Editor’s note: Ezra Gottheil is an analyst with Technology Business Research.

HAMPTON, N.H. – Plummeting average selling prices have caused far more damage to PC vendors’ revenues in the fourth quarter of 2008 than declines in unit volume.

Combined, HP, Dell, Lenovo and Apple’s unit sales decreased only 5 percent year to year; however, their collective average selling price, or ASP, dropped 13 percent, causing an 18 percent decline in PC revenues.

ASPs have been declining over the long term, but the fall-off became steeper in 2008 and the bottom dropped out in 4Q08.

believes the decrease in ASPs is structural and permanent. While the addition of netbooks to the product mix directly drove down ASPs, their presence in the market affected ASPs across the product spectrum.

Netbooks showed both consumer and business purchasers that, for most uses, they do not necessarily need top-of-the-line PCs. The recession is driving customers to value-based decisions and they will retain the habit long after an economic recovery. Like the gasoline price shocks of 2008 and the 1970s, the recession is causing PC buyers to downsize.

There was, however, some good news for vendors in the unit and ASP figures for 4Q08. In a dramatic and frightening economic crisis, unit volume was down only 5 percent. TBR believes this demonstrates the price elasticity of the PC market.

As prices decrease, the market expands, both by adding new purchasers and by current PC owners purchasing additional PCs. With useful PCs available at a much lower price point than ever before, unit sales would have mushroomed under typical economic conditions.

The decline of ASPs challenges PC vendors apart from the recession. Vendors typically have lower profit margins on lower-priced models. The lower-priced PCs are increasingly seen as interchangeable and disposable commodities, and vendors are having difficulty differentiating. To drive sales of more than one PC per customer, vendors must make it easier to manage data and programs on more than one PC at a time. The lower price point makes it difficult to profitably provide adequate and expected service and support.

TBR believes the PC market is changing radically. Vendors must look to change their relationships with buyers, establishing longer-term relationships and providing valuable paid services after the sale.

No longer dominated by hardware or software, PCs are becoming a service business. The change in the market presents vendors with threats and opportunities. Companies that can figure out how to embrace this trend most quickly and profitably will emerge as winners, and the winner’s circle may contain different players from those who stand there now.