Blu-Ray and HD DVD: Betamax - VHS 'Format Wars' Redux?

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Case Details:

Case Code : BSTR230
Case Length : 21 Pages
Period : 1975-2006
Organization : Sony Corp.
Pub Date : 2006
Teaching Note : Available
Countries : USA
Industry : Electricals and Electronics

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Sony's First Format War

In 1963, Sony introduced the first VTR for use in business and the airline, educational, and medical fields.

In 1964, it introduced a new VTR called CV-2000 for home use. In 1971, it launched the 'U-Matic' system, the world's first commercial color video cassette format. In this format, the videotape was housed in a cassette as opposed to the open-reel format prevalent at that time.

It had cartridges that used a 3/4 inch tape and had a playing time of 90 minutes. Later, Sony developed two players - the VP-1100 video cassette player and the VO-1700 VCR -- to play and record on the new tapes respectively.

The 'U-Matic' system was quite popular in North America and Japan and was widely used in television stations, schools, and businesses...

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Betamax Vs VHS

Earlier in 1974, in order to establish the Betamax format as the standard, Sony had demonstrated the prototype to several electronic manufacturing firms and sought to license the Betamax technology. Initially, companies like Toshiba, Pioneer Corp , Aiwa , Zenith , and Wega Corp. signed up. However, several other companies like Matsushita, JVC, and RCA declined. Sony was to learn very soon why JVC did not show any interest in licensing its technology. In 1976, JVC introduced VHS, a rival video format that was not compatible with Betamax. By then, Betamax had sold over 100,000 units and had virtual monopoly in the market...

VHS Wins...

By the mid-1980s, sales of VHS machines were far ahead of Betamax. With the availability of video cassette players, more people were keen on watching movies in the comfort of their homes. Sensing a demand, JVC licensed the VHS technology to movie studios so that they could release their movies on VHS. Thus, for a time, video cassettes of just-released movies were available only on VHS. By the time movies came to be released in the Betamax format, Betamax was already on its way out. Also, when video cassettes were released, the studios expected that people would buy them the same way that they bought audio cassettes...

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