Sonys Betamax versus JVCs Video Home System - Essay Example

Q1. Despite its early advantages the ‘Betamax’ format eventually lost out to the ‘VHS’ format. Identify and analyse the flaws in Sony’s strategy. What steps might they have taken to achieve a more favourable outcome? Sony’s Betamax vs. JVC’s Video Home System (VHS) Introduction: The 1970’s and 1980’s saw one of the biggest technological rivalries – The Videotape Format war. This was a war between two of the largest brands Sony’s Betamax and JVC’s VHS. It is essential that there is a good understanding of the evolution of the Sony’s Betamax and JVC’s VHS, before comparing the two. A comparison of the two formats is then made based on the business developments, judgment errors and possibilities of improvements. Further on, a conclusion is drawn and suggestions are made regarding the steps Sony could have taken to ensure growth and success with the betamax. Sony’s Betamax: Sony introduced its first system – Betamax in 1975. This was extremely famous among consumers. Sony had demonstrated Beta – a videotape recording system, to be a single format for all. Sony came up with Betamax, which was developed with the best audio and video quality. They were the first to offer the technology, however they did not give much attention to the requirements of the customers. Sony provided a recording length of less than 60 minutes, which was not enough to record a movie (Format War, 2008). Betamax format focused on quality of recordings not realizing that the consumers’ focus was on recording time and ease information transfer. This was one of the factors that brought the decline of Betamax (Wielage and Woodcock, 1998). Sony was quickly followed by JVC’s Video Home System (VHS), which decided to go with its own format and lead to a format war. Sony faced a lot of competition from many manufacturers like Quasar’s – Great Time Machine, Sanyo’s – V-cord and the biggest competition from JVC’s VHS. The Great time Machine and V- cord eventually faded away, leaving VHS and Betamax battling for years (Moulding, 1996). Sony’s biggest drawback was the fact that they had not done enough research into the markets before they developed the Betamax and they felt that the product would surely sell because it was developed by them. They believed that betamax was strongly backed by their brand name and the quality of the audio and video in the betamax (Sony History, 2008). However, this egoistic approach caused them to loose the format war against JVC’s VHS. This failure due to techno arrogance simply showed Sony’s failure to understand how the technology market really works. JVC’s VHS: JVC’s Video Home System (VHS) was launched in September 1976, when JVC disagreed to follow Sony’s developed format and decided to go in a different direction. They then developed VHS, which was in competition with Sony’s Betamax. VHS was initially developed with features better than Betamax. It provided a higher recording time and the players could fast forward and rewind much faster than a Betamax player (Moulding, 1996). VHS was launched in the market one year after the launch of Betamax and eventually became more famous. VHS offered better hardware at a much lower cost and it also had a wider range of tapes, and it also provided tapes on rent (Schofield, 2003). Flaws in Betamax – Comparative Study: Betamax, a Sony product was developed with the view of providing compact and neater tapes to the consumers to meet their needs. This however was one of the biggest mistakes that Sony had made. They provided consumers with tapes that were smaller and compact but lasted for only 60 minutes of recording time. The consumers were looking for a different product though. Consumers required a tape that could record an entire movie, with best audio and video features. Sony did gain almost 100% of the market; all the video machines in use were Betamax. Sony had a monopoly in the market due to their tapes being incompatible with any other player except their own. This however was for a very short period of time, since it did not provide the consumers what they required. Betamax required constant supervision during recording, the players were slow and the recordings were a maximum of 60 minutes (not even a complete movie). VHS on the other hand had a better, faster and more technologically developed player, which was able to fulfill all the customer expectations (Owen, 2005). If Betamax provided better technology, it would still be in demand. VHS has created a brand image of its own, and was recognized to have a complete package. Even though the picture and sound quality of VHS was not as good as that of Betamax, people preferred using VHS since they would not have to get up half way through the movie or match to change the cassette (Shiraishi, 1985). Also it was obvious that VHS delivered excellent value based on what consumer expectations were, but Betamax delivered excellent values on dimensions that did not matter to the end customers! Betamax was superior according to the labs, however the whole product by itself was not as good as VHS. VHS as a whole product was much more superior and of higher quality (Wielage and Woodcock, 1998). Betamax had a lot of other drawbacks. They had marketing issues as well, since until the 80’s Betamax was a synonym for Video recorders. This was the main