When IBM announced the IBM PCjr home computer in 1983, the industry expected it to dominate the home market. Who didn’t want a computer that could run office software while offering game console-like graphics and sound capabilities? But it didn’t work out that way. Instead, it flopped like New Coke. Why did the IBM PCjr fail?
The IBM PCjr failed because of three flaws: It was too expensive, too incompatible, and not expandable enough. While its competitors were trying to build new machines with as few compromises as possible, IBM deliberately designed the PCjr to be its second-best or third-best product, so the market went other directions.
The PCjr’s promise
The problem with home computers before the PCjr was their incompatibility with computers at the office. Home computers from Apple, Atari, Coleco, Commodore, and Texas Instruments weren’t IBM-compatible, and they weren’t compatible with each other either.
The IBM PC didn’t have the graphics and sound capability to compete with the home computers of 1983. But its architecture allowed IBM to easily enhance the graphics and sound so it could play games similar to home computers of the day. Potentially it could do even better, given the machine’s superior speed and higher memory capacity. Being able to take work home would be appealing too. Maybe then people would buy an IBM PC for the office, a PCjr for home, and keep that pesky Compaq Portable at bay.
And in 1983, no home computer company had achieved double-digit market penetration yet, a situation that eerily mirrored the 1981 business market that IBM quickly started to dominate. When IBM announced the PCjr on November 1, 1983, there was no reason to expect IBM to lose. It looked like it was going to be similar to the VHS vs Betamax battle. With Apple-like graphics, Commodore-like sound, IBM PC compatibility, a wireless keyboard and a sharp RGB display, it looked like a no-compromises machine on paper at least.
How IBM sabotaged the PCjr
IBM wanted to own the home computer market, but IBM also didn’t want the PCjr to cut into IBM PC sales in the business market. IBM was selling IBM PCs to businesses at $2,500 apiece and didn’t want businesses to switch to PCjrs that cost half as much.
It must not have occurred to IBM that businesses would just buy more computers, and still buy expensive PCs, XTs and ATs for executives and high-level managers. The average revenue per system may have decreased, but the overall number of systems and overall revenue would have increased. Plus, if they were buying PCjrs, they weren’t buying those pesky clones.
IBM’s unwillingness to compete with itself eventually led to its downfall in the business PC market, but it led to the IBM PCjr failing first.
IBM shipped the PCjr with a cheap, uncomfortable chiclet keyboard similar to the ones used on cheap Timex-Sinclair computers that sold for less than $100. It was uncomfortable and hard to type on. IBM did give the keyboard an innovative wireless function. But putting the IBM badge on such a low-end keyboard was like General Motors going beyond the infamous Cadillac Cimarron and putting the Cadillac name on a Chevy Citation subcompact.
Consumer magazines blasted the keyboard, arguing that a company known for making typewriters should know better. IBM’s competitors did the same thing. Every other computer in or near the PCjr’s price range had a real, full-travel keyboard. IBM eventually recognized its mistake and replaced it with a more traditional keyboard. It was still lower quality than a PC keyboard and had fewer keys, but it was a real keyboard. The PCjr needed that keyboard from the start.
The initial mistake haunted IBM forever. Even after IBM released a newer, better keyboard, Commodore kept showing the original unexpanded PCjr with the cheap keyboard in its ads, saying you could pay $669 for a PCjr with a junk keyboard, or for the same money, get a Commodore computer with a good keyboard, a disk drive, color monitor or printer, and a modem. The ads worked.
The PCjr worked with the majority of IBM PC software, but it wasn’t fully 100% IBM PC compatible. Notably, the office version of Lotus 1-2-3 didn’t run. So IBM and Lotus had to make a special version for the PCjr. People who bought a PCjr hoping to take the copy of Lotus 1-2-3 from the office home and run it were disappointed with this arrangement.
Part of IBM’s appeal was the perception it was a safe choice. Once word got out that software that said “IBM” on the box might or might not work on a PCjr, it didn’t seem like a safe choice anymore. Especially when the list of unsafe titles included the most popular stuff. Buying a home computer that needed a special version of Lotus 1-2-3 was worse than buying a home computer that would need a special version of Excel today.
Whether the compatibility issues were deliberate or just carelessness is unclear. But in practice, only about 60% of IBM PC titles ran on the PCjr in 1984. Apple played this up in its TV commercials, touting the Apple IIc as being able to run far more software, as well as beating it on price. Later clones proved people were willing to live with somewhat less than 100% compatibility, but 60% wasn’t nearly enough.
