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|Richard Sonnenfeldt's "VIDEODISK" Book Chapter|
This is the complete text of the chapter titled "VIDEODISK" from Richard Sonnenfeldt's autobiography Mehr als ein Leben. Thank you very much Richard for sharing this frank narrative of the management of the RCA CED system.
“Poppy,” ask my youngest grandchildren, “play Heidi again.” They never tire of seeing that twenty-year-old RCA videodisk movie playing on the TV in my den from a 1979 prototype player.
While Heidi plays for the umpteenth time, the catastrophe of RCA’s videodisk invades my mind. Almost nobody knows today that in 1984 RCA lost more than six hundred million dollars when it scrapped a product that performed perfectly. While I avoided that catastrophe personally, it still hurts to remember how my greatest achievement was converted to a corporate debacle which began about six weeks before Christmas in 1978 when Ken Bilby, RCA’s Executive Vice President of Public Relations, said to me: “Just give Uttal your regular spiel.” He was pleased with how I had handled previous interviews with leading newspapers and on television in the US, Japan and England as the vice president in charge of RCA’s videodisk project.
Bro Uttal was working on an article to feature Edgar Griffiths, my boss and CEO of RCA, on the cover of Fortune magazine. I anticipated no problem because I had learned how to handle questions from journalists who wanted to dramatize the videodisk competition as a “winner-take-all” battle between then the world’s largest electronics companies, RCA and Dutch Philips, the developer of a competing laser videodisk. Uttal briefly viewed a few exciting video movie clips and barely noted that the player looked like a production model. Unlike other interviewers he did not want to operate the equipment. I was not bothered by this apparent lack of interest because Ed Griffiths, my boss, had already trumpeted in a high-profile Business Week article that he wasn’t going to put videodisk on the market.
Over coffee, Uttal asked me to confirm that RCA had no plans to launch videodisk. No sweat there. My orders were not to start preparations for mass production. Then Uttal wanted to know, “With these prototypes of videodisk and player, how long would it take to go commercial and how much would that cost? Who would make the decision to launch the product?” Other writers had wondered why I was authorized to answer such questions while my boss, Ed Griffiths, had put the kibosh on a market introduction. These conflicting signals convinced many writers that RCA had something up its sleeve.
As a matter of fact, Ed Griffiths had nothing up his sleeve and I had no inkling whatever that this was precisely what Bro Uttal was going to write about.
A courtesy preprint of Uttal’s Fortune article was rushed to me and to Griffiths late on a Friday afternoon, just before Christmas 1978. That evening, yet, I was asked to meet him “first thing, Monday morning,” at his Cherry Hill office.
Now I rushed back from my home on Long Island to my office in Manhattan and scooped up a foot-high stack of papers: my plans for the commercial introduction of videodisk, at least eighteen months away, because Griffiths had cancelled all funding for any possible preparations for production of videodisk.
I dreaded my impending meeting with my boss. “Hard to predict what he is going to do,” I thought. “If he runs true to form, he will he blame me for the Fortune article which was roasting him.”
On the helicopter from my home in Long Island to Cherry Hill in New Jersey, my thoughts inevitably went back to what I had taken on in 1974, over four years earlier.
After his costly computer debacle in 1971, Robert Sarnoff, RCA’s CEO, wanted to make a splash in consumer electronics. Market researchers and industry experts agreed that a device to play video movies on living room TV sets would be the next big thing in consumer electronics. But burnt before by a prematurely announced video product, Holotape, that turned into a lemon, Sarnoff ordered that videodisk be “kept in the laboratory until finished.” He did not understand, and nobody told him, that videodisk as conceived by RCA researchers would also require exotic new tools and material technology and depended on untried manufacturing processes, in which RCA’s research laboratories had no experience or expertise. The RCA Executive Vice president who ran research was also Sarnoff’s chief technical advisor. He had never developed a consumer product and he blithely assured his boss that there were no “showstoppers,” technical barriers, to putting this product on the market. Sarnoff treated this project as his personal preserve and he kept RCA’s technically more knowledgeable president, Andy Conrad, out of it. Conrad, however, asked me to go and see a demonstration of videodisk and report to him on it.
After the awe of seeing a TV picture produced by a gold coated disk, the size of a twelve inch audio record, there came the “ouch”. I discovered that I was looking at very brief video sequences from disks that were laboratory samples and “best of breed” while the picture I saw was not up to home TV standards. It would be a very long way from here to a mass-market product, I thought. The laboratory concept included a gold-coated plastic disk and recording by electron beams in vacuum on a master from which discs were to be replicated.
Because of Sarnoff’s edict that the product development be kept in research, the vice presidents who ran RCA’s consumer electronics and record divisions, both occupied with vicious competitive battles, were happy not to be involved. Thus there was no one who critiqued the CEO’s pet project. If ever inputs from design engineers, “the factory” and the market were needed, it was here. RCA’s researchers lived in a dream world of their own making. I described it jokingly as brain surgery self-taught.