reason for the lawsuit to be filed against Sony for infringement of copyrights of movie producers (Wielage and Woodcock, 1998). This marketing problem was useful to Sony in a way but was also a big reason for the decline of Sony’s Betamax products. Steps to Betamax’s Success: Even though Betamax was the first successful consumer video format, they had lost out on a lot of factors. Sony was unwilling or extremely slow to bring in other companies to support manufacturing of Betamax tapes. JVC on the other hand were more than happy to share the VHS format with other competitors. Due to this, Betamax had to slash its original high prices to be competitive. At a later stage the prices of Betamax were much lower than that of VHS. This proved to be a great factor in the demise of Betamax (Moulding, 1996). Even though Sony was aware of the fact that their product did not meet up to customers needs, they were unwilling to change or improve Beta. They did loose a large chunk of their share market, but by 1984 they had sold 2.3 million units. However, by 1987, VHS had captured up to 95% of the market and were clearly the market leaders. This was the end of the format war and it was declared that VHS were the winners and that the battle was over (Brandfailures, 2006). There was no doubt that Sony had produced a very efficient product, however Sony had not kept in mind the needs of the consumers and had lost out due to very poor market research and development. Sony’s marketing was based on the pride of the company that the people would prefer everything that was produced by Sony. This caused them to loose in the format war. Sony could have continued with their product if they had improvised it keeping in mind the consumer needs (Brandfailures, 2006). There was an excellent opportunity for them to improve their product whilst they held almost 100% of the market. Sony had a big opening available to them; they could share the manufacturing of Betamax with other competitors as well, to be more competitive against VHS. However Sony had missed out on all the chances since they wanted to keep the entire format for solely their production, hence not letting them meet up to the competition of VHS. From these arguments, it is clear that Sony’s betamax could have been made successful, if Sony had done sufficient market research to understand the customers’ requirements. Also, it could have shared its format with the other players in the market, thus making it compatible with the other recorders; as this could have increases the popularity and market share of the format. When faced with competition, instead of basing its competitive edge on its brand name, Sony could have worked on improving the product specifications and fie tune it to meet and excel the customer needs. These strategies, if followed, along with Sony’s brand name, would have definitely resulted in the success of Betamax. Conclusion: After the prolonged war between Betamax and VHS, as published in Times magazine it was a ‘Goodbye Beta’. Sony continued to produce Betamax till 1998, long after it was declared that the VHS has won the format war and it was superior to Betamax and also, it had captured most of the market. The war went on for a period as long as ten long years and ultimately Sony had to give in and announce a plan to set up VHS line of video recorders (Schofield, 2003). VHS on the other hand was now facing newer competition and was under a threat with the rapid improvements in technology and the introduction of Digital Versatile Disc (DVD). DVDs had taken over the market and completely substituted the videotapes bringing an end to a complete era. Q2. Compare and contrast the rival strategies for the launch of ‘blu-ray’ and ‘hd-dvd’. Which do you think will be successful and for what reasons? Are there any circumstances in which neither strategy might succeed? Blu-Ray and HD Dvd Format Wars (Business Strategy Case Analysis) Introduction: This business strategy case analysis focuses on the new and upcoming technological advances in the field of compact storage (optical) devices: Blu-Ray and HD Dvd formats. Before the comparison of these two innovations, it is essential to understand their functionalities and features. The introduction of the Blu – Ray and HD Dvd led to the war between the two formats to become the successor of DVD. As this report focuses on this conflict, it is essential to understand the two formats in detail before comparing their current situation. Hence an introduction is given about the blu-ray discs and their specifications. Having discussed about their features, it is then essential to compare them, in order to arrive at a proper conclusion for this business strategy case. The comparison focuses on the business development for these two formats focusing on the strategies adopted by the major players to make their product, a success. Based on these data and information available about Blu-ray and HD Dvd formats, an analysis is then conducted on the future opportunities and product life of these discs. Also, an analysis is then carried out on the list of major players who have either adapted or discarded either of these two formats. The current situation of the format war, as seen by the industry experts is also analyzed. A conclusion is then drawn based on these results. The Optical Discs: The first idea