In the first of a three-part special on the PC industry in the UK,
we look back to the earliest beginnings of the desktop computer and
discover how the first versions of the machines we have come to
depend on first worked their way into our lives
The world of computing is dominated by the Far East and the US and
we Brits don't get much of a look-in. Finding examples of
home-grown talent is difficult and once you have listed the most
well known - Mesh and Centerprise - things start to get tricky. But
if you were to step back 20 years and walk down your nearest high
street or pop into your local dealer, things would be totally
different.
For a start, you might be surprised to find Boots and WHSmith, as
well as Dixons, selling computers. And your jaw might drop even
further when you saw what they were selling: British and more
British. Sinclair, Acorn, Dragon and Oric all popped up in the
first couple of years of the 80s and were joined by Amstrad in
1984.
By selling at prices lower than anyone else, the British
microcomputer manufacturers arrived in 1980 from nowhere and by
1983 had all but conquered the high street and grabbed a huge slice
of the European PC market. The only fly in the ointment was
Commodore, but that aside, the first three years of the 80s were
tremendously enjoyable ones for anyone making and selling British
micros.
Revolutionary beginnings
The earliest part of the
British micro story that really grabs interest takes us back to 30
January 1980, when a bearded, bespectacled man, smiling and holding
onto a white box with a 'qwerty' keyboard on the front, graced the
pages of national newspapers. The arrival of Clive Sinclair and the
ZX80 filled just a couple of column inches, but it would
revolutionise the home computer market.
In just a few months, 10,000 ZX80s had been shipped, and with a
price tag of £100, people who had never considered buying a
computer found it within their reach. The impact of a low price tag
cannot be underestimated and although Sinclair would be labelled as
a boffin rather than a marketer in later years, he broke through
the £100 price barrier and delivered a marketing
masterstroke.
The home microcomputer market before 1980 was littered with kit
suppliers targeting 'hobbyists', the sort of person happy to tinker
with a soldering iron and build their own machine. The ready-built
market was priced way above the levels that would spark off
mainstream consumer demand, which meant computing stayed out of
reach of the vast majority of people.
The UK lagged behind the US, which already had a number of products
in circulation, including IBM and Apple, but it was more
open-minded towards home computing than France and Germany and
quickly outpaced its European neighbours in computer
consumption.
Sinclair delivered the breakthrough that sparked off the
consumption by offering the ready-built ZX80 for £100. It didn't
take long for UK rivals to catch up and start competing with
similar pricing, Acorn Computers being typical by adapting its Atom
kit computer to a ready-built product for £150.
Sinclair broke the rules again with the launch of the ZX81. The
machine was more powerful than the ZX80 - and it was cheaper,
costing just £80. The combination of offering technological
advances at very reasonable prices would become a formula that
would be used again in 1982 with the launch of the ZX Spectrum and
in 1984 with the Quantum Leap (QL), which came with a software
bundle of four business applications.
The early 80s resulted in a British micro revolution that became
the envy of the world. Surveys of the microcomputer market carried
out in 1983 by Mintel, the Economist Intelligence Unit and Keynote
quantified the scale of the low-priced micro explosion (see The
Micro Revolution box).
The surveys claimed a fifth of UK households already owned a
computer and analysts expected the level of ownership to rise to a
quarter by 1986. The British market was worth £93.5m for home
micros and a healthy level of units were selling - Mintel estimated
the total number of microcomputer units sold, including business
machines, had reached 920,000 by the end of 1982.
Initially, the main route to market was via mail order, with the
retail and dealer channels slightly too immature to cope with a
product that was rewriting the rules about demand.
Systems for schools
Meanwhile, the other main British
player in the home market, Acorn Computers, was picking up the sort
of support most computer companies could only have dreamt of.
Firstly, the Cambridge-based firm got the backing of the BBC to
make the micros that would accompany a series it was broadcasting
on computer literacy. Secondly, it was awarded, along with Research
Machines, the status as a preferred supplier to the education
market as part of the Department of Industry's attempts to get
computers into every school.
The Department of Industry (DoI) launched its Microcomputers in
Schools scheme in April 1981 with a target of getting one computer
into every primary and secondary school in the country. The scheme
operated by offering a 50 per cent subsidy to schools buying
computers. By the time the scheme ended in March 1984, a total of
£14m had been ploughed into helping schools join the technological
revolution.
The BBC microcomputer series provided Acorn with a steady income
and a strong reputation in schools and although the government
later added Sinclair to the roster of approved suppliers, Acorn
managed to take 80 per cent of the UK schools market.
