The Better Picture That Lost the Living Room

In 1975, Sony released Betamax, a home video recorder that many engineers considered technically superior. A year later, JVC introduced a rival format called VHS. By the late 1980s, VHS had won so completely that Sony itself began making recorders in the rival format. The usual explanation is that the better product lost, but the pattern is more instructive than that.

Early Betamax cassettes recorded for about one hour, while early VHS tapes recorded for two, long enough to capture a feature film or a football match. Consumers reportedly valued recording time more than picture sharpness. JVC also licensed its format widely, which pushed prices down and filled shop windows with VHS machines. Rental stores, a new business at the time, stocked the format most households owned, and households bought the format that rental stores stocked.

Defenders of Sony note that its format did offer a sharper picture, and that the company licensed Betamax to several manufacturers as well. This is true, but the licensing coalition behind VHS was larger, and the advantage compounded as each new buyer made the format more useful to the next.

This is true, but the licensing coalition behind VHS was larger, and the advantage compounded as each new buyer made the format more useful to the next.

The episode is often cited as an early example of a network effect, in which the value of a product depends on how many others use it. It also suggests that engineers and buyers may be measuring different things. Quality, in the market, was whatever customers needed most, and that was rarely the thing the designers had polished.