The MiniDisc Arrives

"It's ingenious how the record industry finds new ways of selling the same music back to you."<>--Pete Townsend.

The Bay Club in San Francisco's Bank of America Center is to working out what the Luxor casino is to poker night with the guys. It's sumptuous, clean and meticulously climate-controlled. Perspiration is quickly sopped up by thirsty white cotton towels. Prostrate bodies don't stand in line to slurp from a rusty water fountain; fresh bottles of chilled Crystal Geyser are fetched hither by fit Bay Club employees. Only talk-show host Jerry Springer's obnoxious mug, barking simultaneously on four television sets, dresses down the room's opulence.

Within this sanctum of sweaty privilege, Sony Electronics will soon introduce its "Sports Series" product line with a "Sony Sports Walk" through downtown San Francisco. A Bay Club trainer will lead me and other reporters skipping to the beat of Sony, followed by a "traditional carbo-load lunch." It's been raining steadily for the past 12 hours, so the walk is moved indoors. That's okay, because I am the lone journalist to show up, and I want Sony to save face. One reporter parading down California Street in the pouring rain with a yellow Sony product strapped to his torso probably wouldn't look too good back at corporate headquarters.

More than a dozen unused name tags stare at me from the check-in table. Arranged on an adjacent table are numerous Sony portable products, bursting with the familiar yellow "sport" casing. There are Sport Walkmans, Sport TVs, Sport Discmans, even a new Sport monocular/radio combo.

My mission is to seek out the latest in technological gadgetry: the MiniDisc, the product Sony hopes will replace the audio cassette as the format of choice for high-quality, portable music play and become standard equipment in homes, cars and boomboxes.

Sony reps in sharp Reebok running outfits abound, pouncing on my every question with lightning quick, PR-steady attention. The MiniDisc demo is quick but impressive. There are two kinds of MDs on display today: a basic playback unit and a pricier recording version. The MiniDisc packs up to 74 minutes of digital sound onto a tiny, 2.5-inch, recordable or prerecorded optical disc. And like your old tape deck, you can record your own, on blank MiniDisc "software" available for $13.99.

The product Sony hopes will bring digital-quality home recording to a mass market improves on the traditional cassette in many ways. Sound quality remains constant even after multiple plays or rerecordings (the manual claims more than one million). The MiniDisc player also has an amazing ten-second skip resistant buffer, which keeps your music from jumping while you are bumping 'n grinding. The discs-dubbed "software" because of their resemblance to computer floppy discs-slip easily in a shirt pocket. There's no messy spaghettilike explosion when a temperamental deck eats your tape. No need for head cleaners or demagnetizers. The sound is extraordinary. Dolby is passe. Moreover, the MiniDisc feels good in the palm, like a new bar of soap. The headphone cord has a wristwatch-sized liquid crystal readout, allowing me to pause, scroll, repeat or shuffle the order of songs, as well as adjust the volume.

No doubt about it, the MiniDisc is awesome technology.

Technology of the Week

If you haven't yet been introduced to the technology, chances are, you will. To complement its two-year-old audio format, which was originally unveiled with much less hype, Sony is in the midst of a multimillion-dollar campaign to convince the world that the MiniDisc is the next generation of sound carrier-the heir to the portable audio throne.

But if the MiniDisc is just the latest cool toy for the gadget freak, for the technophobic consumer it poses a threat to the comfort of a well-nurtured music collection.

Within just 20 years, consumers have been prodded to abandon their 8-track and reel-to-reel tapes, LPs and 45s. The lifespan of each new audio format seems to keep getting shorter and shorter. As soon as one audio format becomes accepted and established, along comes a sleeker, snappier product with more bells and whistles. Just as with computers or video games, you either keep up or get left behind. Now it's the cassette's turn. In 1993, Norio Ohga, then president of Sony and a father of the compact disc, told reporters that the CD was invented specifically for economic needs, not for convenience or sound quality. "At the time we developed the compact disc, the LP market was saturated and the cassette market was beginning to slow down," he said. "We knew we needed a new carrier."

