Why VHS beat Betamax

It probably wasn’t the first format war and it certainly wasn’t the last. But VHS vs Beta, the battle of VCR formats, has served as a cautionary tale for more than a generation now. But there was no single reason why VHS beat Betamax. It was an accumulation of things that led to VHS winning.

Betamax was first on the market, and it had better image quality and generally better build quality. But VHS cost less and the tapes gave a longer run time, so in the end VHS won because it achieved critical mass among early adopters first.

The curse of the early adopter

For me, this one’s personal. My dad loved science and technology, and even though he had little interest in using a computer himself, he encouraged me to learn as much about them as I could. Dad wasn’t the type to run out and be the first to buy things because he didn’t want to go pay top dollar for something, then have something twice as good at half the price come out a month later.

But he tended to be in the second wave. Not on the bleeding edge, but still an early adopter. And like me, he tended to look at the options and pick the best technology. And I’ve wondered my entire adult life why he and I almost always picked the technology that lost, starting with VHS vs. Betamax.

You see, Dad was the first on the block to buy a VCR. Even the guy across the street from us who built a solar house in 1982 got his first VCR after Dad did. But Dad bought a Beta, and within about a year, everyone else bought VHS.

I finally understand why your technology can be first and best and still lose. And it’s a little more complicated than just undercutting the price.

Betamax’s early advantage

Beta hit the market in the United States a good 21 months before VHS, and it had a quality advantage too. It had better sound reproduction and about five percent more resolution. That wasn’t much, but it was enough that when you recorded, you didn’t lose as much quality. Compared to DVD they were both terrible, but Beta was slightly less terrible and DVDs were still nearly two decades away.

Was the quality lost on the televisions of the era? People still argue about that. I think it depended on the TV you had. But the quality went beyond the picture and the sound. The mechanism was smoother and the action on the buttons was usually better. But that was also part of the problem. Did anyone care about that part of the experience? No. If that’s not the height of snobbery, then I don’t know what is.

The VHS advantage

JVC designed VHS as an open standard, without royalties. This gave it an immediate price advantage, and by attracting multiple manufacturers who could take their own approaches, chances were they could find other ways to drive the cost even lower. By 1983, a VHS VCR sold for about $439 while a Beta VCR cost $489, and the VHS tapes cost $1 less too.

But VHS had one more advantage: longer recording times. I’ve heard some people theorize that VHS won just because you can record a whole U.S. football game on VHS, but not Beta. I think that played into it, but there’s usually more than one deciding factor. A football game is about 3 hours and 15 minutes long, and by 1983, a Beta VCR could record 5 hours on a tape. But a VHS recorder could record 8 hours by then. By 1983, Beta was losing, but the war wasn’t totally over. VCRs didn’t break the $500 price point, a common price necessary for mass adoption, until 1983.

It took 9 years for VHS to beat Betamax

There’s one more important point to remember. The VHS/Betamax war wasn’t exactly quick. It’s easy to think, looking back, that it was immediate. It’s true that it didn’t take long for VHS to overtake Betamax in sales. But as late as 1984, Sony was selling Betamax VCRs just as quickly as it could make them. Sony did realize they were losing, but for a time, at least they were making tons of money while they were doing it.

The battle was protracted because the advantages weren’t completely clear. If you just wanted to record TV so you could watch it later, either one could do the job. Betamax was higher quality when it came to recording. But not in terms of reliability. It turned out VHS VCRs were easier to fix when they broke. And in the 1980s, electronics would break occasionally, and rather than replacing them, we did indeed fix them.

Neither option gave you everything. That may have slowed mass adoption. In the end, VHS won, and it won very decisively. But that tipping point took some time to reach.

I think the deciding factor was when VCRs lived up to their potential as a disruptive technology. Movie studios hated the VCR at first because they thought people would use it to copy movies. And people did. A lot. But VCRs also created a new industry and revenue stream. The market for old movies exploded. Studios could put movies on tape after their theater run ended, and people would buy them. Sometimes movies ended up being more profitable on tape than in the theater. At first studios supported both formats, but over time they shifted over to the majority format, and that kicked the momentum in that direction.