Because of the protection offered by the BBC and DoI contracts,
Acorn managed to keep its prices higher than rivals and only
decided to venture into the low end of the market with the Electron
in the summer of 1983.
No computer, no future
All of the micro manufacturers
benefited from a strange atmosphere in the early 80s. The
government decided 1982 would be Information Technology year, and
with the introduction of micros into schools there was a feeling
that a high-tech revolution had started and if you missed out, the
future, which would be dependent on computers, would be one of
unemployment and misery.
The British manufacturers were happy to exploit these worries and
ran adverts that tapped into user hopes and fears. In the campaign
for its BBC Master series, Acorn used the following text
accompanied by a picture of a child in graduation robes: "Your
child's degree ceremony might seem a long way off, but the BBC
Master Compact is equipment to help at every step of the way. Our
new micro can provide your child with constant support throughout
their education, eventually graduating into business and
professional use. Put it on your Christmas list. It should help to
put a few letters after your child's name."
The micro manufacturers spent large amounts of money on advertising
and glossy colour spreads - pictures of Amstrad and Sinclair
products could be found in Sunday supplements as well as
MicroScope. Television also provided a platform for vendors to use
and after the launch of Channel 4 there were two commercial
channels for them to advertise on.
The sums of money that went into supporting launches were running
into six figures. MicroScope revealed the details of the
advertising budget Sinclair intended to spend in the first few
months of 1984 to reinforce demand for the Spectrum and the QL:
£250,000 was earmarked for national press adverts, £2.5m for
television adverts for the Spectrum, and the remaining £750,000 for
press advertising for the QL and £600,000 on a QL television
campaign.
The results were staggering, with sales increasing month on month,
but by the end of 1984, some market analysts were expressing fears
that the British market for home micros was nearing saturation
point.Those fears were based on a slowdown in the market that began
in the US in the summer of 1984 and hit the UK in the key Christmas
period, leaving Sinclair and Acorn with millions of pounds worth of
stock they had to get rid off.
Too little, too much
After starting by selling via mail
order, it didn't take long for dealers to emerge and that was
coupled with the growing importance of the high street. The costs
of a slow market were felt even more by manufacturers, which had
millions of pounds worth of products distributed across a wide
channel.
Each time a retailer declared its intention to enter the market and
start selling products, it managed to get hold of kit - and there
was a strong argument to suggest that Sinclair, Acorn and Commodore
products were over-distributed.
WHSmith made the front page of MicroScope with its decision to sell
the Acorn Electron from launch, marking the first time a high
street retailer had taken a product from release (see MicroScope, 8
September 1983).
WHSmith was selling computers through 250 stores, Boots matched
that number and a host of other stores, including Dixons,
Rumbelows, Argos and Laskys, also stocked micros. Add to the high
street retailers a growing dealer network and the continuation of
mail order sales and the reasons for overstocking start to become
clear.
The other reason for overstocking in 1984 was the experience
retailers had suffered in 1983. With 70 per cent of home micro
sales coming in the last three weeks of the year, anyone who failed
to get product in that time would miss out.
But because of the immaturity of the market and the recent decision
by many other retailers to stock micros, when it came to ordering
products for Christmas 1983, the big names in the high street
exercised caution and placed conservative orders.
Unfortunately, they got it very wrong and empty shelves were proof
that demand was, in fact, much stronger. Those manufacturers that
were able to get product into shops enjoyed the sight of it
disappearing into a shopping bag within minutes, but for others it
was a blow.
Acorn missed out on a great deal of sales it should have enjoyed in
1983 because it was unable to deliver enough Electrons. Component
shortages meant it was only able to deliver a few thousand when
orders were running at 160,000. The main beneficiaries of its
failure to get stock were Sinclair and Dragon.
But even Acorn's rivals struggled to meet their advertised delivery
times and the Advertising Standards Authority (ASA) was forced time
and time again to chide the industry and remind it of its
obligation to customers.
The next step
If 1980 was a breakthrough with the ZX80,
then the arrival of Amstrad with the CPC-464 in 1984 took the
development of the micro to the next logical stage. By providing a
monitor and a built-in cassette player included in the price, it
removed the last couple of excuses users might have had for not
buying a computer.
Sinclair relied on users providing their own cassette player to
load programs and using their television set as a monitor.
Amstrad's decision to sell an all-in-one tore up another page in
the rulebook that declared profits should be maximised by selling
peripherals separately.
