Record Industry Decries Sales of DAT Recorders

The U.S. record industry, which fought the introduction of digital audio tape recorders for years until it reached a copyright protection pact with DAT makers in July, is crying foul after two companies said they may start selling the machines in the United States before the industry pact is enforced by legislation.

Sony Corp. and Matsushita Electric Industrial Co., which markets Panasonic and Technics brands, announced at the Consumer Electronics Show in Las Vegas earlier this month that they plan to start selling DAT machines by next summer--which means the devices could be on the market before federal legislation is passed to discourage unauthorized duplication of recordings. Matsushita’s Technics division even announced a price of $1,200 to $1,300 for DAT recorders, which are considered the next major advance in audio recording because they offer far superior sound quality to the existing cassette tape format.

Record industry officials reacted testily to the announcements. And Jay Berman, president of the Recording Industry Assn. of America, a Washington trade group that represents record companies, said his group may bring legal action against Sony and Matsushita if they market DAT recorders before Congress passes legislation to enforce the industry agreement to incorporate special copyright protection features.

“We have an agreement that we should be seeking legislation embodying our” industry pact, Berman said. “We said that DAT machines would be built in such a way that limits serial copying. Our agreement also was that we would seek legislation enforcing it. The two things go hand in hand. We have said many times, if (manufacturers) don’t do those things, it will be our intent to sue.”

“The situation has still not been solved as far as we are concerned,” added Bill Berger, executive vice president of Arista Records. “We want . . . (music) publishers fully protected.”

The recording industry thought that it had made peace with equipment makers last July. That’s when manufacturers agreed to include special copyright protection circuitry in their machines and seek a federal law to require such protection. The circuitry, known as the Serial Copy Management System, allows consumers to make direct digital copies of compact discs in unlimited quantities, but it prevents consumers from making tapes of those tapes.

But officials of Sony and Matsushita said although they intend to include the new circuitry in their forthcoming recorders, they won’t necessarily withhold the machines from the market until legislation is passed.

“Our understanding is that passage of legislation is not a necessary prerequisite to the introduction of DAT recorders,” said Jason Farrow, a senior vice president at Sony Corp. of America, whose chairman, Akio Morita, has indicated that he hopes to use Sony’s entertainment units--CBS Records and Columbia Pictures Entertainment--to stimulate sales of Sony’s consumer electronics equipment.

“As with any business, we’ve looked at potential pros and cons about bringing a product into the market” added Mark Sharp, manager of government affairs at Matsushita. Regardless of the status of copyright protection legislation, Sharp said, “we intend to have these machines for sale this summer. Hopefully, (the industry agreement) will preclude any lawsuits.”

The RIAA trade group has been looking for a congressional sponsor for the copyright protection agreement. But experts are unsure if legislation might be passed.

“Until a concrete proposal is submitted and hearings held, we don’t know how quickly we are going to dispose of the issue,” said Ira Goldman, counsel for Sen. Pete Wilson (D-Calif.), who previously introduced a bill to regulate DAT recorders. “The question is, ‘how do you best protect the interests of (recording artists)?’ The best politically obtainable solution appears to be the one reached by the recording industry and the manufacturers.”

At the Consumer Electronics Show, other manufacturers also unveiled DAT recorders, which have been sold in Japan and Europe for several years. But they declined to say whether they might join Sony and Technics and begin selling DAT recorders in the United States.

Sony expects its first-year sales of DAT recorders to reach 70,000 units, about twice the sales of Sony compact disc players in their introductory year. Yet DAT recorders would still represent only a fraction of the market for the other major sound recording format--cassette tape recorders, which sold more than 20 million units last year, according to the Electronics Industry Assn.

Although playback-only digital audio tape machines for cars have been sold for more than a year, DAT recorders have been kept off the American market because of opposition from the record companies. They fear that the machines will lead to widespread taping of material on compact discs and cut into the record industry’s estimated $6.2 billion in annual sales.

Record companies have also stalled DAT by balking at producing prerecorded digital audio tape, which cost as much as $35 a title.

Despite the technical and marketing roadblocks, record company officials say they are concerned that DAT recorders will be rushed to the market in the absence of new copyright protection legislation.

“We’d like to see the legislation enacted first,” said Geoffrey Holmes, senior vice president of Time Warner Inc., the parent concern of the Warner record labels. “There is no reason to rush into DAT; there isn’t even a market yet.”

But the protracted controversy, which has raged for more than three years, has raised concern that consumer interest in DAT may wane if machines aren’t brought to the market soon, experts say.

“All of the manufacturers are chomping at the bit to introduce DAT,” said Lee S. Isgur, a consumer electronics industry analyst for Paine Webber in New York.

But, Isgur said, “DAT may already be too (dated) to be an important product. Whatever advances you can get in sound reproduction with DAT, you are going to be able to improve on with” even newer technology such as recordable compact disc players, which already are being developed by several companies.

Ironically, the RIAA says it is scheduled to meet later this month with makers of recordable CD machines to work out agreement on copyright protection for that technology.