Marantz may be a small audio concern, but it is making noises heard from Washington to Tokyo.
The Chatsworth company wants to be the first to sell digital audio tape recorders, better known as DAT recorders, in the United States. The recorder, a tape version of the increasingly popular compact disc players, uses digital technology to reproduce sounds with crystal clear quality comparable to original master recordings.
But Marantz's plans to introduce a DAT recorder late this year have focused attention on a political fight that's brewing over people's right to tape music. The debate is reminiscent of the one in the early 1980s over the rights of owners of videocassette recorders to tape programs, which resulted in a historic ruling allowing taping.
The controversy makes Marantz's plans to introduce the recorder increasingly uncertain. If nothing else, however, the fight has put Marantz into the public eye after years of obscurity.
Acquired in February
At one time, Marantz was a leader in stereo equipment, but it was hurt by the closing of several consumer electronics chains, notably Pacific Stereo, and by the increased value of the Japanese yen. Marantz imports all of its equipment from Japan.
In February, Marantz was acquired for $15 million by Dynascan, a Chicago electronics company (1986 sales of $147 million) known for its radar detection devices. By the time the Tushinsky family, which controlled Marantz, agreed to sell to Dynascan, Marantz had piled up $7.7 million in losses in 1986 on sales of $60 million.
"A lot of people are saying that they've heard of this poor little company who never did before," said Jerry Kalov, Dynascan's chairman.
The debate over DAT recorders on one side involves the recording industry, which wants laws preventing unauthorized home taping of compact discs. Led by the Recording Industry Assn. of America (RIAA), some big-name musicians and a Washington group they formed called "Coalition to Save America's Music," the group's leaders argue that artists and recording companies will lose sales because owners of DAT machines can borrow compact discs and tape them for free. Home taping on conventional audio cassette recorders, they argue, already costs the industry as much as $1.5 billion a year in lost record and tape sales.
Issue Under Debate
On the other side of the fight is the electronics industry, which has formed its own Washington lobbying group with an equally euphemistic name: the "Home Recording Rights Coalition." Its leaders believe that DAT recorders simply are a technological advance over widely available audio cassette recorders and that consumers should have the best available technology.
Federal and state lawmakers are debating the issue. Congress is considering a bill, backed primarily by Rep. Henry Waxman (D-Los Angeles), that would prohibit the sale of DAT recorders for one year unless they have a special encoding chip designed to prevent taping of compact discs. In Sacramento today, a legislative committee is scheduled to hear testimony on a bill authored by Sen. Herschel Rosenthal (D-Los Angeles) that would have the same restrictions.
For now, little is at stake for Marantz financially. Because it will import and sell DAT machines that are made in Japan, the company has virtually no money invested in plants and design work. And because the first DATs in the United States are expected to sell wholesale for $1,500 and retail at close to $2,000, Marantz expects sales to be negligible at first.
What is at stake is a chance to be the first company to introduce the product in the United States and to gain brand recognition before the DAT recorders are widely available.
"The first company in the marketplace very often commands a large share of the market for some time," Marantz President James S. Twerdahl said.
Because of the uncertainty over the legislation, no one knows how big the market for DAT recorders may be. But compact disc sales totaled $930 million in 1986 in the United States, up 139% from 1985.
Stereo executives also believe that the DAT product could help restore Marantz as a prominent name in the stereo business.
"I see this as part of an overall campaign to resume the leadership Marantz once had," said Wilfred Schwartz, chairman of the Federated Group chain of home electronics stores.
Recording industry representatives, however, suggest that stepping into the limelight wasn't entirely Marantz's decision, and that the company may have been put up to it by its Japanese suppliers, who Marantz refuses to name.
"We've viewed the Marantz announcement for a long time as a trial balloon," said Hilary Rosen, vice president of government relations for the RIAA.
Marantz executives counter that they are merely taking advantage of an opening in the market because Japanese manufacturers, such as Matsushita, Sony, Technics, Casio and JVC, are reluctant to enter the market first for fear of causing political controversy over fair trade issues.
Twerdahl said the company wants to cooperate with lawmakers, but hinted that the firm might sue if it believes a new law is unfair.
The first DAT models are expected to be sent to trade publications that review audio equipment before the first of the year, he said, with DAT recorders shipped to stereo stores by early next year.
But record industry executives want the machines to have an encoding chip that would give artists and recording companies the option of protecting their works against taping.
Marantz's Twerdahl argues that if lawmakers prevent DAT recorders from taping compact discs, it will effectively kill DAT sales because there will be no incentive to buy a DAT recorder instead of a compact disc player.