The VCR Battle

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The VCR Battle

• Strategic Maneuvering and Mass-Market Dynamics
  The Triumph of VHS over Beta
• Case by written by Michael A. Cusumano, Yiorgos
  Mylonadis and Richard S. Rosenbloom

Management of Innovation and Technology WS02/03
Dennis Damer, Svenja Lassen and Stefan
Broda
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Table of Contents

• VCR History
• Development of VCR market
• Sony is not an OEM manufacturer
• The best standard were all working on
• VCR Technology Adoption Lifecycle
• Why Sony lost

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VCR history

• 1956 invention of the Ampex VCR
• 1960s stagnation on the VCR market
• 1970 cross-licensing agreement for video
  recording patents (Sony, Matsushita, JVC)
• 1971 Sony Leadership of U-Matic invention
• 1975 introduction of Sonys Betamax format
• 1976 JVC introduced the Video Home System
  (VHS) format

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Development of VCR market
Betamax
VHS
Formation of groups
VHS Europe and US
VHS adoption in Europe
30 Penetration in USA
Pre-recorded tapes soar
Decisive period 1974 - 1977

• 1975 78
• VHS Group
• Matsushita, JVC, Hitachi, Sharp, Mitsubishi,
  Sanyo
• Beta Group
• Sony, Sanyo, Toshiba

• 1976 JVC
• Introduction of VHS

• 1984
• Zenith drops Beta format
• End of Beta

• 1975
• Sony introduced Betamax

• 1977
• VHS enters European Market
• RCA adopts VHS format

• 1978
• Major European Brands adopt VHS standard

Decisive Period
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Sony is not an OEM manufacturer
BETAMAX

• Reluctant to share technology
• No OEM shipments
• Brand image consideration
• Started production before asking others
• Differentiation strategy
• Developed new features
• Unable to satisfy market

Sony, Sanyo, Toshiba
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JVC The best standard were all working on
VHS

• Polite and humble
• Integrated partners in development
• Alliance building
• Mass production
• Supplied OEMs
• Imitating Sonys features
• Initial advantage
• Longer playing time

JVC, Matsushita, Hitachi, Sharp, RCA, Mitsubishi
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Some facts of the development
Recording-Playing Time Year Beta VHS 1975/5 1
hr. 1976/10 2 hr. 1977/3 2 hr. 1977/10 4
hr. 1978/10 3 hr. 1979/3 4,5 hr. 1979/8 6
hr. 1982/3 8 hr.
Special Effects Comparison Beta VHS Wireless
Remote 1977/3 1977/6 ½ Speed 1977/3 1977/6 Slow
/Still 1979/3 1977/12 Portable
VCR 1978/9 1978/2 1/3 Speed 1979/3 1979/8 Scan/S
low/Still 1979/3 1979/8 Stereo
recording 1980/7 1979/8 Hi-fi 1983/4 1983/5 One
-unit camera-recorder 1983/7 1984/3


VCR Market share by Country and Format
(1983) USA Japan Britain W. Ger. France Italy Abo
ve Totals VHS 75 70 74 60 70 60 72 Beta 25 30 24 2
0 20 20 25 V-2000 0 0 2 20 10 20 3
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Why Sony lost

• Neglected Early Majority (Mass Market)
• Not able to satisfy demand
• Production capacity
• Recording/Playing length of tapes
• No compromises regarding technical standard
• ? Human factor of business (arrogance)
• Refused to license Betamax to adult movie
  industry
• ? Network externalities

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• Thank you very much for your attention!