FORMAT FORECAST

When we left our story last month, Intergalactic Widget's top engineer, Smedlap, had just completed his presentation on dig ital audio cassette systems. Smedlap explained that both rotating-head (R DAT) and stationary-head (S-DAT) systems were entirely feasible from an engineering standpoint. Criteria such as mechanical and electronic complexity, data density, head life, recorder size, playing time, and cost were amazingly balanced between the two systems. It was up to you, the Chief of Intergalactic, to decide which format to embrace.

While in the throes of indecision, Ms. Meyerbeer, your ace marketing analyst, had angrily burst into the board room. She planted herself firmly at the head of the conference table, making her convictions quite clear.

"The potential problem with digital tape," she explained, "is that maybe no one will want to buy it." She paused for dramatic effect, while Smedlap's eyebrows did the talking, and then continued. "You see, we have to consider the marketing implications before we jump into this. Above all, let's not repeat the same old scenario in which you engineering types huddle in the lab, appear with some new product, and then expect the marketing people to create a market for it. The world doesn't need any more quadraphonic receivers or Elcaset tape machines, or even digital audio recorders based on videotape. So why does it need not one, but two new digital tape formats? "Think about it. Why was the analog compact cassette such a success? Primarily because it offered a combi nation of features not present in any other format. Given steady improvements in sonic quality, the cassette's supremacy over the vinyl disc was apparent: It was recordable, and portable. Cassette decks were also more portable, and less destructible, than open-reel recorders. And the cassette was more convenient, smaller, and easier to record than the eight-track cartridge. It constituted an entirely new format concept, which proved to be so strong that the cassette has become the dominant medium for prerecorded music. When you add sales of blank tape, the numbers are staggering.

"The lesson is one of originality. When a new product appears, to be successful it must be wanted by the buying public. That requires the presence of an unfilled need, and the proper means to exploit it. The Compact Disc is an ideal example of a product destined to succeed, because it em bodies the magical combination of benefits which make it an original: It combines, for the first time, the phono graph's advantages of rapid access to any portion of the music, and the cassette's advantages of convenience and durability-plus the new advantage of super-high fidelity.

"Digital audio cassette recording, however, does not offer a new concept in format. Aside from smaller size, digital cassettes essentially duplicate the analog cassette, with potential for better sound quality-quality already available in the CD format. Thus, the question of success for the new DAT formats rests on their head-to-head competitiveness with analog cassettes, with the Compact Disc--and with each other. As makers of prerecorded cassettes, will we need to make tapes for both formats, or only for one-and if so, which one? "How do S-DAT and R-DAT stack up against the analog cassette? There are some advantages: Sound quality will be better, cassette size will be smaller, and the formats will enjoy the favored status of being 'digital.' There are also negative attributes: Two formats are inherently weaker than one; the cost of hardware, tapes and duplication will be higher; hardware size will probably always be larger, and DAT will have to compete against an existing standard.

"A similar list of pros and cons may be drawn up for DAT versus the CD.

Digital cassettes have advantages:

They are recordable, and the cassettes are slightly less bulky than CDs.

There are also disadvantages:

The tape will probably cost more than a CD, will not be as durable, and will wear out with repeated playings. Also, the hardware will be more expensive, the heads will wear out, and players will not be as portable.

"Clearly, DAT faces stiff competition from the leading contenders. Further more, no matter how we sort out the pros and cons of DAT, we cannot come up with an original application in which it is clearly unique, or superior to existing formats. Therefore, because it lacks concept originality, the DAT will apparently not create an entirely new market of its own. Its only hope is to supplant existing markets. And that leads us to the obvious question: Exactly what are the existing markets?"

There are two existing markets for cassettes-prerecorded tapes and blank tapes. While the former accounts for significant sales, sales of the latter, continued Ms. Meyerbeer, are even more significant. Being a marketing wiz, she quickly cited statistics to back her claim. "According to a study commissioned by the Recording Industry Association of America, in 1982 home tapers recorded 564 million albums worth of music-about 20% more mu sic than was purchased. And, the study shows, it's not just a few nasty teenagers doing the home taping. The RIAA reports involvement by a broad group of age ranges: 31% of those who tape at home are 10 to 17 years old, 39% are 18 to 34, 25% are 35 to 54, and 5% are 55 to 79 years old.

Blank tape is big business, and a full 84% of all blank tape purchased by consumers, says the RIAA, is used to copy copyrighted music.

"Why," Ms. Meyerbeer asked, "have honest Americans become pirates? One possible answer might be money.

Blank tape is certainly cheaper than buying an album and wasting all that money on things like artists' royalties.

But most pirates live in above-average-income households, and often only tape records they have already purchased. There is also another, more important reason why they tape: A cassette is more convenient. It plays at home, in the car, at the beach, or while you're exercising; anyone who carried a turntable when jogging would be considered eccentric.

"Where does this leave us? We may conclude that the market demands a high-fidelity sound carrier which is portable. The DAT will certainly fulfill these criteria, but the trouble is that two other formats-the analog cassette and the Compact Disc-already fulfill them.

Both kinds of recordings may be played at home, or outside the home on inexpensive players. Particularly in portable applications, because of inevitable degradation caused by the ambient environment (automobile noise, wind, crowd noise, etc.), the sound quality of even the analog medium is fully acceptable.

"Thus we are stuck with the basic question: How successful can a pair of new formats be, if they offer no new market innovations over existing for mats, if the hardware and software will be more expensive, and if the hard ware will also be bulkier? "Well, you say, the DAT will be digital--a significant improvement over the analog cassette. And it's better than the CD because it is recordable. That is a new combination in itself: The first widely introduced consumer digital recorders.

"But that brings us to yet another stubborn question: Does the consumer really need or want a digital recorder? Specifically, what is he going to re cord? If he buys a prerecorded analog cassette or an LP, what is the advantage in copying it onto a digital medium? A cassette is already portable, and copying it onto a digital cassette would not increase fidelity. And an LP might as well be copied to analog tape, since it is cheaper than digital and captures the LP's fidelity. And if the consumer buys a prerecorded dig ital medium (CD), why bother copying it onto digital tape if car and portable CD players are cheaper? Even if digital recordability is desired, the CD already has that base covered. Both write once and fully recordable/erasable CDs, compatible with regular CDs, have already been developed.

"The bottom line is not promising," Ms. Meyerbeer concluded. "For digitally prerecorded music, the CD will be cheaper and more portable. And digital recordability may not be very important; besides, the CD will offer this too.

And let's not ignore the multi-billion-dollar industry of prerecorded and blank analog tape. Even a wildly innovative, more convenient, and cheaper format would have difficulty supplanting such a successful standard. A non-innovative, less convenient, and more expensive format will certainly have its work cut out for it.

"Nevertheless, in the long run, the DAT probably will replace the analog cassette, and share the prerecorded and blank medium markets with the CD. That will happen because the DAT will sound a little better, the cassettes will be a little smaller, and its digital technology will be a little more desirable. More than anything, the DAT will succeed mainly because it is new. But at best, that adds up to a slowly gained success, indeed." Her marketing argument concisely put, Ms. Meyerbeer falls silent. As Chief, the decision is now up to you.

Do you: Forget about the digital tape thing and stick with analog cassettes? Get into S-DAT? Get into R-DAT? Get into CDs? Go back to Monte Carlo for another extended vacation? As a consumer, you'll have about the same choices. Except, perhaps, substitute Miami for Monte Carlo.

(adapted from Audio magazine, Mar. 1986)

Also see:

Dr. Thomas Stockham on the Future of Digital Recording (Feb. 1980)

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