Together with Philips, the Dutch electronics giant, Sony perfected the CD format. When they demonstrated it at a meeting of industry bigwigs and record companies, it was flatly rejected. "They all thought the LP was fine," Ohga said. "But we introduced CD, and within five years we had kicked the LP out of the industry."

So if you think your music collection is tidy, complete and safe from the MiniDisc, think again. Because Sony doesn't just want you to replace your cassettes; it is prepared to use its record companies to encourage you to do it.

Whassup Wid DAT?

At the 1995 Grammys, host Paul Reiser gave some insight into the purchasing habits of average America. "A little message to the industry," Reiser began. "I bought tapes to replace my records, then I bought CDs to replace my tapes. If you change one more time, I swear, we're all going to buy sheet music and hum."

Reiser's joke fell flat-maybe even flatter to Brian Levine, Public Relations Manager for Sony Electronics. "That's funny," he allowed. "But the truth is, over time, the consumer will choose the format that meets their needs best. We feel that MiniDisc meets their recording and playback needs better than analog cassettes. Anyone who tries MiniDisc will be attracted to it and purchase it."

Sony isn't pimping the MiniDisc to come in last, mind you. After all, the company has tasted bitter fruit in the new-format game more than once. Back in the late '70s, RCA's endorsement of the VHS video format sent Sony's Betamax to an early and undeserved grave. Then there were Sony's lesser-known audio bombs like the Elcassette and the stereo microcassette. More recently, Sony and Philips have been proclaimed by some as losers in the race to produce a double-sided digital videodisk format. Toshiba and Time Warner have produced a DVD that better fits the needs of Hollywood, according to a February Business Week article, leaving Sony and Philips losers once again. Perhaps more to the point, in 1992, Sony's Digital Audio Tape format was also designed to replace the standard cassette. But the superior playback quality of digital recording scared off other record companies, which were afraid that DAT would lead to widespread audio piracy. Thus, the format was launched with only a few prerecorded titles-mostly classical releases. Due in part to this dearth of product, Digital Audio Tape bit the dust on the consumer end, although it became enormously popular with studio set: musicians, producers, engineers.

Sony is spending millions to ensure that the MiniDisc won't suffer the same dismal fate. The company kept notes from its DAT debacle and applied its lessons when time came to launch the MiniDisc. Record-company fears of widespread digital piracy have been partly alleviated: all MiniDisc recorders incorporate a copy-protection system. A user can record onto blank MiniDiscs many times, but they can make digital recordings of a prerecorded MiniDisc only once, and cannot ever record over prerecorded discs.

Not only has Sony pioneered the electronics side of its new music carrier, the company is releasing lots of the music, too. Unlike in 1982, when it launched the compact disc, Sony now has the distinct advantage of owning a stockade of established labels that includes Columbia, Epic, Ruffhouse, Sony Classical and Sony Discos. Sony is number three among record companies in American distribution, behind WEA and Polygram. Its roster of talents spans the spectrum-from Michael Bolton to Leonard Bernstein, Pearl Jam to Pink Floyd.

"When we launched MD, we took all of these factors into consideration," Levine said. "We made sure we had great support from the music industry, we came out with a number of prerecorded titles right away, and we installed [copy protection] in the recorder units."

Final for the Vinyl

Comedian Larry "Bubbles" Brown once cracked that he had installed a fool-proof burglar deterrent for his car-an 8-track tape player. "Last week, someone broke in and left two tapes," goes the joke.

The obvious superiority of cassette tapes helped them blow by 8-track tapes with relative ease. It wasn't quite such an easy ride for the CD, but anyone who doubts the ability of the record industry to make American consumers adopt a new audio format needs to reexamine the assassination of the long-playing record.

In 1986, barely four years after Sony unveiled its compact disc, Motown Records was one of the first labels to discontinue titles from its record inventory, making about 400 older hits available only on cassette or compact disk. At about the same time, many record companies-including Warner Bros., Atlantic and Polygram-also began offering retailers deeper discounts for volume purchases of cassettes than for records. Capitol Records discontinued altogether its discounts to volume LP retailers.