To me, videodisk looked much tougher than the creation of color TV, where commercially available components could perform new functions while only the viewing tube was a conceptual and major manufacturing challenge. Not so for videodisk. No RCA factories could produce videodisk as conceived in the labs and, quixotically, researchers saw the sophistication of their concepts as a barrier to competition. Nobody worried that these ivory tower concepts might, instead, turn into a booby trap for RCA. Because prognostications and assumptions were mistaken for facts, Laboratory executives talked of being “on the market” in two years while I saw that they had nothing to be on the market with. This was not the first time that I saw that lack of reality perception lead to optimism. Ludicrously, the year 1976 was bandied about as a launch date for videodisk.
To make matters worse, RCA’s chief technical officer stated that “videodisk need not be perfect when first introduced to the market.” This led researchers to believe that consumers, enthralled with novelty, would tolerate defects. Thus, unrealistic manufacturing schemes and fantasies about schedules were compounded by delusions about consumer behavior. I had long since learned that “Good news rises to the top and bad news goes nowhere unless you dig it out.” Bob Sarnoff had no one responsible for digging out all the news about videodisk. Because I saw a looming disaster, I recommended that the product divisions and the research laboratory be directed to work cooperatively on videodisk, but this did not happen.
After another demonstration I repeated my concerns to Conrad, the president. Now he said: "Bob Sarnoff does something very important. He demands the impossible and people try to do it. Let us not interfere.” I asked: “Who will judge when the research is finished?” Little did I know that I would become the one to answer that question.
Late in 1974, RCA’s videodisk project was jarred into the limelight when NV Philips, Europe’s largest electronics company, and MCA, the famed movie studio, announced their LaserVision videodisk joint venture. The press recalled RCA’s failed Holotape video project, the computer fiasco and RCA’s loss of leadership in its birthright consumer electronics businesses. Influential writers and Wall Street analysts predicted that Philips would win the videodisk battle against “has been RCA” which had nothing to announce at this time, because the “research was not finished.”
Alarmed, Bob Sarnoff now put videodisk development under president, Andy Conrad and he named me to take charge of the project as Staff Vice President, RCA SelectaVision. I was also to develop a strategy for videotape. This was a classical “project management” appointment whereby all staff functions reported to me directly but individual researchers continued to report to their own bosses whom I was to hold responsible for results. My trepidation at accepting these challenges was balanced by the thrill of having been selected to manage RCA’s most important product development of that era. Success would restore RCA’s image as the world leader in consumer electronics and would mean far more to me than running a data communications business!
My highest priority was to assess the state of disk technology, because without viable technology all else would become irrelevant. To do that I had to sort the real from the improbable and I decided not to depend on second hand opinions. I had a demonstration room built adjacent to my office at 30 Rockefeller Plaza and I asked the research laboratories to send me their entire inventory of disks. Two trusted engineers worked practically around the clock for several weeks. The only valid test then was to play disks for the claimed half-hour of recorded video. The results were horrid.
Among hundreds of disks we found less than a dozen that would play at all, none with the claimed thirty minutes per side. New disks deteriorated in days even without being handled and the sapphire stylus, which had been claimed to last a thousand hours, routinely failed in less than ten hours. Most frustratingly we could see nothing wrong when we examined faulty disks under microscopes.
To predict that these designs could become a consumer product was like betting that dice rolled ten times in a row would only come up with sixes. To drive the point home, I invited the top brass to my demo room. There was Bob Sarnoff, the CEO and chairman, in his extravagant Italian silk suit -- and a perpetual frown on his face until he saw a few good videodisk pictures. Andy Conrad, the president, looking owlish with his big horn-rimmed glasses seemed smaller than he really was, perhaps because he never spoke first. And there was Jim Hillier, the Executive Vice President of Research and Engineering, faintly cheerful, with his huge pipe now unlit in the presence of his boss, radiating superiority on all matters technical.
When they stopped admiring the few video cameos I had shown them, I invited Bob Sarnoff to select and play disks from huge stacks I had arranged. Soon he asked: ”Why are you showing me all these bad disks?” I said, “because only one in a hundred plays at all, for a few minutes and never for the claimed half an hour. We never know which is good, unless we play it again. Then we don’t know why it is still good or why others have gone bad. Who thinks that putting this technology in a factory will cure these problems? How would you like to ship millions of disks to consumers and then ship and reship equally defective replacements and their replacements? We have years of work to do!” Bob became angry and he said to me, “What are you? Just another &&&&& engineer who wants to keep his toys forever? Sonnenfeldt, remember it is me who determines the schedule.” And I said, “Yes sir, but it is me who will tell you when you have a product to sell.” Andy Conrad winked at me on the way out. "Well done", he whispered. The research boss tapped his pipe and slipped away.
The researchers who had jumped from idea to idea of disk making, without keeping cumulative test records were shocked when I said that I did not want them to work on new concepts until they first found out what was wrong with the old ones. I knew, that to confirm a design suitable for mass consumer use, tens of thousands of disks would have to be tested, not just once when they were brand-new, but repeatedly after shipment and handling and after being stored and played in typical home environments. And we would have to prove that disks would stay good for years after. At that time, the labs could handcraft at most a dozen disks a day and we could test them only by playing and replaying them from beginning to end which took an hour for each disk. Everybody now understood that we would not know what we had for many, many months. Unfortunately that did not still the silly talk that there were no showstoppers but it stopped the nonsense about being on the market in two years.