for an optical disc (named as Videodisc) was put forth and patented by David Gregg in 1969. In early 80’s this media underwent a technological boom with the introduction of CDs. This was a great leap as CDs offered better audio quality and storage space up to 650 MB. This enabled much better data storage and retrieval. It also paved the way for establishing a standard for pre- recorded and re-writable media at a very low cost (Bellis, 2008) The 1990’s saw the birth of DVDs. These were introduced as a better version of the CDs with higher storage limits. These enabled recordings, standard definition video distribution and higher quality. DVDs were of the same dimensions as of CDs with better data storage, reading and writing features. This was considered to be the end of an era for the CDs occupying literally every single storage media market at that time. (Blu – Ray: History, 2008) With the innovations in technology, the demand for more upgraded products increased with the new generation computer systems. The demand was for much higher storage and better features. This gave rise to the birth of Blu ray and HD DVD formats. The search for technology to provide a feature that allows higher real time data processing device led to the research for a format that can carry higher amounts of data more precisely (Labriola, 2006). Also, this had to be in the same dimensions of the currently used optical devices, so that the hardware for reading and writing this format is backward compatible with the existing formats (i.e., CD and DVD). This has led to the war between Blu-ray and HD Dvd formats to be the successor of DVDs. Blu Ray: Blu - ray is also known as Blu- ray Disc (BD). This is one of the newest technological developments in the field of optical discs. Blu - ray has been developed by the Blu-Ray Disc Association (BDA) and a group of the world famous consumers electronic and media manufacturers like Sony, Samsung, Dell, HP, Hitachi, Mitsubishi, JVC, Pioneer, Phillips, etc., (Blu – Ray: Info, 2008). Initially Sony along with Pioneer started two new projects: Ultra Density Optical (UDO) and DVR Blue. These were formats of rewritable disc, which eventually became BD – RE (Blu – Ray). This was officially announced in February 2002, and the blu – ray association was founded with nine initial members, after which the number grew (Demos, 2005). The research was conducted to develop blu ray discs which can hold larger amounts of data than the current optical discs (such as CDs and DVDs) and also enable high definition videos, in short a much better version of the existing discs. The reason for it to be named as blu ray disc is that the data is read or written on the disc using a blu- violet laser rather than the red laser used for the traditional optical discs. The storage capacity of a blu ray dick is up to 25GB on a single layer disc and up to 50GB on a dual layered disc. The dimension of the disc is the same as that of a VCD or a DVD. However, the content is authored using the complicated Java based platform (BD –J) (Blu – Ray: Info, 2008). HD DVD: HD DVD (High – Definition Digital Versatile Disc) is a high-density optical disc format, designed and used mainly for the purpose of storing data and high definition videos. This was designed mainly by Toshiba to substitute DVD format optical disc. HD DVD was initiated by Toshiba since they were not ready to be a part of the Blu- Ray which was initiated by Sony (Labiola, 2006). Toshiba announced that they were competing and they developed HD DVD, which was first declined by the blu – ray association twice. After this, with the intervention of the U.S Department of Justice when three new members were added to the panel and the voting rules were changed and the vote was finally passed to accept the proposal of Toshiba (Auger, 2005). HD DVDs used the same technologies as DVDs, except that HD Dvds provided a higher storage capacity of up to 15 GB per layer when compared to 4.7 GB per layer in DVDs. The HD Dvd utilises the HDi interactive format to author the content in the disc. This is very similar to web development using the technologies such as CSS, HTML, XML scripts rather than the complicated Java platform used for Blu- Ray as mentioned earlier (Auger, 2005). Rival Strategies - Blu Ray vs. HD DVD: Blu – ray and HD DVD are the latest developments in the media markets. Both these formats of discs have dominated the high definition markets, and have not left a scope for new producers to enter the market with better standards. Sony’s blu – ray disc is undoubtedly the best in the market at present. Even though blu – ray was introduced in the markets after HD DVD, blu – ray has out beat HD DVD in many ways. Both these companies are backed up by other large organizations in related markets. Blu – ray is supported by strong and powerful organizations like Sony, Panasonic, Philips, LG, Pioneer, and Apple (Sweeting, 2005). All these companies have a strong brand name and are trusted world over for their quality of service. On the other hand companies like Microsoft, Toshiba, Hitachi, and NEC support HD DVDs. Blu – ray disc have a higher hand in the studio market share. About 60.2% of the studios support blu – ray format, as compared to 33.5% who support HD DVD. The studio support is currently split in favor of blu – ray. Major studios like Disney, Sony