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

Table of Contents VCR History Development of VCR market ”Sony is not an OEM manufacturer” “The best standard we’re all working on” VCR Technology Adoption Lifecycle Why Sony lost

VCR history 1956: invention of the Ampex VCR 1960‘s: 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 Sony`s Betamax format: 1976: JVC introduced the Video Home System (VHS) format

Development of VCR market * Betamax * * VHS * Formation of groups VHS: Europe and US VHS adoption in Europe Pre-recorded tapes soar 30% Penetration in USA Decisive period: 1974 - 1977 1976 JVC Introduction of VHS 1975 – 78 VHS Group: Matsushita, JVC, Hitachi, Sharp, Mitsubishi, Sanyo Beta Group: Sony, Sanyo, Toshiba 1975: Sony introduced Betamax 1977 VHS enters European Market RCA adopts VHS format 1984: Zenith drops Beta format End of Beta 1978: Major European Brands adopt VHS standard Decisive Period

”Sony is not an OEM manufacturer” BETAMAX ”Sony is not an OEM manufacturer” 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

JVC: “The best standard we’re all working on” VHS JVC: “The best standard we’re all working on” Polite and humble Integrated partners in development Alliance building Mass production Supplied OEMs Imitating Sony‘s features Initial advantage: Longer playing time JVC, Matsushita, Hitachi, Sharp, RCA, Mitsubishi

Some facts of the development 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/Slow/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 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. VCR Market share by Country and Format (1983) USA Japan Britain W. Ger. France Italy Above Totals VHS 75 70 74 60 70 60 72 Beta 25 30 24 20 20 20 25 V-2000 0 0 2 20 10 20 3

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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