One of the most promising areas of growth in the entertainment industry as a whole and the music business in particular has been the development of new technologies in response to ever increasing demands by consumers for new leisure outlets. The coordinated effort of research and marketing that made possible the flourishing pre-recorded cassette trade, as well as the necessary hardware to make it widely affordable, is just one example in many carefully planned and executed efforts to bring advances in technology into the marketplace. With the approach of the Eighties, the entertainment complex as a whole has never had such opportunities to develop and exploit new methods of presenting their products to the public. Science and business have rarely been coupled in such a potentially lucrative fashion as during the present time, and the next few years promise fruits resulting from this cooperation that can only be guessed at today.
One area that holds an extraordinary potential for market growth is that of video discs. Developed over the past eight years, the concept is simple -a disc, not unlike a conventional record, that could be played on a system yielding both sound and pictures. Initially enthusiasm for the concept within industry circles was high, with several companies investing in the development of the necessary equipment. As time passed, however, most dropped out of the running, leaving at the present time, two concerns in direct competition - MCA/Philips and RCA.
The MCA video discs are the same size as phonograph records, but with a silver finish. MCA's product has no visible grooves, the information is read by a laser which never comes in direct contact with the disc itself. MCA is already test marketing their version, trademarked DiscoVision. Among the many features of the MCA DiscoVision video disc system are included freeze frame and slow motion, and full fidelity stereo. The price tag is currently retailing for $700.
Norman Glenn, MCA's senior vice president of DiscoVision Inc. in a recent interview with Cash Box outlined some of the company's goals for its new enterprise, as well as outlining a history of the video disc concept as a whole. Glenn, who has been overseeing the DiscoVision project for upwards of four years, has an MBA from Wharton School of Business. Experience at Collier's magazine, NBC radio, Young and Rubicon's television department and the television wings of United Artists and MCA makes him uniquely qualified to supervise the development of this promising new field.
Commenting on DiscoVision's inception, Glenn recalls: "MCA, entirely on its own, developed an optical video disc system. The first public demonstration ever held of an optical video disc system playing the replicated video disc was staged by MCA. However, we didn't envision ourselves becoming involved in the hardware manufacturing business. We saw this as a separate department. About the same time as we were doing this, Philips of the Netherlands was also working on an optical video disc system which was very similar to ours. All the engineers were coming down parallel paths at the same time.
"So we made an agreement with Philips about four and a half years ago, whereby we could combine our technology with theirs and utilizing the best features of both systems, Philips would have the responsibility for the manufacture of the player, and MCA would have the responsibility of the manufacture of the video discs, and for the making of the programs that go on them.
"What we hope will happen," Glenn adds, "is that other companies will get into the software end. Just as MCA Records presses product for, say, Warner Bros., we can also set up a video disc production facility that will involve outside product."
Expanding on the Philips/MCA agreement, Glenn explains; "This isn't a joint venture, just an agreement between the two companies that they would do this, we would do that. It's non-exclusive, so that they were free to go to other manufacturers."
Looking to the future, he adds "If this is to become the market that we want it to become, we need more than manufacturers of players. We can't just be dependent on Philips and Magnavox. If Pioneer comes, that will attract a lot of attention in Japan. It wouldn't surprise me that if you get Pioneer, you'll see another major Japanese supplier come in."
Testing in Atlanta
DiscoVision's first test market was Atlanta, Ga., with introduction of the system on December 15th, 1978. "We shipped a limited number of players and a limited number of video discs into Atlanta at that time," Glenn explains. "We distributed a catalog which had about 200 titles in it, about half of which went on sale on December 15th. We expect to have all 200 of those titles available for sale by the end of April. Furthermore, during the remainder of '79, we intend to release about 50 to 100 additional new titles, which will be of various types."