Meanwhile, I was convinced that the system concept was sound. The problems we found were all in a videodisk design for mass production and the stylus to play them.
Meanwhile, we hoarded a small stock of disks with brief and catchy video sequences, hoping that the disks would stay good for at least a few weeks and that styli would not break during a brief demonstration.
Philips and MCA invited the press and an RCA contingent to the posh Hotel Pierre in New York in March 1974 to attend a glitzy demonstration of their laser disk. When there were glitches the demonstrator quickly turned the player off and launched into talk. Philips technology development was under a Dutch colleague of mine from Digitronics days, who whispered to me, “the show-biz types are ahead of themselves.” While the RCA researchers were ahead of themselves in making claims to their boss, at MCA and Philips it was the marketers who were putting on shows for the public.
Though we knew from the Philips demonstration that their disk was no immediate threat, the press reported that Philips had a winner while RCA had shown nothing. I was directed to keep RCA’s oar in the race. Four days later, with my heart in my mouth, I responded with a demonstration of the RCA videodisk to more than a dozen writers from The New York Times, The Wall Street Journal, Forbes, Time Magazine and the trade press. Though I was sweating bullets, everything went off without a hitch. I cast our demo as a progress report and I did not claim that we were showing a product prototype.
Here are excerpts from a history of RCA’s videodisk published by Harvard Professor Margaret Graham. “The chief demonstrator was Richard Sonnenfeldt …. He had two vital qualifications; he had Start-Up experience and he had an exceptionally tough reputation… The Philips- MCA showing forced RCA's hand….Sonnenfeldt's presentation was low-key and matter of fact, a noticeable contrast to the style of earlier video player events….. ‘Our philosophy,’ he said, in a pointed attempt to deflate the Philips claim to superiority based on exotic laser technology, ‘is to put a simple low cost, easily serviced player in the home and to keep space-age technology in the factory…..’ The low profile approach, so uncharacteristic of RCA, gained general approval for RCA's product and repaired RCA's somewhat damaged credibility with potential licensees…Press coverage during the next few months generally favored RCA over Philips….Sonnenfeldt, deliberately distinguishing himself from the hype of the Philips demonstration, admitted that his viewers were looking at a laboratory model which would still require a lot of work….. He admitted that the disk and stylus would wear out, but at a rate that would be no worse than that for stereo audio disks and stylus cartridges that were acceptable to consumers. His key point was that the simpler RCA player and disk would be a consumer friendly product, much cheaper and more reliable than the Philips product. He was extremely well received by the press." So wrote Professor Graham. The press seemed to assume that I was understating the capabilities of RCA’s videodisk.
Not connected with anything that I was doing, Robert Sarnoff resigned as CEO of RCA on November 5, 1975 and Andy Conrad took his place. He granted my request to build a pilot plant in Indianapolis and staff it with top-notch professionals to create seamless capabilities from research lab to factory floor. To these tasks I attracted a most competent Operations Manager and a brilliant Yale Ph.D. scientist to oversee Princeton research. I had Tom McDermott, a Hollywood veteran look after program acquisition and Don Dickson, a famous marketing professional, started to blueprint distribution plans. All were vice presidents reporting to me.
Under this new regime there was steady improvement in the quality of laboratory disks but not enough to convince me that they could ever be produced in real factories. I told Conrad that we faced ivory tower dead-end technologies—electron beam recording and metal coated disks-- while RCA’s top research executives continued to predict that all problems would be solved. The scientists kept trying and assuring, and I kept testing and proving, unfortunately, that they were making insufficient progress. Under pressure, Conrad now told RCA stockholders that videodisk would be introduced in 1978.
At this time, I was diagnosed with a
large kidney stone that had to be surgically removed. My surgeon said, “If you
don't quit smoking, you will be awake while I work on you for a couple of
hours." I smoked right up to his deadline and then I never touched a
cigarette again. To prepare me for the operation, the surgeon also said, “You
will be convalescing for about six weeks, with some pain, but then you will
play tennis better than ever." I said: "Doctor, that's great, because
I have never played tennis in my life!" Sure enough after the operation,
when I was 51, I took up tennis and at 79, my tennis was
Told that I would be in the hospital for ten days, I was out in five and instead of the three predicted weeks at home, I went back to work ten days later. I remember pounding the hospital corridors to get rid of the gas pains, and a week later walking up and down the hills around my home with killer pains in the muscles around my twelve-inch incision. Was I really afraid, as someone asked me, that I would be replaced at RCA?
Back at work, there were more test results to look at but unfortunately they proved that we still had no design for a consumer product while the researchers persisted in trying to perfect a technology which to me showed diminishing returns.
My instinct has always been to face up to bad news as the first step in creating good news. On the videodisk project, only testing could separate the good news from the bad and testing itself was now the bottleneck. When you can test a two-hour videodisk only by watching it for two hours, then testing a thousand disks takes 2000 hours, and much, much longer if you have to re-test disks repeatedly for durability and handling. Designing faster tests was essential and it was a great challenge. The inevitable happened: the best researchers gravitated to where the action was: they developed accelerated tests, actually using lasers.