The cheap, good-enough advantage of VHS over Betamax

One key lesson of the VCR is that markets tend to favor products that provide good-enough quality at a lower price. If you can get into a market with that kind of product early enough, that negates any advantage of being first. VHS hit the market in the United States by 1977, which was plenty early enough to catch up. VCRs didn’t break the $500 price point until six years later, in 1983.

But here’s an interesting wrinkle. In its 1983 Christmas catalog, Sears pushed Beta hard, cutting the price of Beta VCRs by $110 to sell a Beta unit at $379 right next to a VHS unit priced at $439. It wasn’t enough. Why not?

How markets grow

The theory of diffusion of innovation explains VCR adoption perfectly. VHS vs Betamax falls right in line with it.

Consumers neatly divide themselves into five groups: Pioneers, early adopters, the early majority, the late majority, and laggards. The pioneers were more than glad to pay $1,500 to get a VCR before 1980 or earlier. They’re the ones who noticed you’d run out of tape if you tried to record a football game on Beta. While they only make up 2.5 percent of the total market, they’re critical. They’re very vocal and influential, to the point of being zealots at times, and they pull in the early adopters. Getting a substantial majority of pioneers and early adopters is the hard part. But then they sell the technology to the early majority.

On the other end is the laggards. They’re the last ones to adopt a technology, and the last ones to scrap it. Those people who still use VCRs in 2019 and never figured out DVDs? Laggards. They’re about 16 percent of the market. They probably bought their VCRs late too.

For a technology to catch on, it needs the innovators and early adopters to evangelize it to others. My next-door neighbor will ask me about something before he goes to the big-box store, because he trusts my opinion more than he trusts a commissioned salesperson. A product has to hit somewhere between 15-18 percent market penetration in order to catch on.

The push for 18 percent: Why VHS beat Betamax

What happened with VCRs was the VHS came into the market in 1977 and immediately captured 40% of the VCR market. Now at that point, that was still a tiny part of the curve above, which represents the entire consumer market. But VHS continued to pick up momentum due to its lower price, longer recording time, and cheaper tapes. By 1981, VHS had 75 percent market share to Beta’s 25 percent.

In 1983, Sears cutting their price wasn’t enough to hold off the tide. VHS beat Betamax because at this point it offered better value, even if not every retailer gave it the price advantage. VHS tapes were still cheaper to buy, and even cheaper if you measured the price by the hour rather than by the tape. And by 1983, most movie studios were only releasing movies in VHS format, not Beta. If you wanted to take part in the quintessentially 80s weekend ritual of heading to the video store to rent a couple of movies to watch, you had to have VHS.

By 1984, 1 in 7 households owned a VCR. Sony was selling VCRs as quickly as it could make them, but VHS was still outselling it 3 to 1. So we can estimate VHS had 11 percent market penetration to Beta’s four percent at that point. In 1984, about 10 million units sold. If 1985 mirrored 1984, VHS would hit 15-18 percent market penetration that year. Nearly 12 million sold in 1985. And then the dominoes started falling.

Game over

And that’s why VHS beat Betamax. It’s not that no one bought Betamax. Millions of people did, and as late as 1984, Sony was selling them as quickly as it could make them. But the combination of price and availability gave VHS an advantage that Beta couldn’t overcome. It hit 18 percent market penetration first, and the game was over. It ended quickly. In 1987, VHS outsold Beta 9 to 1. The gap continued widening, even though Sony stubbornly kept making Beta tapes clear up to 2015.

Dad relented and bought a VHS in 1987, if I remember right.

What about Sears?

Sears continued to sell Beta VCRs in its Christmas catalogs at least until 1985, and even cut the price to $199. At this point I think the Beta was there to help Sears sell costlier VHS VCRs. It could sell the Beta at $199, and it made the $299 VHS look like a better deal. Sears could push the mid-range and high-end VHS VCRs and stay out of the sub-$200 price wars.

I’m willing to accept the theory that in 1983, Sears and Sony made a deal to try to stem the VHS tide. But in 1985, I think Sears was using it to try to stay out of a price war. But Beta wasn’t back for a repeat performance in ’86.