Softness Yields CE Focus for PC Vets, Microsoft Plans Two Lines of Attack – firms involved in personal computer industry want to invade the consumer electronics market – Brief Article – Industry Overview

Todd Wasserman

With signs of a slowdown in the PC industry, category veterans Microsoft, Compaq, Intel and Hewlett-Packard have crashed the consumer electronics party in earnest. Evoking “convergence,” an industry buzzword for the migration of digital applications onto products like radios, VCRs and TVs, the four have eyed CE for some time, but in 2001 all are set for a full-frontal assault. CE industry greybeards, however, warn the category is no picnic. “It’s not easy to make great hardware in the consumer electronics business. I think they’ll find it harder than they think,” said Scott Edwards, svp-marketing communications for Sony.

Edwards, who spoke at the International Consumer Electronics Show in Las Vegas last week, was especially referring to Microsoft. The Redmond, Wash., software giant has had some fun with Sony’s recent troubles keeping up enough with PlayStation 2 supplies. But Microsoft’s years-long buildup for this fall’s Xbox gaming console is the “easy part,” Edwards said. The hard part is managing demand at retail, something Sony struggled with across several lines last year.

Microsoft is mum on details of the $500 million launch, but one pr strategy did emerge which may signal Xbox’s positioning: Microsoft is emphasizing that the graphics are so good they give game developers new freedom to be artists.

A favorite touchstone is Disney’s Thy Story, the 1997 computer-animated hit film. “We see two things that people get out of games,” said John O’Rourke, dirgames marketing for Microsoft. “The puzzle aspect and the entertainment aspect.” O’Rourke said there are many people who see the cartoonish graphics of other systems and decide to pass on games, but when they see Xbox, they’ll give games another try. The tack also addresses the target 16-26 mostly male gainers, who value envelope-pushing creativity. “This whole company is run by skate punks and gamers,” said Seamus Blackley, Xbox technical officer, who identifies himself with those groups.

Not content with one beachhead, Microsoft is planning two new TV consoles this year, including Ultimate TV, a satellite-based WebTV successor. Microsoft decided to put off its $50 million-plus Ultimate TV campaign, via FCB Worldwide, San Francisco, until February.

Compaq’s bead on the CE industry is part and parcel of CEO Michael Capellas’ “everything to the Internet” strategy, evidenced in “Inspiration Technology” branding ads via FCB, New York, featuring a variety of devices linking to the Internet. While Compaq’s server hardware works the infrastructure “supply” side, Compaq is creating devices for the “access” side. New models due this spring include a stereo console that copies CDs and a Presario PC that lets users edit digital movies and burn them on DVD. And Compaq also has plans for the digital imaging market, said Sean Burke, vp-Presario products at Compaq. Expect a line, including digital cameras, sometime in the first half of the year. Compaq presaged its entry into digital imaging by introducing a multi-function printer and a scanner last summer. Compaq did not disclose plans on how it will promote its new CE devices. The Houston-based PC giant is planning new creative in its $350 million branding effort for March.

Rounding out the rest of the newcomers, Intel announced a digital audio player to bookend its kid-focused microscope and digital cameras. Intel’s next big initiative is a Pentium 4 campaign slated for first quarter, a rep said. HP is planning some new CE devices this year including a “Superdrive” DVD recorder and possibly cell phone/handheld computer, printers hooked directly to the Web and home Internet gateways (Brandweek, Dec. 11, 2000).

In response, Sony, the leading CE brand, plans to up its ad budget slightly, Edwards said. Sony’s planning a three-stage campaign for 2001. A home networking effort, showcasing synergy between TVs, stereos and Sony PCs is due in March or April. In summer, Sony will highlight its Walkman brand, which now comprises all Sony’s handheld audio products since Sony killed off Discman last year. In the fall, Sony will launch a digital imaging campaign. Edwards also dismissed rumors that Sony was looking to review its agency. Young & Rubicam, New York and Irvine, Calif., handles.

If Sony didn’t have enough troubles, cell phone maker Nokia also has designs on the CE category. Nokia announced the Media Terminal, an Ultimate TV-like “infotainment center” due at year’s end. Debra Kennedy, Nokia’s dir-marketing, said the company has resisted offering a “me-too” product like a digital audio player. “We’re very focused,” she said. “We’re very calculated about what we need to go into.”

On the style front, the iMac infatuation appears over. Last year, the CE industry seemed to be on a mission to recreate everything from VCRs to boomboxes in the image of Apple’s iMac. This year, the bright colors and translucent plastic were traded for opaqueness, titanium and subdued colors. “We know it’s a fad that will pass,” said Sharp Electronics vp-marketing Bob Scaglione, referring to the see-through orange and purple models of 2000.

COPYRIGHT 2001 BPI Communications, Inc.

COPYRIGHT 2001 Gale Group

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