While we could not plan a product launch, I continued to radiate cautious optimism to the outside world. At the same time Ed Griffiths, then the risk-averse Senior Executive Vice President and RCA’s most powerful operations executive, griped that expenditures for videodisk were a bad investment. Ed’s idea of a new business was to install RCA telephones in motel rooms that already had RCA TV sets. Not that I would turn my nose up at such profit opportunities, but this was the level of risk that Griffiths liked. He was fond of saying that pioneering never pays. That upset my boss, Conrad, who asked me to write a paper and prove that pioneering had paid for RCA in the past. Conrad loved my paper but Griffiths snatched it out of my hand and never reviewed it with me. Conrad said, “Ed is just trying to cover his ass in case videodisk is a bomb.”
By that he meant a financial bomb. I worked to make sure that we were not building a technology bomb. Though the research scientists devised theoretical remedies for disk making, I was now convinced that the present disk design could not be made to work. I reminded myself how difficult it is to do anything right the first time. However RCA’s reputation remained at stake, its dealers were clamoring for new product, and of course I could not prove the negative: This concept isn’t going to work!
We did, however, find a solution to the sapphire stylus problem. A diamond stylus had previously been rejected as too costly and too difficult to make, but now one of my bright engineers showed that the tiny stylus could be fashioned from diamond dust, cheaply available as a by-product of precision industrial grinding operations. To shape grains of diamond dust, so small that you needed a special microscope to see them, was a major challenge. It took months to fashion our first prototype diamond stylus, with an even tinier sensing electrode of pure gold plated on it. But it worked! And then we learned how to mass-produce these sophisticated mites.
Meanwhile our researchers under Chief Systems Designer Dr. Jon Clemens also succeeded in putting a two-hour recording on a single disk, a big advantage over the Philips laser disks, which required four disks per two-hour movie. Also we had a new player design on ice, with a factory cost of $125, a three-fold reduction. Another great accomplishment was that we had learned how to scan two-hour disks in two minutes, using lasers and computers to automate tests. But all of this would matter only if we learned how to manufacture durable and well-playing disks.
I reported to Conrad that I was on the bridge of a Titanic, headed for an iceberg—no known method of producing videodisks in a real factory. Conrad realized that the introduction of videodisk that he had announced for 1978 was now out, but he told me to do nothing hasty. I felt like the general of a disciplined army dug in, neither retreating nor able to move forward.
While I stewed over what to do next, events intervened once again.
On September 13, 1976, Andy Conrad resigned after it was discovered that he had not filed United States tax returns for several years. Before the news became public, I was called at home at ten in the evening and told that the Board of Directors had just elected Ed Griffiths CEO. I shuddered. I saw myself going from being the old CEO’s trusted troubleshooter to the new one’s bete noire. My new boss had called videodisk a “turkey” which he wanted to kill and even now I was not able to predict success from available technology.
The day after Griffiths’ appointment, I was scheduled to go to Tokyo for renewed demonstrations of the RCA videodisk to virtually the entire Japanese electronics industry. Hopefully, no one outside my group suspected that the present design had no prospect of volume production, although any competent product developer could have guessed.
I had remembered that JVC (Japan Victor Corporation), along with RCA and EMI in England, owned the rights to the "His Masters Voice" trademark, “Little Nipper,” the white terrier listening to the voice of his master emanating from that old style “Victrola” horn. I had a large collection of finely executed alternative designs, from which “Lttle Nipper” had been selected and I asked my secretary, a dignified black woman, to have a nice one framed and send it with my compliments to Mr. Matsuno, the CEO of Japan Victor Company. They also had the right to this trademark. Before I left for Japan, I asked her which one she had picked, and she said, "The one with the Chinese coolie listening to his master.”
In Tokyo, I first saw Akio Morita, the legendary chairman of Sony, which had just announced its Betamax videotape player, which played one-hour video tape cassettes. I proposed that Sony produce a special Betamax for RCA to play two-hour movie cassettes. With all of the haughtiness of a Noh actor, Morita lectured me that his Betamax VCR was a “Time Shift” machine, designed to record and replay broadcast programs. “Forget video movies, there is no market for them,” he said, “ at Sony we know what the consumer wants.” True enough for the Walkman and other products, but as Sony was to learn, at great expense, not true for its one-hour Betamax. Morita must have thought that because Sony had bested RCA with Hi Fi, transistor radios and Trinitron color TV, we could not be right on anything. He turned me down.
Matsuno-San, the CEO of JVC in Tokyo, was even more cordial than usual. When I asked whether he had received my present, he said, "I will show it to you, my friend.” Soon after, I saw my coolie picture on the wall behind Matsuno’s desk. I asked whether that picture of an Oriental in a subservient position had offended him? He said: "But why should it, the coolie is Chinese!"
Now Matsuno delivered a “shocku,” as he called it. He had a VCR videotape machine, called VHS, (different from Sony’s Betamax) which played two-hour cassettes, exactly what was needed for feature movies. Konosuke Matsushita, the all-powerful and revered founder-chairman of JVC’s parent company had forbidden the introduction of VHS because “he wanted no war with Sony.” The introduction of videotape movies now required only a change of mind by Matsushita and the grant of video licenses, thus far refused by the movie studios. Videotape technology had suddenly become practical and was now a threat to videodisk and there were persistent rumors that the US Supreme Court would force the studios to license videotape movies. If those things happened, videotape might eclipse videodisk and I decided to hedge RCA’s bet.
