Problem Paper No.

3:
Marketing 508 - Laura Carvajal
Dr. Kendall
September 24, 2011






















In 1975, Sony entered the videocassette recorder market with its introduction oI the Betamax,
Iollowed by VHS in 1976. The Beta was the Iirst compact, inexpensive, reliable videocassette
recorder. The Beta led VCR production and sales Irom 1975 to 1977. Despite the Iact that
Sony was Iirst 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 Irom
production by Sony in the late 1980`s (Cusemano).

In the case oI Beta versus VHS, VHS successIully copied many oI the market leader Beta`s
desired Ieatures but in such a manner that it diIIerentiated its product, creating a new category
which was Iavorably received in a mass market (Cusemano). Due to diIIering Iormats, tapes

were not able to play interchangeably on either machine ultimately, customers had to choose
one category or the other.

Both Beta and VHS oIIered ease oI use, but with diIIerences in technology. Beta claimed to
oIIer better picture quality than its competitor, however this would later prove to be less
important when compared to the more competitive pricing oIIered by VHS. An important
Ieature and an exclusive one that inIluenced 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 Ior consumers since most movies ran
approximately two hours. Although Beta later increased their tape recording capacity to Iive
hours, they never caught up with VHS, which was later able to record up to eight hours (Time).

AIIordability was another major issue and a major reason Ior Beta`s downIall. 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 Ior quality however this was not the case. VHS gave the
customer what they wanted a Iunctional machine at a more aIIordable price (Bermingham).

Initially, Sony desired to limit licensing agreements while JVC`s strategy was aimed at extending
many licensing agreements. Within a short period oI time, JVC had Iorged partnerships with
Hitachi, Panasonic, RCA, Magnavox, Quasar, Sharp and others all oI which had their own
brand oI VCR and at a signiIicantly lower price than Beta largely due to high competition
among the brands. By 1984, 40 companies utilized the VHS Iormat compared to Beta`s 12
(Sweany). With respect to the VCR market, its scale was such that an array oI 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 oI Sony's reluctance to extend licensing agreements was the widespread
availability oI VHS. Initially, all movie rentals were in Beta Iormat however as market demand
veered in Iavor oI VHS, retailers began to shiIt their movie rental stock in the more popular
Iormat. The emergence oI this secondary, complementary market, also contributed to the decline
in the popularity oI Beta (SchoIield).

Beta`s U.S. market share declined to 25 by 1981. By 1986, it was a mere 7.5, as VHS was
declared the victor by the end oI the 1980`s. (The Great 80`s). Had Sony made diIIerent
decisions early on, perhaps there would have been a diIIerent outcome however VHS won the
competition hands down by delivering what the consumer wanted and establishing itselI as a
market leader within its own category.








ReIerences:

Bermingham, John. Beta or VHS? When Good Is Good Enough!(2002, July). Retrieved
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Cusumano, Michael, et al. (1991) Strategic Maneuvering and Mass-Market Dynamics. The
Triumph of JHS Over Beta. Retrieved September 23, 2011 Irom
http://dspace.mit.edu/bitstream/handle/1721.1/2343/SWP-3266-23735195.pdI
Goodbye Beta: Sony will make VHS players (1988, Jan 25). Time. Retrieved September 23,
2011 Irom http://www.time.com/time/magazine/article/0,9171,966523,00.html
The Great 80s (n.d). Retrieved September 23, 2011 Irom The Great 80`s web site:
http://www.thegreat80s.com/80s-Memories/Betamax.html
SchoIield, Jack. Why VHS was better than Betamax. (2003, Jan. 24). The Guardian. Retrieved
September 23, 2011 Irom
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 Irom
http://www.ndsmcobserver.com/2.2755/betamax-vs-vhs-an-old-school-technology-battle-
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