Digital Machine May Be Obsolete by Time It Arrives : Marantz’s New Tape Deck Not on Track

Marantz’s venture into the digital audio tape business sounds something like an 18-month-old broken record.

In June, 1987, the Chatsworth company made a splash at an electronics trade show when it announced that it would be the first home audio company in the United States to sell Japanese-made DAT recorders, the state-of-the-art cassette decks with the sound quality of compact disc players. But the plans were shelved that fall when Marantz couldn’t get a manufacturer in Japan to make the machines for it.

Last March, Marantz again said it was on the verge of launching its DAT recorder, only to shelve the plans again for the same reason.

Other audio companies, including Harman Kardon and Casio, had similar experiences. After whetting the audio buff’s appetite with DAT’s promise of a cleaner, crisper sound than is available from conventional tape decks, the companies ultimately scrapped their plans for the same reasons Marantz did.

The delays now appear to have dimmed consumer interest in what was once touted as a dazzling new technology. “People are sick of hearing about it,” said William Wolfe, technical editor of Stereo Review magazine in New York. And further delays may even make DAT obsolete as newer technologies are developed.

Marantz continues to be interested in marketing DAT recorders as soon as possible, but the company’s president, James S. Twerdahl, concedes: “The squabbling may end up turning consumers off altogether.”

A DAT recorder uses a cassette about 2 inches shorter than a conventional audiocassette and records using digital signals like those used to make compact discs. The result is clear, distortion-free music. Anyone who tries to record off a CD with a conventional tape deck simply cannot reproduce the CD’s sound quality because a tape deck records using analog electronic signals, not digital. And unlike conventional cassettes, the sound quality of a DAT does not deteriorate when it is copied.

But the music industry, led by the Recording Industry Assn. of America trade group, has bitterly fought DAT’s introduction. It worries that DAT recorders will encourage piracy of compact disc recordings and hurt sales, and it has threatened to sue companies that sell them in the United States. That ploy, electronics industry executives say, has intimidated some Japanese manufacturers. In addition, they say, the manufacturers are holding off until the controversy subsides because they don’t want to risk exacerbating frequently touchy U.S.-Japan trade relations.

Japanese companies also fear that introducing DAT machines might undermine sales of their own compact disc players just as the U.S. market is starting to take off. Industry research shows that less than 10% of U.S. households have bought one since CDs were introduced five years ago. The number of compact disc players sold in this country had reached 7.1 million through 1987 and is expected to jump to 17.5 million units by the end of next year, according to recording industry figures.

The irony is that for all of the fighting over DAT recorders, their impact on the audio business may be brief. Models probably will be priced initially for $1,200 to $1,500, well beyond what most consumers can afford. Wolfe, the Stereo Review technical editor, adds that the technology is highly complex, making it unlikely that prices will plunge as prices for compact disc players did after they were introduced.

Another problem is that companies such as Philips N.V., the giant Dutch electronics conglomerate, are already working on more advanced sound systems using blank, erasable compact discs, estimated to be two to five years away from being introduced. The technology would be similar to the erasable discs that companies such as Tandy Corp. are developing to store data in computers.

A Philips spokesman said those machines would likely store more music on a disc than DAT recorders could store a cassette. Consumers also would be able to record on a system that plays their old compact discs. Furthermore, they could select songs at random, as they can on compact disc players today, without fast-forwarding through unwanted tracks as they must when listening to a cassette.

“There may not be any reason for DAT at all,” Wolfe said.

DAT machines were first demonstrated at an audio show in Japan in October, 1986. Thus far, the only authorized DAT machines for sale in the United States are available for installation in cars but cost as much as $1,500 to $2,000. Also, these machines only play back prerecorded tapes; they do not record.

DAT recorders are on sale in Japan and Europe, where a model can cost $2,000. They are also available in very small supply on the informal “gray market,” where the machine is bought overseas and resold here.

Marantz’s Twerdahl said that because of all of the uncertainity, the company isn’t counting on selling DAT machines soon and has not included projected sales of the equipment in its current business plan. Having been burned before, Twerdahl said, he is reluctant even to guess when Marantz might finally introduce a DAT machine.

“It’s embarrassing. It’s a little like the mouse that roared,” he said.

Marantz intended its announcement that it would sell DAT machines as a signal that the company was making a comeback. But a 1987 article in Billboard magazine called the company’s announcement a “grandstand play.”

“The cynics accused us of doing it as a public relations stunt. It did provide that function, but it helped reassert Marantz’s position of leadership,” Twerdahl said.

The disclosure came shortly after Marantz was bought for $14 million in early 1987 by Dynascan Corp., a Chicago maker of CB radios and cordless telephones. Before the sale to Dynascan, Marantz had been controlled by the Tushinsky family, whose Superscope company bought the firm in 1962 from founder Sol Marantz. The company imports stereo systems built to Marantz’s specifications by Japanese manufacturers.

Before Dynascan bought the company, Marantz had been struggling financially and its reputation was slipping. In 1986, it lost $8.7 million on sales of $60 million, in part because it competed in the videocassette recorder market against cheaper Japanese models.

Dynascan stemmed the losses by selling two divisions for about $3 million, putting in strict costs controls and getting out of the VCR business except for those packaged with audio systems. In 1987, Marantz posted a small $193,000 operating profit on sales of $56 million. Jerry Kalov, Dynascan’s president, said he expects Marantz’s 1988 results to be flat for both profit and sales but believes that the division has turned around substantially.

From the start, the recording industry has said it wants DAT machines to include anti-copying devices, although a government study released earlier this year said that an anti-copying chip favored by the industry could distort music.

The electronics industry contends that DAT machines represent no threat to compact discs sales, citing the way conventional cassette decks complement record players. Officials argue that the recording industry will benefit because it will mean sales of new prerecorded tapes.

There may be some movement toward a compromise, although industry executives caution that such optimism has been heard before. The breakthrough appears to include a system developed by Philips that would limit a consumer to making only a single copy of a compact disc with a DAT recorder.