I went to see Mr. Konosuke Matsushita, whom I had known since 1958, to ask whether RCA could buy the JVC VHS video recorder as “branded merchandise” to be marketed in America under the RCA SelectaVision label. He was intrigued by the possibility of a first order for 100,000 machines at almost $ 1,000 each and of putting the onus of “war with Sony” on RCA. Soon after, Zenith, then RCA’s number one U.S. competitor signed an agreement to market the Sony machine. Now thoroughly alarmed, Roy Pollack, who ran RCA's consumer products division, capitalized on my contact and made a deal with Konosuke Matsushita to introduce the VHS video tape machine in America under the RCA label. Because there still were no desirable prerecorded videotape programs, videotape machines remained a small business for the time being, but I worried that they would become very big business if feature movies were licensed for tape.
Meanwhile, the Philips disk looked less and less credible as a consumer product. This moderated the pressure on RCA to continue videodisk development. In short order, Griffiths forced the retirement of RCA’s research boss, the most vocal supporter of videodisk and then had a new Vice President conduct new market research, universally assumed as intended to kill videodisk. The study again strongly affirmed consumer interest in home video movies. No surprise! The report also stated that the videodisk player, thus far pegged at $995, had to sell for $ 495 at retail. This was regarded as the coup de grace for videodisk, but I had a new player design with a factory cost of $ 125 “in my pocket.” The new market research also warned of potential competition from video magnetic tape--again, no news here. Like others before it, this market survey never addressed RCA’s inadequate consumer electronics distribution organization and lack of sales savvy for introducing a new media product. As already stated, I had a team under two vice presidents to address this problem.
Had Griffiths really hoped that this market research would let him kill videodisk? Many thought so, but I don’t know that. It came at the worst time for validating disk production methods advocated by the laboratories.
The laboratories had designed a so-called autocoater, which was to automate the application of coatings to the plastic disc. I found it in a dirty shed on the slopes of Mount Tamalpais near San Francisco. From the outside it was a boxcar sized vacuum chamber, but inside it was a jumble of complex technology. Loaded with gear that had never been tried, this behemoth was now being readied for shipment to Indianapolis. When I asked for test results before authorizing shipment, I was stunned to discover that there weren’t any. Two months later, after specifications had been agreed to, the Autocoater failed its tests. Incredibly, my engineers asked to have it shipped anyway, because "we can fix it.” It might have been fun to tweak this machine, but the supplier’s responsibility to deliver a working piece of equipment would have been compromised.
The machine arrived in Indianapolis nine months later and three months more were needed to start the first runs. Then we were horrified to see that autocoater disks were worse than their hand-made predecessors! The metal layer began to corrode practically the instant the coated disk emerged. Even worse, minutes into a run, the heat generated inside the Autocoater warped the plastic disks so much that they jammed the transport mechanism. No cooling was possible in the vacuum of the autocoater. All of this meant “back to the drawing board.”
How could things have gone so far wrong? I remembered the many times when I had failed to achieve planned results, but had learned a lesson. The lesson here was that coated disks were impractical. As usual, it is very, very difficult to do anything new right the first time.
Meanwhile the most enthusiastic proponents realized that attempts to eliminate the defects of electron beam mastering had reached a dead end: not one single master was ever free from defects that produced not only terrible disturbances in the picture but, depending on their size, fractured the stylus. The stump would then damage the disk beyond repair. Even when the stylus survived, these mastering defects caused the devastating “woodpecker” effect, a hammering sound that made viewers jump out of their seats with their hands over their ears. My hope of using electron beam mastering now died and that was a shocker, because our scientists believed that it was preposterous to try and master videodisks with a diamond cutter, as is done for audio records. We were now staring at two dead ends: manufacturing of coated disks and electron beam mastering.
As if that was not enough, injection molding, the lab’s choice for videodisk replication was also failing. Not one injection-molded disk ever passed muster. While earlier calculations showed that injection molding would be superior for pressing disks, real world data now proved why it would not work. That forced us back to the maligned conventional technique for replicating audio disks, which had been used hitherto only as another defect-prone stopgap method to make experimental videodisks.
Griffiths next called a meeting of all RCA senior operating and staff heads in David Sarnoff’s erstwhile office at Princeton in late November, 1976 to vote on videodisk. Assuming that we were coming to a funeral, Griffiths’ staff predicted that RCA executives would vote videodisk down. I reported that we had a good player design and that program licenses for recording feature movies on disk were available. And then I announced the bad news: RCA did not have a viable disk product design. Once we had such a design, for which I could set no date, it would take another two years to tool for opening day inventory. I ended by saying that I would do all I could to make videodisk a technical success. Next, the new executive vice president of research expressed optimism that the technical problems would be solved. This was the first time that research management had acknowledged technical problems by promising to solve them!
When the votes of the top executives were counted, there was one vote against continuing videodisk, five abstentions and twelve yes votes. It was clear that a majority of its managers thought that RCA needed videodisk to reinvigorate its consumer electronics business. Some thought that Griffiths was dumbfounded at the outcome. The laboratories now recognized that acknowledging technical dead-ends had not eroded support for my proposal to eliminate them. More than that, I was asked to exercise direct supervision over the research effort.
