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Sony to Expand Its VCR Line to Include VHS

January 12, 1988|Wm. K. KNOEDELSEDER Jr. | Times Staff Writer

In a reversal of a long-held position, Sony Corp., which pioneered home video with the introduction of its Betamax cassette recorder in 1975, announced Monday that it will begin selling recorders in the competing VHS format.

Plans call for Sony's VHS home decks initially to be made on contract by Hitachi Ltd. of Japan. They are to go on sale in Europe this spring and will be introduced later in the year in the United States.

Although the company said it will continue making the Beta system, many industry experts and analysts see the move as Sony's belated admission that its Beta-only stand of the last 13 years has been a failure.

A few experts even say that Sony's decision is a death knell for the Beta format, which is widely considered to be technologically superior to VHS. "I think you'd have to be crazy to buy a Beta machine at this point for anything other than commercial use," one analyst said.

According to industry estimates, the VHS-format machines--which feature a larger cassette, a different tape feed-through system and generally lower prices--now account for more than 90% of VCR sales.

According to Sony spokesman Steve Burke, more than 25 million Betamax recorders have been sold worldwide since 1975, with 5 million of those sold in the United States. Overall, an estimated 170 million VCRs--VHS and Beta--have been sold worldwide.

With most video stores stocking few if any Beta cassettes, industry experts have been saying for years that, sooner or later, Sony would have to cut its losses and switch to VHS.

"Basically, this is the final concession that, having stayed with the Beta system they've hurt their market position," said Eugene C. Glazer, an analyst for the New York investment firm of Dean Witter Reynolds.

The move into VHS "will put them on more equal footing with other VCR manufacturers, but there won't be as much of a benefit to them as there could have been if they'd done it some years ago," Glazer said. "The big boom market in consumer electronics in the 1980s was led by VCRs--the biggest boom the industry has seen in a long time--and Sony pretty much missed it. They are now coming in when market growth is far more limited than five years ago. Now you can't expect rising shipments year after year."

John B. Franck, an analyst who follows Sony for Provident National Bank, agreed that Sony "made a mistake by not doing it sooner. . . . I think Sony backed itself into the corner on this issue."

Franck said the Sony decision came after pressure from many of the company's dealers. "I think they've done it for strategic reasons to protect their dealers," Franck said. "A lot of shops that are exclusively Sony dealers were being forced to carry another line of product--they had to pick up a Sylvania or Hitachi line of VCRs. Sony doesn't want (its) dealers stocking other people's product."

In a statement issued Monday, Sony played down the significance of the move, saying the "decision to further diversify its video lineup . . . is another step in its ongoing efforts to provide consumers with a greater variety of ways to enjoy video."

"We are not retreating," Burke said. "By adding VHS to our lineup, we have achieved the widest range of choices for dealers and consumers."

Experts say that the history of Beta has been marked by a series of uncharacteristic miscalculations on the part of Sony management. The first mistake, they say, was introducing it with a cassette that provided consumers with only one hour of playing time--not enough to record a feature-length movie.

A second mistake was in limiting the licensing of the technology to just a few manufacturers while its rival, Japan Victor Co. (JVC), which came up with VHS, provided its technology to many. As a result, consumers had more choices among VHS machines, and the format developed sales momentum.

Sony, analysts say, also failed to understand that the VCR market was "software-driven" as opposed to "hardware driven," meaning that consumers didn't care so much about Beta's higher-quality resolution as they did about VHS's lower price and the greater availability of prerecorded cassettes.

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