Reissues of out-of-print recordings soon gave naysayers an extra incentive to buy compact discs. Classic recordings from Frank Sinatra, Lou Reed and Bruce Springsteen were re-released in 1987 on CD. Polygram and Columbia combined to roll out the Rolling Stones' catalogue on CD in time for the holidays, one of the first major acts with that distinction. That was also the year the words "bonus track" trickled into the language, as record companies encouraged LP buyers to adopt a new format by putting extra songs on many CD and cassette releases.

In 1988, most record companies raised the charge for returning LPs to 10 percent of the purchase price, compared with 5 percent for cassettes and CDs. For retailers, it sent a message that CDs were less of a financial burden. By year's end, most record companies refused to take back LPs altogether, forcing powerless record stores to issue a no-return policy for albums. The bargain bin soon became the final resting place for albums. In the mania surrounding acceptance of the CD format, the Recording Industry Association of America reported that the total volume of recorded product sold in 1988 topped the previous 1978 peak year. "I would guess its going to be the greatest year in our history," association president Jason Berman said at the time. He was right-1988 ultimately eclipsed the prior record by 37.5 million units sold.

1989 was the year of the bonus track. Paul McCartney, the Bee Gees, Michael Jackson, Goya, Elvis Costello, Dave Grusin and Kate Bush were but a few of the artists who tacked CD-only tracks on their new releases. "Every CD we reissue has something like that," said David Dorn, Rhino's director of media relations. "When we remaster a track, it sounds infinitely better. With bonus tracks, it's a better value and a much better package."

From start to finish, it took eight years for the CD to dethrone the album. In 1984, two years after the debut of the CD player, manufacturers shipped just 5.8 million CDs, compared to 204.6 million LPs and EPs. CDs doubled in production each remaining year until 1988, when they ultimately overtook the LP-207.2 million to 72.4 million. Last year, CDs accounted for 662.1 million units and LPs slid down to a measly 1.9 million, up from the previous year's 1.2 million. (Blame Pearl Jam, which released a vinyl version of Vitalogy two weeks before the CD version.)

The cassette, meanwhile, peaked at 450.1 million units shipped in 1988. Since then, it has witnessed a steady decline in shipments, falling to a low of 345.4 million units in 1994. Some people in the industry take this as evidence that cassettes are on their way out.

Tower Records founder Russ Solomon isn't one of them. In the grand scheme of things, he believes, the CD took "about 20 minutes" to become accepted by record buyers. Solomon doesn't hold as much hope for the struggling MD. "The difference between the MiniDisc and the CD is that people wanted the CD and people don't want the MiniDisc," he said.

"They have an expensive player. Even though the prices have come down, the discs haven't come down in price. The question comes down to: 'What's the benefit to the customer?' Sony hasn't been able to demonstrate that very well. As a result, the customers are not responding to it."

'Xoom', 'Xoom'

To get those MiniDisc sales humming, Sony is banking on a new set of psychographics. It has even coined a buzzword for them: "Xoomers" or Generation X'ers who are attaining Baby Boomer's wealth and status. According to Levine, there are three major target audiences for the MiniDisc. The Generation X'ers, who will be the primary purchasers of the MD. The Baby Boomers, who are traditional Sony powerhouses in buying televisions and camcorders-typically 30-50 year olds. And now, "Xoomers."

"We're zeroing in on 'Xoomers', who are 25-30 year olds who have the enthusiasm for music that the Generation Xers do, but also the pocket change the Baby Boomers have," explained Levine.

But "pocket change" isn't exactly the best phrase for it. The price of pre-recorded MiniDiscs starts at $15.99 and gets as high as $30.99-averaging a few dollars more than the typical CD. And even though Sony just knocked $200 off its introductory playback-only player, the MZ-E2, the sticker price is still a daunting $349.

To get audiophiles interested, Sony has produced a number of "Xoomer"-oriented promos. The June 1994 issue of Rolling Stone was sent to subscribers with a free MD compilation disc. At the 1994 World Cup games at Stanford Stadium, students wandered around with futuristic MiniDisc rocketeer-like backpacks. They have "grassroots" promotions planned: MiniDisc after-work parties at bars in major metropolitan cities like San Francisco, New York and Boston; MiniDisc demos at the site of Big Ten football games. MiniDiscs will be seen on the beach (Sony is a sponsor of Bud Light Pro Beach Volleyball) and on a major airline, with high-profile MiniDisc trials in airplanes and in business kiosks.