Griffiths now decided to have me continue research and development, but he cut funding for all preparations for production by paring my budget by sixty per cent. I got nowhere with my plea that “production preparedness” was cheap and prudent insurance. Griffiths did not want insurance against a risk that he wanted to eliminate.
To me, it meant having to fire over half of the product development and manufacturing engineers that I had so carefully recruited and trained. It meant, that if we were successful in developing a prototype its mass production would be delayed by years.
Business Week reported in July 1977:
“Griffiths notes that videodisks were chosen for RCA development over the videotape machines in the early 1970’s….and that the problems of software and marketing for the videodisk were not thoroughly explored at the time. ‘There was a great willingness to bull ahead in the old days,’ he said.”
Later in the same article he is quoted: “ Suppose you put $100 million at risk to market the unit. Suppose, at the end of that expense, you couldn’t declare yourself a failure or a success. So you spend another $100 million. What will you do? What will you do? Where are you going to make your profits? Not on the sale of the unit or the pressing of the disk. Both are low-margin items.”
“The easiest thing for me would be to order up the videodisk at the first available date. It would be in the tradition of our innovative leadership. There would be lots of articles written about RCA’s bold step, but the last article that might be written might not be the one we would want to see.”
So quoted Business Week. It would not have been easy to “order up the videodisk” because there was no product to order up. The article also quoted an “experienced executive” as saying that Griffiths’ strategy might lead to three or four years of super earnings but that revolutionary innovations in electronics would come from others, who would reap the benefits.
I knew that Griffiths disliked taking risks.
By this time I knew that researchers were so wedded to their ideas of video disk manufacturing that I ordered all equipment for making experimental disks shut down with only enough time to build a disk inventory for further testing. After that there would be no facilities for pursuing dead-end technologies. There was a great wailing because no one doubted that I could get Griffiths’ support in a jiffy for terminating the videodisk project!
But that was not my goal. I wanted to mobilize the energy and boldness of desperation by creating “the mother of necessity.”
Now with commercialization of videodisk safely on ice, Griffiths sometimes included me when he invited subordinates for lunch in his dining room, which he had expensively refurbished. These titans of business spent fortunes on decorations of their offices and dining rooms while they squeezed division managers for pennies at the expense of RCA’s future.
Despite an extensive and tasty menu, Ed always ordered a tuna salad sandwich and iced tea, and his subordinates became very fond of those delicacies. He would invariably talk about football or baseball. Bored, I ordered hot dishes from the menu, which amounted to making a statement. I also knew that our waitress could make a "bullshot," a cocktail of vodka and beef bouillon and have it look exactly like iced tea. When I ordered iced tea, I got a bullshot. That eased things enormously, but one day Ed said to me "Dick, don't you ever use sugar in your iced tea?" Whereupon I said, " oh, I forget,” and promptly put some sugar in my bullshot.
Sometimes I escorted important visitors to Ed Griffiths' office, where he sat in a huge chair atop a raised platform behind an enormous mahogany desk. I always had to sit across and below from him in a smaller chair. When I once brought up a high-ranking visitor, Griffiths did not sit at a conference table with his guest, who was kept at my level. On another occasion Jack Valenti, then president of the Motion Picture Producers of America, visited and pointed out to me that the depth of the carpet pile increased by the yard on the way from my office to that of the CEO.
Meanwhile, I was waiting for results from my decision to shut down those videodisk facilities. Within three weeks, at lunch at the Princeton Laboratory cafeteria, there stepped forward Len Fox, a materials specialist. He mentioned that two years ago he had dispersed fine carbon particles into a plastic videodisk and that it had produced rudimentary pictures from a player that was designed to play metal-coated disks. “Why was this not pursued?” I asked. Because his research boss had shown with mathematical certainty that major improvement was impossible. I made sure that Fox had the resources to try again and soon he showed us a disk that did not work in theory, but worked in practice.
We could use conventional factory presses to stamp the “Len Fox” disk, which could then be tested within minutes. Soon its performance approximated that of the best metal-coated disks. This was a stunning breakthrough, which eliminated virtually all of the disk “life” and manufacturing problems with which we had wrestled for over three years. These videodisks should be as durable and as easy to make as LP audio records! Of course, Len’s disks were still replicated from recording masters, made with computer driven electron beams, whose multiple defects were copied on all disks. Within days of Len’s surprise, Jerry Halter, a quietly modest and persistent engineer, announced that he could now make superb defect free videodisk masters with a diamond cutter. Because research management ridiculed him, we had supported Jerry’s work for two years by hiding him in a modest cubicle in Indianapolis. His accomplishment eliminated at one stroke the irreducible defects of electron beam mastering. Have a diamond cutter vibrate millions of times a second to cut a master? “Ludicrous!” the research bosses had said. “I will do it,” Jerry had said. And he did.
These inventions created a wonderful new dynamic, yet it took us well into 1978 to prove everything out with pilot runs. We accomplished more in nine months than in the previous three years. With research scientists, inventors, design and manufacturing engineers (I had secretly stashed away a few), working as a team, we were now approaching the end of videodisk development. Our team felt that we had revived the RCA esprit that created color TV. But we were still not allowed to prepare for mass production—always remaining eighteen months away.
