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21 April 2006 - International [Global]
Competitive Advantage
Few people reading this will remember when the videocassette and video recorders (VCRs) were first introduced. This revolutionary technology allowed people to record TV programmes, which they might otherwise have missed, and to also watch movies in the comfort of their home through the growth of video rental stores. It is difficult to appreciate just what a difference this technology did make not only to the leisure activities of millions of people but also to related industries such as cinemas.

If you still use a VCR then it is more than likely that you will be using a VHS format. VHS stood for Vertical Helical Scan, which related to the way in which it recorded information. This rather cumbersome expression was later changed to a far more consumer friendly Video Home System. When the technology was introduced in 1975, consumers had a choice. The rival to VHS was Betamax. The rivalry was important because the standard recording format of either VHS or Betamax was used not only in VCRs but also in the actual videotapes themselves. Movie distributors therefore would be considering whether to release a VHS version or a Betamax version but probably not both because the cost would be prohibitive. Similarly the VCR manufacturers would tend to opt for one standard or the other.

Many people considered Betamax to be the superior standard but it suffered from a shorter recording length compared to the VHS. Betamax enjoyed success in the professional TV studios but the real market was the home entertainment market. Betamax was introduced by Sony and supported by Sanyo, Toshiba, Pioneer, Aiwa and NEC whilst VHS had the backing of JVC, its inventor, Matsushita, Hitachi, Sharp Mitsubishi and Akai. The battle to gain competitive advantage and dominate the market continued into the 1980s with the VHS format eventually winning the day.

Now the whole process might be repeated after the launch of the first high definition (HD) DVD players and discs in the United States. This time the battle will be between two rival standards; Sony, Samsung, Dell and Apple are amongst the companies supporting Sony's Blu-ray technology whilst Toshiba, NEC and Sanyo are pushing the HD DVD standard, This time Sony have the advantage in the capacity of the technology; the Blu-ray disc will be capable of storing 50GB of data whilst the HD DVD stores only 30GB. Current DVDs hold only a measly 5GB by comparison.

The two systems will, like their VHS and Betamax ancestors, be vying for the support of the key industries that will determine whether the standard will survive or die a Betamax like death to be cherished by a few hard line supporters. This includes the movie industry, the games industry and the music entertainment business. Microsoft has come down in favour of HD DVD but the stakes are high. The development of these standards will allow a new generation of games and high quality video and audio to be available to millions of householders. High definition technology will allow gamers even greater realism in games and the image clarity and quality will be better than ever before for TV viewers.

The battle is on therefore for dominance in the industry. This will be a good example of a living case study, which will be worth following over the coming months and years.

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