comment: Kodak sees the technology as a way to preserve film sales. But it may prove more attractive to professional publishers than consumers.
*Sega CD, Turbo Technologies CD ($300): Video game machines that use a CD player for better graphics and video effects. Comment: All the game vendors, including Nintendo, are banking on CD machines to keep sales humming. But will consumers be willing to pay for them?