Reporters continued to speculate about RCA’s intentions as rumors multiplied that we had a revolutionary new disk design. Once I told a nationally prominent writer that "we have not made a decision to introduce videodisk, and we have not made a decision not to introduce videodisk." For that I received high compliments from Griffiths, who was always sensitive about his style of management. Meanwhile Forbes, The Wall Street Journal and prestige publications in England and Japan continued to feature videodisk as the coming blockbuster in consumer electronics. There were magazine covers with headlines like, “Videodisks, The dawn of Program your Own TV” or “Videodisks, the Expensive Race to be First,” but also, “RCA’s New Vista, the Bottom Line.” Hardly a week went by without my picture appearing in RCA’s press clippings and I was invited to appear on TV and radio talk shows in New York, Tokyo and London. The coming of home video movies was the hottest subject in consumer electronics. Not one of those articles ever predicted that videotape could sweep videodisk from the market.
In 1978, many times at 6:30 in the morning, the RCA helicopter picked me up near my home on Long Island to whisk me to an airport near Princeton in New Jersey. At RCA’s air base, which was always best located near the home of the latest CEO, the engines of our Falcon jet were started as we radioed ahead from the chopper. Then we soared falcon-like to Indianapolis, where a waiting limousine would take me to a 9AM meeting. And back the same route that evening.
I was seriously concerned that videodisk, still so long away from being in consumers' hands, would be scooped by VCR if movies were licensed to be prerecorded on videotape cassettes. The marketers on my staff devised a plan to determine what might happen if the same programs were available on tape and on disk.
RCA’s consumer electronics marketing management and their product-starved discount appliance dealers had never sold software programs to motivate buyers to buy hardware. I was convinced that they shouldn’t try. Instead, our experts worked out a plan for “magnet stores,” in strategic locations with viewing booths, to entice customers to buy players and disks. At a cost of about $ 40 million, we planned to confirm whether to introduce videodisk nationally or scrub it. This was a reasonable price to pay for an answer to a one-billion-dollar question--the cost of a full-scale national roll out without a test.
When Griffiths announced that he had hired Fred Silverman, to replace Herbert Schlosser as CEO of NBC, Silverman’s employer, ABC, would not release him. Now Griffiths had to keep Schlosser as a lame duck CEO at NBC for six months. When he finally left NBC, there was nothing for Schlosser to do at RCA. Griffiths, without talking to me, appointed him to “acquire video disk programming.” Until then, my vice president Tom McDermott, a Hollywood veteran, had prudently and quietly acquired a library of movie “evergreens.” and he left promptly. It was ludicrous. While Griffiths had made it impossible for me to ready videodisk for production, he paid Schlosser to acquire expensive programming for a product that did not exist.
By November of 1978, I let it be known that I would soon report that all was ready to finally start production preparations. Griffiths and his yes men were twitching to avoid that decision. Because it leaked that RCA had perfected its videodisk while its CEO refused to announce a decision to introduce it, there was much speculation that RCA must have something up its sleeve. That led to the December 31, 1978 Fortune article with Griffiths on the cover for which I had been interviewed.
Here are some quotes from that article: "Griffiths’ most significant reversal of Conrad's policies has been to delay the introduction of RCA's much heralded video disk system. The decision flied (sic) in the face of corporate tradition: the videodisk venture is exactly the kind of business proposition that General Sarnoff would have leaped at, for it entails high risk, potentially huge rewards, and the possibility of changing the communications patterns of the nation…
“But the disk system is bedeviled by the same chicken and egg problem that color television once faced. Sonnenfeldt believes that RCA cannot afford to offer an adequate catalogue of disks unless some one million players are in the field. Yet most consumers won't buy players until a catalogue of playing material is available. So RCA would have to take the risk of launching discs and players simultaneously and waiting for a minimum of three years for the player population to achieve critical mass. In the meantime, Sonnenfeldt says, the company would have to spend at least $50 million and perhaps as much as $ 100 million to introduce the system.
" Conrad had declared that videodisk would be on the market by the spring of 1978. But one of Griffiths' first actions was to order a market survey, which later showed that the player on RCA's drawing board was too expensive to attract enough customers. Sonnenfeldt's team came up with a simplified player that could be sold at retail for $ 400, a price within the boundaries established by the market survey.
"The danger of this cautious approach is that RCA may be shut out of a potentially huge market, or at best may find itself so far behind others on the learning curve, that fat profits are impossible. If Griffiths gave the go ahead to-morrow, it would still take RCA at least eighteen months to get the product to market.
" RCA's videodisk system could end up just like the company's videotape recorder, which it abandoned in 1975 because competitors had made so much progress that it was more sensible to buy the recorder for resale. RCA buys the recorder, which it calls SelectaVision, from Matsushita."
Several paragraphs later, the article continued:
"RCA sorely needs to introduce some winning new electronic products. Markets for most of its existing ones, particularly television sets, are reaching maturity…Griffiths is having trouble translating research into producible and marketable products…”
I read Fortune’s message as: “Griffiths manages RCA poorly.”
