Problem Paper No. 3: Laura C. September 24, 2011 In 1975, Sony entered the videocassette recorder market with its introduction of the Betamax, followed by VHS in 1976. The Beta was the first compact, inexpensive, reliable videocassette recorder. The Beta led VCR production and sales from 1975 to 1977. Despite the fact that Sony was first to enter the market – and arguable had a better product than JVC’s VHS, it was surpassed by VHS in 1978 and continued to lose market share until it was removed from production by Sony in the late 1980’s (Cusemano).

In the case of Beta versus VHS, VHS successfully copied many of the market leader Beta’s desired features but in such a manner that it differentiated its product, creating a new category which was favorably received in a mass market (Cusemano). Due to differing formats, tapes were not able to play interchangeably on either machine – ultimately, customers had to choose one category or the other. Both Beta and VHS offered ease of use, but with differences in technology.

Beta claimed to offer better picture quality than its competitor, however this would later prove to be less important when compared to the more competitive pricing offered by VHS. An important feature – and an exclusive one that influenced how customers perceived the VHS – and one that may have ultimately cost Beta its market position: VHS tapes initially recorded two hours versus one hour (Beta). This was an important development for consumers since most movies ran approximately two hours.

Although Beta later increased their tape recording capacity to five hours, they never caught up with VHS, which was later able to record up to eight hours (Time). Affordability was another major issue – and a major reason for Beta’s downfall. Sony assumed that quality was the customer’s primary concern however VHS machines, components and tapes were less expensive than their counterparts. The Beta marketing strategy mistakenly assumed that customers would opt to pay more for quality however this was not the case. VHS gave the customer what they wanted – a functional machine at a more affordable price (Bermingham).

Initially, Sony desired to limit licensing agreements while JVC’s strategy was aimed at extending many licensing agreements. Within a short period of time, JVC had forged partnerships with Hitachi, Panasonic, RCA, Magnavox, Quasar, Sharp and others – all of which had their own brand of VCR and at a significantly lower price than Beta – largely due to high competition among the brands. By 1984, 40 companies utilized the VHS format compared to Beta’s 12 (Sweany). With respect to the VCR market, its scale was such that an array of technological innovations could be implemented to challenge Sony.

Demand was high, and JVC’s move to create partnerships proved to be a strategic victory early on. Another consequence of Sony’s reluctance to extend licensing agreements was the widespread availability of VHS. Initially, all movie rentals were in Beta format however as market demand veered in favor of VHS, retailers began to shift their movie rental stock in the more popular format. The emergence of this secondary, complementary market, also contributed to the decline in the popularity of Beta (Schofield). Beta’s U. S. arket share declined to 25% by 1981. By 1986, it was a mere 7. 5%, as VHS was declared the victor by the end of the 1980’s. (The Great 80’s). Had Sony made different decisions early on, perhaps there would have been a different outcome however VHS won the competition hands down by delivering what the consumer wanted and establishing itself as a market leader within its own category. References: Bermingham, John. Beta or VHS? When Good Is Good Enough! (2002, July). Retrieved September 24, 2011 from ohnhttp://www. drugdeliverytech. com/ME2/dirmod. sp? sid=;nm=;type=Publishing;mod=Publications%3A%3AArticle;mid=8F3A7027421841 978F18BE895F87F791;tier=4;id=D270C17B418E41D980D7F5BAEA10855B Cusumano, Michael, et al. (1991) Strategic Maneuvering and Mass-Market Dynamics: The Triumph of VHS Over Beta. Retrieved September 23, 2011 from http://dspace. mit. edu/bitstream/handle/1721. 1/2343/SWP-3266-23735195. pdf Goodbye Beta: Sony will make VHS players (1988, Jan 25). Time. Retrieved September 23, 2011 from http://www. time. com/time/magazine/article/0,9171,966523,00. html

The Great 80’s (n. d). Retrieved September 23, 2011 from The Great 80’s web site: http://www. thegreat80s. com/80s-Memories/Betamax. html Schofield, Jack. Why VHS was better than Betamax. (2003, Jan. 24). The Guardian. Retrieved September 23, 2011 from http://www. guardian. co. uk/technology/2003/jan/25/comment. comment Sweany, Sean. Betamax vs. VHS: an old-school technology battle. (2006, April 26). The Observer. Retrieved September 23, 2011 from http://www. ndsmcobserver. com/2. 2755/betamax-vs-vhs-an-old-school-technology-battle-1. 265159