Tangle in Tapes

A company that grabs early sales leadership for a highly popular new product usually finds that the battle has only begun. The harder part of the fight is to stay on top after competitors swarm into the market, as they almost inevitably do. This lesson is hitting home at Ampex Corp., which helped make stereo tape recordings one of the outstanding sales successes of the late 1960s.

Ampex, based in Redwood City, Calif., first won supremacy in the market by the ancient strategy of being first with the most. When stereo tape cartridges and portable players appeared in 1965, most recording companies were reluctant to make the large investment needed to produce tapes for cartridges. Ampex officials correctly figured that consumers, particularly among the young, would spend heavily for the opportunity to listen to 80 minutes or so of uninterrupted stereo music of their choice in cars, on the beach, or anywhere that they might travel. The company contracted to reproduce on tape the music of scores of recording companies and began mass marketing.

Ampex quickly won the largest share --as much as 40%--of a market that last year had estimated retail sales of $400 million. Tapes account for 25% of the sales of the entire recorded-music business, up from 3% or 4% in 1966. Though the sound of new disk records is generally thought to be better, the quality of tapes tends to last much longer because they use no needles. The recorded tapes have become the fastest-growing segment of Ampex's domestic business. In eight years under President William Roberts, the company's sales have climbed from $84 million to $296 million and its profits from $3.8 million to $13.7 million.

Mod Counterattack. Now Ampex is paying the price of success. Its example has stimulated some of its music suppliers to become competitors, drop their contracts with Ampex, and begin making tapes themselves. Their activity adds to already vigorous competition from

RCA, Columbia, Capitol and such relatively new companies as General Recorded Tape and International Tape Cartridge. Ampex officials concede that their market share has recently dropped to about 35%--some rivals put it closer to 30%--and is likely to shrink further, perhaps to 25%. Though they think that such a share would be enough to keep sales rising because of anticipated market growth, they are not complacent about the prospect.

The Ampex counterattack is led by Donald V. Hall, 33, vice president of the Chicago-based tape division. He is a mod executive who favors Edwardian suits and splashy ties, partly, he says, as an example to older Ampex executives, whom he is trying to persuade to think "pop." He also has come to admire the music that the young favor, and that helps him in negotiating with some recording stars. "These kids on records are saying something," he explains. "If you are an adult, and you shut them off, then you are not hearing what's going on."

Bagging a Speckled Bird. Hall has signed up some 36 independent record producers to replace the companies that have dropped Ampex contracts. More important, Ampex has established its own record-making division, partly to assure itself of a future supply of music. It has recruited The Great Speckled Bird, The American Dream and other singing groups to perform on tape.

Even if these efforts fail to stop Ampex's market from winding down, the company has many other prospects for growth. It also makes equipment for radio and TV stations, satellite-tracking stations and computer systems, and produces information-retrieval systems. Ampex has an impressive record of seeing and exploiting the potential of the new technologies. Every year since 1962, two-thirds of its sales have come from products less than five years old.

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