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1987: Winds of Change Begin to Blow

8/28/2006 02:00:00 AM Eastern

The 1987 Winter Consumer Electronics Show proved to be highly rewarding as the show issue ran 168 pages, demonstrating that TWICE had already won acceptance, by industry manufacturers, as an important publication.

The show was primarily focused on audio, giving dealers a preview of what was being billed as the next hot new audio product, digital audio tape (DAT) recorders. But a look was about all they would get for the year as the music industry successfully fought to hold off product introduction as it lobbied Congress for legislation mandating the inclusion of anti-copy circuitry.

For video, the floor talk was mainly about the excessive VCR inventory and their crumbling prices. But Go-Video set off a new firestorm of complaints from Hollywood by demonstrating a dual-deck VCR at the 1987 Winter CES.

Dealers met for the first time with the new GE/RCA Consumer Electronics team. They received assurances that the merger only presaged better things to come. Shortly after the show, GE donated its David Sarnoff Research Center, better known as RCA Labs, to an arm of Stanford University. At midyear, GE swapped its electronics arm for France's Thomson group's medical electronics business.

New applications for the CD format were a hot topic through 1987. Philips spent much of the first half of the year lining up backers for its CD-Video format (20 minutes of digital audio plus five minutes of Laservision analog video), and presented it at the Summer CES. Before the year was out, they revealed plans for an entertainment-educational system dubbed CD-Interactive.

GE's annual report for 1986 revealed, for the first time, that RCA's pool of patents, primarily related to consumer electronics, generated approximately $154 million in annual royalty income. RCA had never shown this as a line item, instead crediting royalties to the earnings of related divisions. GE's breakout indicated that RCA Consumer Electronics operated at a loss through most of the 1980's.

The winds of retailing began to shift noticeably in 1987, showing signs that the freewheeling days of unlimited expansion were coming to an end. The industry was surprised when Dixon's Group of the United Kingdom outbid U.S. retailer Audio/Video Affiliates to acquire the parent of Philadelphia-based 90-store retailer Silo.

On Wall Street, Atari made a bid for California retailer Federated Group and Soundtrack of Oklahoma purchased Long's Electronics of Alabama.

New York City's Crazy Eddie chain adopted a poison-pill defense against a hostile takeover and then made a bid to acquire the 24-store Tipton Centers chain. When that failed, Crazy Eddie's founding Antar family made a $7 per share bid to take the loss-ridden chain private and was outbid by an offer from Houston's Entertainment Marketing.

Video was back in the spotlight at the Summer CES where JVC and major supporters of its VHS VCR format staged impressive introductions of Super-VHS. Experts predicted its improved performance would make it a consumer favorite, replacing VHS as the market leader. Sony's hopes that an Enhanced Beta system might reawaken the market for its format were dashed when RCA-Columbia Home Video announced it was dropping Beta from its prerecorded videocassette catalog.

A lavish CES exhibit was staged for CD-V by developer Philips, a group of supporting hardware makers, movie studios and record companies. Philips said it would have more than 250 titles ready for release by fall. But a degree of skepticism was expressed by some show-goers who noticed that the only 5-inch CD-Vs on view were a handful of titles from Polygram, a Philips music subsidiary. And, the prototype players shown were modified Laservision units designed to handle 12-inch and 10-inch video discs, as well as music-only CDs and CD-Vs.

Go-Video filed a multibillion dollar anti-trust suit against the Motion Picture Association of America, a number of individual movie studios and Japanese and Korean VCR makers. The David vs. Goliath legal action charged there was a conspiracy to keep it from obtaining and selling dual-deck VCRs. The suit was settled and Samsung agreed to make the first units for Go-Video. After dragging through federal courts for 16 years, the $3.1 billion antitrust suit filed against the Japanese TV industry jointly by Zenith and Emerson Radio's parent National Union Electric was dismissed by the federal appeals court in Philadelphia. They found no evidence that the Japanese conspired to destroy the U.S. industry through price fixing and avoiding competition with each other. A further appeal to the Supreme Court was similarly rejected.

Another major highlight of 1987 was the first public demonstration of HDTV; a two-week showing at the Hecht Department Store in Washington of the analog MUSE system by developer NHK, the Japanese broadcaster NHK, the National Association of Broadcasters and Japanese set makers. The FCC formed a special HDTV advisory committee to study the best way to develop an advanced TV system that would be compatible with existing TV receivers in the same way that color broadcasts can be viewed in black-and-white on monochrome sets.







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