Why Atlanta? "First off you have to look at the limited number of players at this time," is Glenn's answer. "We immediately threw out New York, Los Angeles, and Chicago; we just didn't have enough players. We needed to go into more than one market, of course, because if you only go into one, it distorts that market's response. You need another market to measure against, at least two, so we threw out the three major markets right off. Then we took a list of the next 25 markets and listed them on the basis of certain demographic characteristics. We were looking for so-called hot markets where the retail sales level is good, where home ownership is good, where the proportion of homes above a certain level is good. When we were through with that we ended up with about ten markets, all of which seemed to be very good. We looked them over and made our decision on the basis of where the sales force is stronger, where we've got good distribution. When we go into it we want success, obviously, in this first market. This is not a classical test market, however in the sense that you see whether or not it's going to work, and if it doesn't work you fold up. We've all committed ourselves far beyond that. So, it really is a first market, as opposed to a test market.
At the moment there are nine outlets in Atlanta, six of them are Richards department stores, two of which are home entertainment centers, a Magnavox dealer called Allen and Dean and another Magnavox center called McDonald's who are selling players and taking back orders for the players, because they're still in very short supply, as well as selling video discs. The only place we're distributing video discs in Atlanta is in retail stores, adjacent to where the player is sold. We are providing racks to hold about 44 separate facings. And each dealer is required to display prominently two of these racks in an area near where the player is being sold. In terms of sale, he owns these discs, pays for them, just like he pays for a television or a receiver, there are no returns. There are, however, exchanges for defective discs, a one-on-one exchange. To date the number of defective discs and service calls that Magnavox has had has been very few. Everything is going very well, technically, so far."
April in Seattle
The second test market where MCA/Philips's DiscoVision players and discs will be inaugurated is Seattle. The system will be made available there on April 12th. "We were looking for affluence, a certain kind of affluence, and also a certain kind of adventure. You're looking not only for up -scale, but also people who are likely to buy new products. So that's why Atlanta and Seattle. There's really no relationship between the two of them. Just that we didn't want to have a second market in the same geographical area. We wanted to spread it around a little bit. It could just as easily have been Denver and Minneapolis.
"In any event, the system will be made available in about six outlets in the Seattle area. Again, following the same pattern, this time with the Bon Marche department store, Frederick and Nelson, which is a wholly -owned subsidiary of Marshall Fields and another home entertainment center, which is also in the marketplace."
What is the range of product being offered on DiscoVision discs, and how will the evolution of this revolutionary system affect its parent industry, records and music? Addressing himself to these questions, Glenn explains that MCA is currently manufacturing discs in two modes - a half-hour per side variety and an hour per side version. At the present time, a number of instructional programs such as Julia Child's "The Omelette Show" are being offered for upwards of $5.95 per copy on the half-hour sides, while feature length, recently released films (such as "Animal House" and "Saturday Night Fever") are being sold for $15.95 on the hour -per - side discs.
"We set our pricing by what we thought the discs should sell for when we get into full production," Glenn said. "Obviously the video disc business is volume intensive. We haven't pressed any discs in more than a run of 5,000 or so. When we get rolling, I think these are prices we can live with."
Does Glenn envision piracy as a possible problem? "It's possible, of course, to hook up a video disc player to a video cassette machine, and make copies. But at $15.95, the disc costs less than a blank cassette, so piracy doesn't really make sense."
Before addressing himself to the video disc's role in the music industry, Glenn briefly outlined DiscoVision's association with major film companies. "What major motion picture companies are doing with us is saying, `Let us give you a little bit of a hand and see what's going on, in exchange for which you'll give us marketing information. But that doesn't mean we're only going to do it with you. I don't think they want that strong an association, either Paramount, or Warner's or Disney. Their attitude is, 'We made available a few pictures non -exclusively, just to find out what's going to happen.' As opposed to making any strong commitment. Of course, at this time movies are selling better than non -movies, very simply, because they're just of broader interest. They've been pre -sold, millions of dollars in advertising. The consumer knows exactly what "Animal House" is, and they may not know what some of our other product is. It's a question of orientation."
