Disc Wars

CBS allies with RCA

The consumer electronics business has produced some fierce marketing wars, but none is likely to be quite so cutthroat as the struggle that is starting for control of the videodisc industry. Videodisc players look much like any stereo deck, but, plugged into a TV, they play prerecorded movies, sports events, opera, sitcoms and documentaries. They promise to advance significantly the cause of viewers' lib, giving TV addicts freedom to watch what they want when they want to watch it.

The big U.S. competitors, RCA and Magnavox, are battling for the new market and for partners to adopt their totally different technologies. Last week RCA, the parent of NBC, signed a major deal with its TV network rival, CBS. It was one of the rare times that the two giant entertainment and electronic companies have cooperated in an important way.

Using RCA SelectaVision technology under a license, CBS will manufacture discs to be played on RCA machines. This will give CBS, the nation's largest record maker, entry into the business. RCA will win not only royalty fees but also the support of CBS, which spent months looking at the systems of both videodisc competitors. Now CBS's library of programs will be available to owners of RCA machines.

In addition, RCA has signed licensing agreements with nearly 20 Japanese and European companies, including Plessey in Britain and Matsushita in Japan. Of course, Magnavox, a subsidiary of North American Philips, has not been idle. Sony has a license to use Magnavox's videodisc technology, and the U.S. company also has a longstanding deal with MCA, the parent of Universal Pictures, to make its discs.

Both RCA and Magnavox accept that only one of them can win. Their technologies are so dissimilar that the discs of one cannot be played on the other's machine. Just as the 33%-r.p.m. audio record won out over the 45-r.p.m., ultimately one company will dominate the market. While RCA essentially uses a phonograph-like needle to "read" its discs, Magnavox uses an optical laser. Magnavox machines offer more features, such as stereo sound, freeze frame, slow motion and reverse viewing. Partly because of its advanced technology, Magnavox's players are likely to be more expensive: they list for $775, vs. RCA's expected $500 or less.

Magnavox players are already on sale in Atlanta, Seattle and Dallas, and the company hopes to be selling coast to coast by early 1981. RCA has not sold a single unit yet, but is aiming for nationwide launch at about the same time. The stakes will be high. Every one of the 72 million U.S. homes that now have TV sets is a potential customer for a videodisc system. On an estimated 30% to 50% penetration of that market by the end of the decade, RCA projects industry annual sales of 5 million to 6 million players and 200 to 250 million discs. Potential total revenues: more than $7.5 billion a year.

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