Beasts from the East.

Electronics and computer companies become competitors for the consumer market.

Marketing Computers, June, 1995.

When Apple introduced the first mass-market personal computer, the Apple II, in 1978, it single-handedly created the personal computer industry--an industry whose main product, the PC, now outsells in dollar value) every other consumer electronics device in North America, including television sets. By unseating even the TV, the personal computer has taken center stage as the world's preeminent consumer electronics device, an eventuality few predicted.

Conventional wisdom saw the PC mainly as a machine for office use, or work at home, but certainly not as a contender for home entertainment on a wide scale. Ironically, home entertainment, in the form of video games, dominated PC use until IBM entered the market in 1981 and positioned its PC as a machine meant for work. Until then the top two PCs, the Atari 800 and Apple II, vied for the title of best game machine. How soon we forget. Well, now home entertainment is back with a vengeance, and it is unsettling the fault lines between consumer electronics firms and PC manufacturers. As each side dips into the other's territory. blurring the divisions between them, a major realignment is underway. Over the next five years, certain PC makers will become bona fide consumer electronics giants, and some consumer electronics firms will become successful personal computer manufacturers. While they come from different histories, with their own assets and liabilities, all share the same longterm ambition--to redefine themselves in the service of the Information Age consumer. Up for grabs is the nature of the device that will serve as the gateway into household management, entertainment, education, shopping and finances. In the process, what we call a PC may become unrecognizable.

The Catalyst: Multimedia

For the moment, PC makers hold an obvious advantage in this struggle--they, by definition, dominate the manufacture of the world's most popular consumer electronics device. But a closer look at why the PC gained this position hints at the increasingly important role of traditional consumer electronics. The technology that spurred 1994 holiday-season PC sales to exceed by 31 percent the previous year's sales is the CD-ROM drive. An appendage to the PC, built by traditional consumer electronics companies, the CD-ROM provides enough storage to offer consumers multimedia entertainment. Most importantly, multimedia doesn't imitate television or the stereo, but stands on its own as a new medium.

The demand for multimedia entertainment also propelled Packard Bell into second place last year, behind Compaq, as the most successful personal computer company in terms of units shipped. In 1992, Packard Bell introduced the first PC bundled with a CD-ROM drive, a prescient move. Today, Packard Bell controls 43 percent of the home market, 24 percent ahead of its nearest competitor, IBM. In fact, multimedia remains popular, pushing the growth of PC sales to the home to 21 percent a year, compared to 9 percent on the corporate PC side. But while this growth is impressive, PC makers have their own Achilles heel, which consumer electronics makers are well suited to exploit.

The Maladjusted Home PC

"The traditional PC manufacturers are not used to