Marantz Goes Round, Round With Digital Audio Tape

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 recorders with the sound quality of compact disc players. But the plans were shelved that fall when Marantz could not get a manufacturer in Japan to make a DAT recorder for it.

In 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.

Consumer Effect

The delay may have dimmed interest in the product. “People are sick of hearing about it,” said William Wolfe, technical editor of Stereo Review magazine in New York.

Adds Marantz President James S. Twerdahl: “The squabbling may end up turning consumers off altogether.”

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

But the music industry, led by the Recording Industry Assn. of America, a trade group, has bitterly fought DAT’s introduction. The group 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 do not want to risk exacerbating frequently touchy U.S.-Japanese trade relations.

Concern About CDs

Japanese companies also fear that introducing DAT machines might undermine sales of their compact disc players just as the U.S. market is starting to take off. Industry research shows that less than 10% of the U.S. households have bought one since CDs were introduced 5 years ago. The number of compact disc players sold in the United States had reached 7.1 million sold through last year, 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 from $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 electronics giants such as Philips N.V., the Dutch electronics conglomerate, are already working on more advanced sound systems using blank, erasable compact discs, estimated to be 2 to 5 years away from being introduced. The technology would be similar to the erasable discs companies such as Tandy Corp. are developing to store data in computers.

More Music

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

“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 and can only play music, not record it. 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 in the United States.

Twerdahl said that because of all of the uncertainty, Marantz is not counting on selling DAT machines soon and has not written projected sales of the equipment into its business plan. Having been burned before, Twerdahl said, he is reluctant to even 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.”

Public Relations

“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 was made soon 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 from Japanese manufacturers who build to Marantz’s specifications.

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

Dynascan stemmed the losses by selling two divisions for about $3 million, putting in strict cost controls and getting out of the videocassette recorder 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 the division has turned around substantially.

Anti-Copying Device

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 that was developed by CBS could distort music.

The electronics industry contends that DAT machines represent no threat to compact disc 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 somebody to making only one copy of a compact disc using a DAT recorder. A special digital signal would tell the DAT recorder not to make additional copies of a particular CD.

Last week, representatives from the recording industry and manufacturers met in London in an effort to resolve differences so the machines can be introduced. No agreements were reached, with the two sides issuing a vague announcement saying their meeting “took place in a most constructive spirit.”

DAT CHRONOLOGY

1986

Summer-Fall: Japanese manufacturers disclose plans to introduce digital audio tape (DAT) recorders that produce clean, clear sounds much like compact disc players do.

1987

March: DAT recorders go on sale in Japan.

June: Marantz unveils plans to sell a DAT recorder in October, which would make it the first company in the U.S. to sell one. The announcement sparks opposition from the recording industry, which fears taping will encourage piracy of prerecorded music.

July-August: U.S.-Japan trade tensions increase because of the large U.S. trade deficit.

October: Marantz postpones introduction of its DAT recorder because Japanese suppliers are reluctant to build it in the wake of political controversies.

1988

January: Non-recording DAT players for cars are introduced in the U.S. Several manufacturers say they are optimistic that DAT recorders will be available in the spring.

March: Marantz says it may introduce a DAT recorder by June for $1,200 to $1,500 each. The recording industry threatens to file lawsuits against any DAT manufacturer that sells them. Marantz later delays introduction again because Japanese suppliers won’t build them.

May-June: Casio Computer Ltd., a Japanese electronics firm, and Harman Kardon of Woodbury, N.Y., shelve plans to introduce DAT recorders in the U.S.

November: Officials representing makers of DAT recorders and the recording industry meet in London to try to work out a compromise to allow DAT recorders to be sold in this country.