Fortune did not know that videodisk had been beset by technical problems relating to its manufacture. Because he had trumpeted his aversion to pioneering, Griffiths was universally and wrongly blamed for the delay in introducing it. I had camouflaged the earlier bankruptcy of RCA’s videodisk technology and then presented the new disk designs as triumphs of RCA research. However, the needlessly long remaining schedule to get to market was totally the responsibility of Ed Griffiths.
Ken Bilby, RCA’s Executive Vice president of Public Relations, ever a supporter of videodisk was elated with the Fortune article and had already prepared an announcement that I would be in charge of launching “The Greatest RCA product development since David Sarnoff introduced Color Television.” That press release was never issued.
Griffiths met me at his Cherry Hill office on Monday morning, I reviewed what was needed to get videodisk to market by the middle of 1980, then eighteen months away. I reported that organizing manufacturing was a massive task, but doable.
I warned that videotape could sink videodisk and I again recommended my plan for “magnet stores” to launch this new medium. Finally, I urged Griffiths to put preparations for videodisk production into high gear, but to forego any announcement of a national roll-out, which could only accelerate efforts by others to introduce movies on video tape. That Monday morning I saw that my review was just a pro forma exercise.
The next day, Tuesday, Griffiths had already decided upon an immediate and bombastic public announcement that RCA would introduce videodisk nationwide. He was not restrained by the realities that I had reviewed for him nor that he would be mobilizing his competition prematurely. With Griffiths’ bombast, Roy Pollack, who ran Consumer Electronics and had opposed videodisk all the way (his was the sole “no” vote at Griffiths videodisk meeting), saw himself eclipsed if I handled this high profile product introduction for which his dealers had badgered him for years. Roy now asked that I work for him and Griffiths asked me to. I refused.
Griffiths asked me to reconsider and I refused again.
I was angry, disillusioned and disgusted. In the last eight years I had tried to save Bob Sarnoff from derision. Then Andy Conrad let me deal with subordinates that he would not confront. And here was CEO number three, apparently goaded by a magazine writer who questioned whether he had the stuff to run a major company. And Roy Pollack who had voted against videodisc was now grabbing it.
I smelled disaster, and I resigned from the video disk project and I demanded that Griffiths offer me a new position equivalent to the one I was vacating and that Bilby issue a press release that would acknowledge my four year development of videodisk.
The new press release quoted Griffiths as saying:
"Dick Sonnenfeldt has done an outstanding job in leading the technical team that has provided us with the prototype of our most significant consumer electronic product since the development of color television. His creative and technical skills will now be applied to other areas of electronic product development."
Bilby said that no one at RCA had ever been similarly praised, because no individual other than David Sarnoff had ever run such a large, long-sustained and ultimately successful technical development effort. David Sarnoff, RCA’s founder did not need press releases to extol his accomplishments, but I did. And Griffiths instructed RCA’s top personnel man to find me another job.
Separating myself from videodisk was the best decision I ever made though at the time it felt like stepping into a void.
When the switch from me to Roy Pollack was announced, every principal videodisk manager under me left the project. I had no jobs for them and they all left RCA. I left the videodisk project at the end of 1978 and I could have introduced the product in mid 1980. It took Pollack a year longer because he lost the talent that had created the product. I have a 1978 prototype player, essentially identical to the product released almost four years later that still plays disks of all vintages flawlessly. In March of 1981.Griffiths wrote in his “Letter to the Stockholders:”
“The SelectaVision Videodisc system will be introduced nationally ….Our ultimate goal is to establish our system as the standard for consumer disc products in the United States and in major markets overseas…”
Within months of that exuberant report Griffiths announced his forced retirement. In 1984 Thornton Bradshaw, RCA’s last CEO who had succeeded Griffiths, asked my advice on videodisk. I said, “Fold.” It felt like shooting my favorite horse, but it had to be done. In two and a half years, after selling over 600,000 videodisk players and over ten million disks, at discount, operational losses rose to over six hundred million dollars on top of the one hundred and fifty million spent on research and development.
Would videodisk have been successful, had I launched it? We would have known whether to launch it nationwide or scrub it for less than a hundred million. And the answer would have been available before videotape programs crushed videodisk. But the outcome might have been the same: Videotape not videodisk.
Videodisk was RCA’s last great technical accomplishment. The early concepts were breathtaking in theory, but for a long time RCA’s leaders failed to guide brilliant researchers with engineering and manufacturing counsel that would have identified production dead-ends earlier. After I arranged for manufacturing experts to complement the researchers, second-generation inventions created a superb consumer product. To have piloted the videodisk from brilliant inspiration, through patient experimentation and exhaustive testing and early failures to robust practicality, was a technical tour de force guided by business vision. But videotape, not videodisk became the standard home video product. And RCA, which could have participated significantly in marketing videotape programs, lost this opportunity as well! When Tom McDermott acquired program licenses under me it was for disk and prospectively for tape so that we would have profited from either or both. The merchants of RCA’s hardware discount emporia did not recognize that pre-recorded programs, not hardware were the profit producers.
There is a simple lesson here. A mammoth project like RCA’s videodisk needs a capable CEO to champion it, someone who can pick and support the right lieutenants, supervise brilliant and creative technologists and blend their efforts with production and marketing specialists. David Sarnoff was such a man. The CEO’s under whom I served were unqualified to supervise ventures of this magnitude. My subordinates and many of my associates were superb. If only my bosses had been as good!