The entrance of Amstrad into the micro market marked a change in
the emphasis on marketing. Using the same techniques he had
perfected in the hi-fi market, Alan Sugar, founder of Amstrad,
stacked 'em high and sold 'em cheap. As with Sinclair before him,
the sales were breathtaking.
The CPC-464, a 64k computer that cost £200 with a black and white
monitor, with the option to get a colour monitor for an extra £100,
quickly managed to take 20 per cent of the British market and sold
600,000 units in 1985.
Having recognised that price equated to sales, Amstrad used the
same trick again with its next computer, the CPC-664. It managed to
sell more than 2m machines, making it the most successful computer
in Europe, largely due to its price - just £449 for a powerful
computer with a colour monitor.
Selling an all-in-one package at a significantly lower price than
anyone else delivered a high volume of sales and large profits,
giving birth to the phrase 'Amstrad effect', which referred to Alan
Sugar's ability to create a new market for products because of his
ability to sell at low prices.
Nowhere was this more clearly demonstrated than with the PCW-8256
for £399. Advertised as a replacement for the typewriter, the
machine, which included a monitor and printer, went on to break
through the 75,000 units a year barrier for word processor sales in
Britain, selling 350,000 machines during its first eight
months.
Boom to bust
Low prices appeared to be a mechanism that
would continually serve up customers, but there were dark clouds on
the horizon. In the closing months of 1984, notice was served to
the micro vendors that the appetite for technology was cooling,
with only 1.3m units sold - 20 per cent less than expected.
The problem for those operating in the micro market was that a
business model had been established that worked when sales were
high and growing, but when they failed to continue the cracks
started to appear.
If the first three-and-a-half years of the 80s were ones of success
for some of the British manufacturers, there were already signs
that it would not last. The next two and half years were not going
to be an easy ride. Victims started to appear on the pages of
MicroScope, with Dragon and Oric struggling and then disappearing.
As the dust settled after a mixed Christmas trading period in 1984,
the damage to Sinclair and Acorn would become apparent. Amstrad
carried on aggressively selling, but would be forced to move away
from the home market to survive and sell to business
customers.
After producing a home microcomputer revolution, the leading
British companies connected with the meteoric rise of the market
were about to find life getting far more difficult. The years 1985
and 1986 would not be happy ones for Sinclair and Acorn.
The micro revolution
In the space of two years - from
the launch of the first ready-built microcomputer for £100 in 1980,
to the end of 1982 - the market for microcomputers was valued by
Economist Intelligence Unit at £93.5m, with Mintel claiming 920,000
units had been sold in Britain.
By 1983, with more computers per head of the population in the UK
than anywhere else in the world, one in five homes owning a
microcomputer, and expectations that the figure would rise to one
in four by 1986, there were genuine fears from analysts that the
market was reaching saturation point.
A survey of the average user carried out by The Financial Times
revealed the effect on parents wanting to improve their children's
grasp of technology had been significant. The FT defined the
average user as male, in his early teens and having received the
microcomputer as a present from his parents.
The major players
Acorn Computers - Founded by Hermann Hauser and Chris Curry in
1978, the company's first product was the Atom. It then went on to
develop the BBC microcomputer series. The Cambridge-based firm was
rescued by Olivetti in 1985, and Hauser and Curry lost control of
the company.
Amstrad - Set up in 1968 by Alan Sugar, the company
initially traded in electrical goods making a name for itself in
the hi-fi audio market before entering the computer market with its
CPC computer range in 1984.
Sinclair Research - Started life in 1980 as Science of
Cambridge headed by Clive Sinclair and retained that name until
March 1981 when it became the familiar Sinclair Research. In April
1986, it sold the rights to all existing products to Amstrad,
including the Sinclair Research name and logos.
The story of the development of the computer industry continues in
next week's issue of MicroScope as we study the years of 1985 and
1986.
Ripping up the rulebook
Rule 1: A microcomputer is expensive - ripped up by Sinclair in
1980 with the launch of its ZX80 for £100
Rule 2: Successive products are more powerful but also more
expensive - ripped up by Sinclair with the launch of its ZX81 for
less than the cost of the ZX80
Rule 3: Monitors and cassette players are sold separately -
ripped up by Amstrad with the launch of its CPC-464, with built-in
cassette player and colour monitor
Rule 4: Word processors sell less than 75,000 units a year -
ripped up by Amstrad with its PCW-8256 which sold 350,000 units
priced at £399 in the first eight months