The IBM PC’s biggest appeal was its expandability. The case had five expansion slots inside and room for two disk drives inside, or four drives after half-height drives became common. Upgrading it was just a matter of plugging a board into one of its expansion slots.
The PCjr had 64 or 128K of memory and a single disk drive. IBM later added the ability to add a second drive and upgrade the memory to 512K. Adding memory and a second drive improved the machine’s compatibility with the IBM PC, but again, since these options weren’t available or even promised at launch time, the perception remained.
Offering a second drive and more memory options would have changed the dialog from the beginning. Reviewers would have still said the stock PCjr was a limited machine, with low compatibility, but with the caveat that when you added a second drive and more memory, compatibility improved.
The IBM PCjr still would have been an expensive option for home use. But consumers would have bought a base model and upgraded it as they could afford to, knowing that in the end they would have a very useful computer.
The last reason why the IBM PCjr failed was price. A bare machine with no disk drive and 64K of memory sold for $669. The configuration you actually wanted, with 128K of memory and a disk drive, sold for $1269. Neither price included a monitor. You could connect it to a TV set, but to run business software, you would really want a monitor. That cost another $680 at launch, though IBM eventually lowered the monitor’s price below $500.
In the mid 1980s, the median household income was about $25,000. So in exchange for a month’s pay, you received a computer with the IBM name but it really didn’t deliver what people expected from IBM.
In late 1984, IBM attempted to save the PCjr. It cut the price of the 128K model with a disk drive to $999 and offered a rebate to dealers that let them throw in a free monitor. At that price, IBM sold 200,000 units. That was very good for the time, but the profit margins were much lower than IBM liked. When the promotion expired, sales fell to around 10,000 units per month. That was only slightly better than they had been initially.
Making the IBM PCjr right
It’s not hard at all to see what IBM could have done differently to keep the PCjr from failing. Soon after IBM announced the PCjr, Tandy set out to clone it. The Tandy 1000 came out in November 1984, initially priced at $1200, with a monitor priced at $299, it didn’t undercut IBM’s pricing by much. But if offered better value. It had three standard PC expansion slots, and an empty drive bay for adding a second drive internally. An entry-level Tandy 1000 wasn’t much cheaper than a comparable PCjr, but the upgrades were cheaper so it ended up being less expensive in the long run.
The Tandy 1000 featured the same graphics and sound chips that IBM used in the PCjr. But Tandy tweaked the architecture to improve its compatibility with the IBM PC.
The result was highly compatible with both machines. How many machines Tandy sold is unclear. But sometime around 1986, you stopped seeing the word “IBM” alone on software packages, especially game titles, and started seeing the words “IBM/Tandy and 100% compatibles” instead. Tandy sold enough machines to make IBM share top billing.
Tandy would have cloned the PCjr regardless. But a more 1000-like PCjr would have meant IBM could have kept some of that market share, rather than handing it all to Tandy. IBM’s policy of not competing with itself hurt it badly when it came to the home market. As Commodore and Atari CEO Jack Tramiel observed, if you don’t compete with yourself, someone else will.
Giving up and admitting failure: End of the line for the IBM PCjr
IBM realized in the spring of 1985 that it didn’t have a lot of options. The Tandy 1000 was selling well. Everyone thought the Apple IIc was selling well. (It wasn’t, but perception is everything.) The Commodore 64 was still selling well. But a new threat loomed in the new Commodore 128, which offered more memory and a faster, higher-capacity disk drive. IBM proved that if it sold the PCjr bundled with a monitor for $1,000, it would sell. But IBM didn’t want Commodore-like profit margins, and that’s exactly the price point Commodore was aiming for with the C-128.
So in March 1985, IBM discontinued the PCjr after only a year on the market. IBM liquidated the existing inventory, and in the end, the PCjr sold somewhere between 250,000 and 650,000 units. That was disappointing, given that in February 1984, Popular Science predicted the PCjr would sell in record numbers.
Record low numbers wasn’t what anyone had in mind.
IBM tried again later in the decade with its PS/1. While it wasn’t a raging success either, it fared quite a bit better. But by then, IBM was past its prime. IBM had a window of opportunity with the PCjr and it flubbed it.