Helge's Notebook - Commentary - AFU Essays - The Decline and Fall of Betamax

The story of Sony's BetamaxTM format is not an isolated one, but it is instructive. It is also surrounded by legend and myth, so a closer look at it might be useful.

Getting To the Table

The story begins long before 1974, when the technology to record video data on magnetic tape was maturing. By itself, it doesn't sound like a daunting task, until the sheer volume of data is considered. There is a practical limit to the speed with which magnetic tape can be transported past the read/write heads of a record/playback machine; this limit was overcome almost a decade before Sony's home market debut by designing a head that turned past the tape, and wrote it's information on the tape at an angle.

If you've ever peered inside your VCR and wondered why that silvery cylinder back in there wasn't sitting straight, you know now that the basic technology hasn't changed in thirty years.

By the 1970s there were several Japanese industry giants poised to deliver home video taping equipment. These machines had to be orders of magnitude more reliable than the clumsy existing professional machines, and Sony was the first to consider their efforts market ready. According to James Lardner, author of Fast Forward (New American Library), Sony invited Matsushita and JVC to license the Betamax technology in December 1974. [1]

Sony's Morita was apparently not aware that JVC was almost ready to market their own machine, so it may have come as a rude surprise to him when JVC and Matsushita declined the offer. JVC believed it had a better product, and didn't see that the Betamax offered anything new. Moreover, Sony's overbearing attitude in this meeting may have made a definite impression on JVC's engineers.

Upping the Ante

In any case, for a year Sony had the VCR market to itself, selling 30,000 Betamax VCRs in the US. [2] But when JVC came out with the VHS format VCR in 1976, the stage was set for the format wars. JVC had a machine that already doubled Sony's recording time of one hour, and that difference would prove crucial.

By January 1977, JVC was joined by four more Japanese electronics manufacturers to build and market VHS format VCRs. Then, in February, Sony abandoned its long-standing policy against OEM deals and joined forces with Zenith.

Matsushita struck back by attempting to recruit RCA. RCA indicated that the VHS recording limit of two hours should be increased to three or four, and six weeks later, a prototype was ready. In March RCA joined the VHS camp.

Bidding for the Customer

While price later was less of a factor, in 1977 the VHS manufacturers, led by Matsushita, got into the trenches. VCR prices dropped as they became cheaper to make. RCA led by dropping prices $300 below the Sony machine, which caused an avalanche of follow-on price cutting. Eventually even Sony was forced to drop its price by $200. By 1982 the price war was still in full swing, and Sony was offering a $50 dollar rebate as a "Home Improvement Grant." [6]

The comments from the sidelines were fairly equinamous. In September 1977, the Saturday Review declared that "Eventually, the public learned to live with two record speeds [33 1/3 and 45 rpm], and doubtless it will also resign itself to two videotape systems."

If nothing else, these comments showed that industry observers themselves hadn't a clue about the technology involved in the VCR.

An Unexpected Joker

Few bits of USAn history are complete without involving lawyers. In 1979, a suit brought against Sony by Universal Studios and Disney was getting into final arguments. At stake was the question if manufacturers of VCRs were infringing on the copyrights of producers of movies and TV programs.

The suit, which named only Sony, eventually left Universal and Disney with no recourse except to consider how to make money from the new technology. Sales of VCRs were apparently unaffected by talk of the legal procedings.

However, even as late as September 1980, the word "Betamax" was used by many as synonymous with "VCR." [3] It is possible that the court case had consequences on Sony's marketing that have never been considered. This is particularly notable when combined with the fact that Sony's share of the VCR market had sunk to 19.1% in 1978, compared to RCA's share of almost twice that at 36%.

Who's Stuck With the Old Maid?

As Sony's market share declined, the manufacturers of prerecorded VCR tapes began to adjust their product lines. Already in January, 1981, Betamax format VCRs accounted for merely 25% of the entire market, and consumers were being warned that the selection for VHS would be "slightly broader." [4]

The Finessed King

A lot of hay was made of the superiority of the Betamax format over the VHS format. However, there is little if any objective evidence of that.

