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No other industry works quite the same way. Only in specialized areas related to computer technology, such as compact disc players, have consumer electronics prices plunged to the same extent.
  technofile
Al Fasoldt's reviews and commentaries, continuously available online since 1983

Flashback: Computer pricing, 1987


By Al Fasoldt
Copyright © 1987, The Syracuse Newspapers

   Obviously, my optimism about computer prices shines through this column like a searchlight, but it was aimed in the wrong direction. Computers became cheaper, but they turned immensely more powerful at the same time. The result: Prices failed to plunge the way I foresaw.

   When my son was 9 or 10, we talked for hours one day about how computers worked. I tried to explain about binary arithmetic, and then discovered he'd already learned that in school. I found out he knew just about everything that was important to know about home computers.
   Except one thing. He didn't know they were made of sand. As it turned out, this gave me a big advantage. I knew that sand was cheap. And I knew that as soon as the people who made computers and chips could get their act together, computers would be real cheap, too.
   I told him that some day home computers would cost no more than $1,000. And anyone who had enough money to live comfortably would be able to afford a computer. And that anyone who was a writer, like I was, would be able to store a lifetime of work on a single hard disc drive.
   And a drive that would store all that work would cost no more than a new Volkswagen.
   In the decade since that conversation, I learned much more than I could have realized about the way free-market forces work, especially in regard to personal computers. They are now far cheaper than I had ever expected, and prices are continuing to go down.
   The reason for this is still the same. They are made of sand. In a literal sense, of course, the chips that make up personal computers are indeed made of sand -- of silicon, one of the most common elements on earth. In a figurative sense, another kind of sand fuels the computer industry -- the shifting mixture of technology and taste, always spurring engineers and marketing experts to improve designs and renew consumer appeal.
   No other industry works quite the same way. In the consumer electronics business as a whole, prices have also fallen, but not to the same extent. Only in specialized areas related to computer technology, such as compact disc players, have consumer electronics prices plunged to the same extent. This is all the more amazing when you consider what has happened in other industries. Take the automobile business, for example. Here is a comparison of typical prices of 10 years ago and today, using an Apple II personal computer and a Volkswagen Rabbit (these days, a Golf):
   Computer with standard peripherals -- 1977 $4,000; 1987 $800.
   Auto with normal options -- 1977 $4,500; 1987 $11,000.
   Of course, today's Apple II computer is much improved over the first model, and so it is not only cheaper but better. If we take inflation in account, the original Apple II would cost $7,163 in today's dollars. The actual cost of the current version is one- tenth as much.
   As striking as the example of the Apple II's price plunge is, it is conservative in comparison with other price changes. In less than 10 years, the retail price of a 64-kilobyte Atari 8-bit computer and its peripherals has fallen from $4,000 to $250. Computers that are no longer being made offer even more dramatic comparisons; some that cost many thousands of dollars a few years ago are now being sold for a few hundred dollars.
   The back pages of Computer Shopper magazine, this country's largest journal of consumer-oriented computer news and reviews, tell the story of the latest price cuts. One retailer offers a Xerox 820-II computer complete with monitor, keyboard, hard disc drive and Word Star word processing software. It is a model that was designed just a few years ago to sell for up to $5,000. The current price: $349.
   Another retailer offers a Sharp PC 5000 laptop portable, which sold for $2,000 a year or two ago. The price now: $199.
   And that hard-disk drive that I told my son about -- the one that would someday cost no more than a Volkswagen -- is now selling in the 10-megabyte category for less than $100.
   When prices fall so quickly and so drastically, predictions become impossible. Will you be able to buy an IBM-compatible computer, including all necessary peripherals, for $500 this year? Yes, without a doubt. For $300 next year? Probably.
   For $100 in two or three years? Maybe. How about $25 in a decade? It certainly is possible.
   If only Volkswagens and Fords were priced the same way!