RCA Defends Timing of Videodisk Canceling
By Sandra Salmans
The New York Times
April 6, 1984
The prospect of another year with an $100 million loss finally convinced the RCA Corporation to jettison its videodisk player business, Thornton F. Bradshaw, the company's chief executive, said yesterday.
RCA announced Wednesday that it would phase out the manufacturing and marketing of its videodisk player this year. The decision, which follows losses of about $575 million on the videodisk system, was long overdue, in the view of some industry analysts.
But in an interview, a relaxed, pipe- smoking Mr. Bradshaw defended the company's steady-as-it-goes approach. Citing a number of problems that had developed in the videodisk player business, he said, ''All these factors were gathering force in the last two years.''
Until a few months ago, however, he added, ''they were never strong enough to tell us that it wouldn't eventually work.'' After ''intensive studies,'' Mr. Bradshaw said, the company concluded that ''no matter how long we hung in there, we couldn't see it making a profit.''
Mr. Bradshaw defended the action and gave an upbeat view of RCA in a presentation to securities analysts yesterday. He said that RCA might seek future growth from the home computer and small business computer fields. RCA last ventured into computers in the 1960's, when it developed a mainframe computer business, which it wrote off in 1971.
The analysts' meeting, RCA's first in seven years, had been deferred ''until we were ready,'' he said. ''RCA has had its share of false starts, and we didn't want to have another,'' he added.
It was under Mr. Bradshaw's predecessor, Edgar H. Griffiths, that the videodisk player - RCA's only major new consumer product since television - was developed in the 1970's. Mr. Bradshaw took over as chairman in July 1981, after Mr. Griffiths had been dismissed by the board and four months after the videodisk player had been introduced with great fanfare. But Mr. Bradshaw had been a director of RCA for nine years, and had stepped up his role in the company's operations after his appointment as chairman.
Difference in Price Cited
At that time, the video cassette recorder was selling poorly. Unlike the videodisk player, the recorder can tape television programs off the air for later viewing. But the videodisk player - which uses a disk resembling a phonograph record to play movies and other programming on a television set - was substantially less expensive, as were the disks.
Given the price difference and video cassette recorders' lackluster sales, RCA's decision to develop the videodisk player was a reasonable one, Mr. Bradshaw maintained. ''I knew that there was a limited time window when we could break through and create a mass market,'' he said. ''It was still a horse race.''
Large volume was key. ''We had to sell the player in the millions, and the disks in the tens of millions,'' he said. ''That's why we built large plants and made heavy investment.''
Soon, however, the videodisk's price advantage had all but disappeared. Manufacturers of video cassette recorders slashed their prices, and ''the VCR began to sell in volume,'' Mr. Bradshaw recalled.
To his surprise, too, the trade in cassettes and disks turned into a rental business and the movie studios, which had agreed to let RCA put some of their films on disk, decided to get into the business themselves.
Others Abandon Videodisk
Other videodisk player manufacturers, recognizing the power of the video cassette, gave up. RCA continued because it was making money on the sales of its disks, and will continue to make disks as long as there is ''reasonable demand,'' RCA said.
''The concept was that it was a razor-razor blade situation, and you could make money on the blades,'' Mr. Bradshaw said. But RCA also needed to make money on the players. To date, it has sold only about 550,000 of the players, half the number it had projected. With volume continuing low, RCA decided - by an unanimous vote of the board - to abandon it.
It was an ''unhappy decision'' for the people who had helped develop and market the videodisk player, Mr. Bradshaw said. ''But when the weight of a $100 million loss is lifted from your shoulders, it's a great relief.''
GRAPHIC: photo of RCA chairman Thornton F. Bradshaw
Copyright 1984 The New York Times Company