The most enticing bait being dangled is an upcoming "win your own recording studio" contest that begins this month. Bands submit tapes and the winner gets a mini home recording studio-a package that includes MiniDisc equipment, blank media and even a Digital Audio Tape recorder-worth around $14,000. The winning band will also receive a trip to NYC to have a recording session at Sony recording studios in New York City.

But wait, there's more. In March, a 30-minute infomercial had its local late-night run on MTV, VH-1, Comedy Central, the Discovery Channel, ESPN, ESPN2, Lifetime, CNBC, Preview Guide and Channel 36. In the jiggly hand-held MTV-esque crosshairs, host Mark Walberg popped up in different locations to hawk the MiniDisc. Unsuspecting "Xoomer" extras were surrounded by slick graphics in head-cocking jump-cuts, gushing over its ease of use, sound and portability. Total calls received: approximately 25,000. "Response to the infomercial has been excellent," said Levine.

How this much-maligned, pandered-to subgroup will respond to these appeals is questionable. In LiveWire's online "Generation X" conference, where pop culture is regularly skewered, two potential "Xoomers" discussed its finer points.

BEV: OK, so my question is how the hell do you pronounce "Xoomer"? David: ex-ploy-tay-shun

Putting it Kindly

From one retailer's standpoint, two groups of people have expressed interest in the MD: the gadget freaks who instantly have to have the newest toy on the block, and the trepidant ones who thinks its a neat idea but too expensive. This is fairly typical in the early stages of a new electronics product. Circuit City sales supervisor Howard Markert believes the initial excitement of MiniDisc lasted about a year after its initial 1993 release. "Sony is a big marketing company and when they release something, they require anyone who carries Sony products to carry the new item whether they want to or not," Markert said. "MD sales have tapered off at a steady pace. There's a demand for them, but everyone's debating 'should I buy one now or wait until the price comes down'."

Tower Records founder Solomon hasn't seen MiniDisc "software" get out of the starting blocks. "We carry them, support them 100 percent, but nobody buys them," Solomon said. "When a MiniDisc player gets down to $19.95, people will buy them like mad. That isn't going to happen for a long time, if ever. Even if they get the player down from $500 to $400 to $300, it's still very expensive.

"The only advantage is its smallness," said Solomon. "It's seductive, but is it worth it to buy a duplicate of the records you're already listening to at home-then have to buy a new machine to listen to it? The public perceives that very quickly, and they're not coming to the party. It's going to be a real struggle for them to pull it off."

As it does with any new product, Sony pumped the stores with slick displays. Incentives for retailers, however, were kind of shoddy. "Sony doesn't expect you to sell things and make money on them," Circuit City's Markert said, sarcastically. "They expect you to sell Sony because if you don't, people won't shop in your store. That's what a billion dollars in advertising a year does."
Still, the size of the company's ad budget doesn't automatically guarantee a winner. Wherehouse Entertainment's new-release buyer Bob Bell says his company has scaled back its MiniDisc inventory. Wherehouse test-marketed MiniDiscs in 15 of their 350 stores since 1993. The same 15 or so stores still have them. "How can I put this kindly," Bell said. "Response has not been overwhelming." Currently, there are no plans to expand MiniDiscs into additional Wherehouse music stores, Bell said.

"We got some in at the very beginning," said a clerk at Star Records in San Jose. "They weren't selling, so we sent the whole shipment back." Still, Sony's Levine takes the long view. "With any product, it takes a number of years before it gets out in the mainstream, until everyone from L.A. to Chicago to Boise knows about it," he said. "Locations that sell hardware have increased, software titles have increased steadily." As the price slowly comes down to affordable levels and the wheels of promotion grind on, Sony is ever-optimistic and counting on "Xoomers" to pull through. "This is going to be the year of the MiniDisc," Levine promised. "Once people use the product, they're going to love it. There's no question it is superior to analog cassettes and incorporates the best of CD and tape." As of now, Sony claims no plans to put bonus tracks on MiniDisc releases. "That's not to say we won't do it in the future," Levine added.