"The first thing I want to say about DiscoVision, the whole video disc proposition and how it relates to the music industry is that we hope the day will come, when it will be a great addition to the entire field of music. We'll be an important part of what that business is, and as it evolves into a home entertainment center concept, we'll be selling more than records.
"On the retail level, as people are coming in to buy "Animal House," en route they're going to be passing the racks of Olivia Newton-John and Linda Ronstadt, and hopefully that's going to create more business for them. What we represent is a whole new industry. I think it's going to be very diverse. People are spending billions of dollars a year on records, so there's a lot of money out there available for this kind of entertainment."
Remarking on the marketability of the video disc through conventional record stores, Glenn sees retail options this way: "If a guy is really running a store on a hard-nosed basis, on a per square foot of floor space basis, there is no way in the world he's going to start taking that valuable floor space and putting in video discs. While certain record retailers may be willing to do this, - the larger ones - he's not going to do it initially because it's cost effective, he's not going to do it because he can justify it on the basis of what the volume is going to be. There are not, at first, going to be that many places where the consumer can go to buy what he has to buy. He's doing it for other reasons. He's doing it so that he can get a little excitement going. It's a store promotion. So, he's got reasons for doing it, and they're not the conventional reasons of how much merchandise he can move.
"The record companies want to do it for store promotion, to bring people in to buy records. But from the record retailers' point of view, it depends on when you want to take the snapshot down five years from now when there is a player population of sufficient size to justify it, he will be another guy who is carrying it. And I'd like to have him carry it. I'll tell you another thing that works very much in our favor. The demographics of the record business are such that they coincide with the demographics of the motion picture business. If we think that motion pictures are going to be our biggest seller then the guy who is going to buy Fleetwood Mac or any other contemporary act, is also going in to buy "Animal House." He's the same person. So I think there's that happy association, as far as the record retailer is concerned, and as far as the product is concerned."
At the present time, how much of DiscoVision production is geared to music oriented material? "Hopefully, in the future, it will include a great many music titles." Glenn responds. "So far, the only music disc we've got is one, an Elton John concert in Edinburgh. John Reid is in love with the video disc. We had a demonstration about three years ago and he loved it. He's been up many times since and told us he'd make something available to us. What he was able to give me, the best material he had, was a concert done for Scottish television, Elton John in concert. They subsequently made a sale in the U.S., late night, for ABC. So, I had no problems as far as clearance, as far as unions, as far as anything was concerned.
"Of course, the fact that so far we have only this one disc available points up an important fact; this is a business we're prepared to go into without having music. Not on purpose, but what I'm saying is that it may have a life of its own, independent of music.
"The reason MCA got into this was not because they visualized it as an audio record with pictures, but because they saw it as a means of delivering films. So while it looks like a record, we still think of it as film. It's flat like a pancake, but it's a film all the way. Our deals are structured that way, that's the way we've approached it. Now, none of us knows what the shape of this thing is going to be in the future. And it very well could be, as I personally suspect, that a large element of what this will become will involve music.
"So far we haven't had a chance to find that out because we don't have enough discs out there to see how the public is going to respond. It's all brand new. But certainly, what we want to learn in the first couple of years is how the public behaves. Not what their attitudes are, but how they actually behave when given a choice of certain kinds of material. And for that reason I'm very eager to get at least a dozen music titles in that catalog as fast as we can, so that we can see how people are going to respond. A dozen titles isn't all that much, granting everything I've said. But I'd like to at least make a start. I'm not going to forecast that this will ultimately be a music business, although it could very well turn out that way. I think of it more as a diversified kind of information and entertainment medium, that will offer the consumer a wide variety of choice. All things considered, however, the feeling here is that music is going to be a very important part of video discs. We don't know how big, but we know it's going to be important. We want to get there as quickly as possible to give the public a chance to show us what they want. Secondly, we believe that the record store is going to be major outlet for us down the road. Absolutely and categorically. I think that the record store is going to change its personality. It's going to be much more than it presently is. It's going to be an entertainment complex."