Technologically, the two formats were each other's equal. True, except for the recording length, Sony pioneered most of the improvements over the years, but the VHS manufacturers caught up to each improvement, usually in less than a year. So, for instance, within a month of Sony's announcement of Beta Hi-Fi, JVC and Panasonic announced VHS Hi-Fi formats. Interestingly, the two VHS formats were incompatible with each other. [7]

Comparisons between VCRs with similar features showed no significant differences in performance. In fact, most of the differences could only be seen with sensitive instruments, and likely would never show up on most consumer grade television sets. [5] In particular, the qualitative differences between the two formats were less than the differences between any two samples from the same manufacturer. [8]

In the end any technological superiority Betamax might have had made no difference to the success of the Betamax format

Cheap Tricks

Did Sony price themselves out of the market? It's true that Sony VCRs started out by being a bit more expensive than their VHS counterparts. Possibly because of Beta's unpopularity, Beta VCRs were much cheaper than similar VHS VCRs by the end of 1985. A Beta Hi- Fi VCR could sell for half the price of a VHS Hi-Fi VCR in 1984 [9], and by the end of 1985 Betas were selling for under $300. [10]

If price made a difference initially, it apparently wasn't a factor later.

The Fat Lady Sings

In 1987, Rolling Stone announced that "The battle is over." [11] On Jauary 10, 1988 Sony admitted to plans for a VHS line of VCRs. VHS players commanded 95% of the VCR market. [12]

In May 1988, Video magazine came out with an article entitled "Beta Survival Guide." [14] And in September Sony's first VHS recorders came off its assembly lines. [15] A year later, the Betamax share of the consumer VCR market had dropped to less than 1%. [16]

Today the format is still around. In 1994, Video magazine published another survival guide, explaining that the scarcity of blank Beta tapes has consumers buying up prerecorded tapes at fire sale prices, to record over them. [17]

Counting up the Points

Sony did not commit the sins ascribed to them by most of the pundits explaining the demise of Betamax.

  1. Sony did not "refuse to license Betamax." In its January 25 issue, Time explained that "While at first Sony kept its Beta technology mostly to itself, JVC, the Japanese inventor of VHS, shared its secret with a raft of other firms." [13] This is blatantly untrue. While Sony was decidedly behind in the licensing of its technology, it tried from the very beginning to sign on other manufacturers to the Beta standard.
  2. Betamax was not too expensive. Consumers buying a new VCR saw only minor pricing differences between the two formats. Those looking for the latest technology could apparently find Betamax machines for much less than comparable VHS machines. (Interestingly, one article [8] that makes this statement actually compares two machines where the VHS version is $600 dollars cheaper than the Betamax machine. Possibly the technophile streak that appears to be the curse of many Betamax afficionadoes influences buying decisions much more than price.)
  3. There was no shortage of prerecorded Beta tapes. This at least was true initially. Only once the Betamax share had declined well below the VHS share, did prerecorded tape manufacturers try to decrease their inventories of Beta format tapes.
  4. The Universal and Disney's suit against Sony had no determinable effect on Sony's standing in the VCR market. However, this issue is less than clearcut.

Even Sony today agrees that the difference in recording length was the difference that layed Beta low. [17] The other factor appears to have been the one factor for which no company can control: pure luck.

References

[1] "The Format War," Video Magazine, April 1988, pp50-54+

[2] "Whatever Happened to Betamax?", Consumers' Research, May 1989, p 28

[3] "The Betamax Blues", New York, September 15, 1980, p 43

[4] "Beta/VHS What's the Difference", Video Today, January 1981, p A8

[5] "VHS Meets Beta", Popular Electronics, August 1981, p 43

[6] "Even Sony Can't Avoid the Price War in VCRs", Business Week, September 6, 1982, p 33-34

[7] "VHS Hi-Fi: JVC Answers Back", High Fidelity, September 1983, p 65

[8] Stereo Review, April 1984, p 66

[9] "Tape Format Face-Off", High Fidelity, September 1985, p 45

[10] "To the Beta End", Forbes, Dec 16, 1985, p 178

[11] "Format Wars", Rolling Stone, Ja 15, 1987, p 43

[12] "Sony Isn't Mourning the 'Death' of Betamax", Business Week, Ja 25, 1988, p 37

[13] "Goodbye Beta", Time, Ja 25 1988, p 52

[14] "Beta Survival Guide", Video, May 88, pp 45-48

[15] "Video News", Radio Electronics, Sep 88, p 6

[16] "Whatever Happened to Betamax", Consumers' Research, May 89, p 28

[17] "Desperately Seeking Beta", Video, Feb 1994, p 42-44+

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