Slow and Steady

But even in a depressed audio equipment market, MiniDisc sales are growing-albeit slowly. According to Sony's 1994 Annual Report, total company audio-equipment sales for the year declined 9.4 percent, from $9.28 billion to $8.41 billion, but sales for the MiniDisc grew.

In 1993, only 60,000 MiniDisc players were sold worldwide. Industry sales totaled 600,000 players worldwide in 1994, buoyed by a strong reception in Japan. The 1995 industry sales projection is 1.5 million units. "When CD came out in 1982, they only sold 30,000 units worldwide," Levine noted. "MiniDisc almost doubled the sales of CD in its first year." Perhaps more important to the format's ultimate success, Aiwa, Clarion, Denon, JVC, Kenwood, RCA, Sanyo and Sharp have already released their own MD players. Maxell and TDK have recordable media available. Even Matsushita, which is known in America as Panasonic, announced last month that it will soon begin selling MD players in Japan. For Panasonic to adopt the MiniDisc format is similar to Tommy Lasorda suddenly deciding to manage the Giants. "This is very important for the growth of the format," Levine said, noting that until recently, Panasonic backed a competitor to the MiniDisc format. MiniDisc player sales may even be represented in the Recording Industry Association of America's 1995 year-end manufacturing statistics, a minor milestone that other would-be cassette-replacement formats haven't ever achieved. To get on this list, the MiniDisc must be made by at least three manufacturers and be voted in by association members.

Similarly, the number of available MiniDisc titles more than doubled in the past year. There are currently 1,200 music titles available in the MiniDisc format-even if you can't find them in a store near you. (They can be special ordered at some stores.)

In addition to Sony's many record labels, other labels including Capitol, Chrysalis, Def Jam, EMI, Liberty, Rykodisc, SBK, Virgin and industry leader WEA are poised to jump on the MiniDisc bandwagon.

But Wherehouse's Bell believes that, other than Sony, the major labels still fear investing in the format. "They're backing off somewhat," he said. "Besides Sony, of course, the other five major labels haven't released any significant titles."

At least one of these labels isn't likely to change its mind soon. Polygram, the country's second-largest record company, is owned by Philips, the creators of their own high-end musical technology, the Digital Compact Cassette. Released in 1993, as Philips' response to its failed DAT collaboration with Sony, this digital replacement for the analog cassette is considered a flop in the marketing books.

Problems range from the price (initial shipments were priced at $900) to having the same drawbacks as the analog cassette. Circuit City no longer sells Digital Compact Cassette. "It's gone, disappeared, dead," said Circuit City's Howard Markert. "The tapes wear out, you can't do editing very easily, and it is sequential recording-so if you want to listen to the 14th song, you have to wait until it gets there."

Rather than admit defeat, Philips will continue to put out Digital Compact Cassettes and resist the MiniDisc format. Among the labels under the Polygram banner are Island, Mango and Motown; so artists like U2, PJ Harvey, and Queen Latifah will not be seen on MiniDisc-at least any time soon. But, if MD technology takes off, expect for other labels, including Polygram, to crossover.

"These guys are so darn greedy," said Stan Goman, senior VP of retail operations at Tower Records. "If they can sell something, they're going to jump right in it."

The Last Word

Tower Records has been selling MiniDiscs for two years. At the Tower Records store on Blossom Hill Road, the MiniDisc revolution has hit the pause button one too many times. Scrunched between the audio books section and the bargain cassettes sits a tri-level, polyurethane shelf holding around 50 MiniDiscs, many of them multiple copies: Journey, Warrant, Living Colour, Kris Kross-the duller side of the cutting edge. Even 12-inch singles have a bigger display. More MiniDisc software titles lay jumbled in an open cardboard box on the floor. It is either freshly looted from popularity, or a latchkey kid in the house of technology. "They don't sell too well," offers a clerk, stamping prices on cassettes next to the display. "It's too bad, because its a nice system."

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