Pictures, 20th Century fox; Warner Bros and MGM support blu – ray format (McClain, 2007). However, Universal Studios is the company that supports only HD DVD. The other supporters of HD DVD also support Blu – ray (Huang et al, 2008). Though Blu – ray and HD DVD are competitors, the most obvious substitute for Blu – ray discs is HD DVDs. Blu – ray discs are more expensive than HD DVD and so are the players. For people who feel that it is not worth spending extra money for the HD factor, DVDs become an obvious substitute for both HD DVD and blu – ray (McClain, 2007). Since HD DVD is cheaper to produce and since they have a lower capacity the price of these HD DVDs is also lesser when compared to Blu – ray. The price of Blu – ray discs ranges around $11.99 whereas HD DVDs cost in the range of $8.99. Thus the difference in cost makes HD DVDs a good substitute for Blu – ray discs (Kaisha, 2007). Sony proposed in February 2006, to start the blu – ray discs. They introduced the blu – ray disc that was used mainly for high definition video and for data storage. They shipped out the first blu – ray players in June 2006. The start of sales was very low for Blu – ray at the start, since the choice of discs were very less and the prices were very high. However, there was a change in this thought once Blu – ray started producing games Play Station 3 and made the console a blu – ray disc player as well. They aimed at different sectors of the market and introduced the discs with high storage. This played a very important role in the growth of the blu – ray discs since Play Station 3 used only blu – ray drive as a primary storage of information. Also Sony concentrated on the marketing front for the Blu – ray discs and used its influential marketing techniques. Their main growth for the blu – ray was completely based from the sales of the Play Station 3 (Distad, 2008). They sold a total of 10.5 million play station 3 consoles, which meant a total of 10.5 million blu – ray machines across the world apart from the blu – ray players. Some of the market researchers and analyst were also of the view that Sony with its un-comparable marketing campaigns for Blu – ray ensured that Blu – ray format does not loose the format war. Sony had learnt from its mistakes with the Betamax Video formats, and used the Play Station 3 as a secret weapon to win this format war, after their loss as Betamax Videos (Smale, 2008). Toshiba introduced HD DVDs to the market in March 2006, beating Blu – ray into the market by three months. They saw a high volume of sales once they were launched in the markets, however by January 2007, blu – ray disc outsold HD DVD at a ratio of almost two is to one (Distad, 2008). Toshiba tried to avoid the format war from starting up, however, in August 2005 after a lot of negotiations it was announced that all attempts to unify standards had failed. By the time Blu – ray had brought in play station 3 and sold around 10.5 million blu – ray machines HD DVD had sold only about one million HD DVD machines, even though they had tie ups with Xbox (Smale, 2008). In February 2008, Toshiba decided to stop production of HD DVD players and announced they would provide product support and after sales services for the current consumer (Dvorak, 2006). Decline of both Blu-ray and Hd DVD: Blu – ray and HD DVD are both the latest technological development in the market. They both have grown immensely over the last few years, however, HD DVD due to a few of its drawbacks was let down from the market at a much earlier stage. Though still in demand, it has not been able to win the format war. It is very evident from the current situation that Blu – ray is the clear winner of the format war. This is because Sony has learnt its lesson from the losses they suffered because of Betamax. Sony ensured that their product is of high standards and is what the consumers want (Kabushiki, 2006). Toshiba on the other hand has already faced a series of blows with the decline of HD DVD. They faced their first blow when Sony introduced Play Station 3 with an inbuilt blu – ray player, after which the second big blow was when Warner Bros. shifted to blu – ray format (McClain, 2007). There were a series of blows within a period of one week like that of Best Buy choosing to back Blu – ray, Wal- Mart announcing that it would buy blu – ray products exclusively, Netflix discontinued buying the HD DVD for rentals. All these events caused HD DVD to loss the format war on the basis of a technological knockout. Even though Blu – ray has overcome all the competition and is the market leaders at present, it is a known fact that they would decline soon. This is because of the fact that technological developments are continuous and people are always looking for a better option (Holaham, 2007). A lot of the market watchers believe that the Internet would take the place of the discs. This is because the industry is trying to make the Internet the new distribution medium of content. It is not very far in the future that people would prefer to save all their content in an easier format. There are various possibilities for developments. With the major technological improvements one can assume that something new and better is in the making and will soon be the new best in all markets (Distad, 2008). 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