January 17

This Day in History

Hollywood

Jan 17, 1984:

U.S. Supreme Court decides Universal v. Sony, as VCR usage takes off

Eight years after it began, the court battle over the legality of the video cassette recorder (VCR) and its allegedly detrimental effect on the motion-picture industry comes to an end with the U.S. Supreme Court’s ruling, issued on this day in 1984, in Universal vs. Sony.

The case marked the Hollywood establishment’s first response to the revolutionary development of home video technology. After a development process initiated by its innovative founder, Akio Morita, Sony introduced its affordable Betamax video tape recorder to the U.S. market in 1976. As Morita explained it, consumers could now “time-shift” programs, or record shows broadcast when they were at work, at school or otherwise engaged, and watch them at a later time. Not surprisingly, many Hollywood honchos, including MCA/Universal’s Lew Wasserman, saw the VCR as a direct threat to the studios’ most valuable asset: their movie and television libraries. Wasserman already had his own version of the home video device, called Discovision, under development, but he wanted consumers to buy recorded material from the studios, instead of being able to record it themselves.

Along with Walt Disney Productions, Wasserman’s Universal filed a lawsuit against Sony in the U.S. Federal District Court of Los Angeles in November 1976. The lawsuit charged Sony with copyright infringement and sought to block the sale of Betamax machines. In its defense, Sony claimed that consumers had the absolute right to record programs at home for private use. The company compared the VCR to the audio cassette recorder, introduced in the 1960s and used by millions of consumers to record music from the radio and other sources.

The case went to trial in January 1979, and that October the U.S. District Court ruled in favor of Sony, stating that taping material for private entertainment purposes was fair use and that the plaintiffs had not proved that the practice harmed the motion picture industry. The U.S. Court of Appeals reversed the decision in October 1981, but by that time its verdict would at the very least have been much more difficult to enforce: Annual VCR sales had increased from 30,000 in 1976 to 1.4 million in 1981. In that same time period, Sony had lost its lead in the video recording marketplace to a rival company, Matsushita, and its competing “video home system” or VHS format, which had improved on the Betamax formula by making the recording time of the tapes far longer (if of lower quality). By 1981, a number of Japanese manufacturers were vying to supply U.S. consumers with VHS technology, and the price of a video recorder, once as high as $1,295, was becoming affordable to middle-class Americans.

Universal vs. Sony eventually made it all the way to the U.S. Supreme Court, which reversed the appeals court’s decision on January 17, 1984. Two years later, 50 percent of American homes had VCRs and the sales of movies on videocassette were greater than the annual theatrical box-office haul. In the end, though Disney lost the lawsuit, new management led by the young Michael Eisner (hired just months after the verdict was in) spearheaded the release of classic Disney movies on videotape. Within a decade, seven of these had entered the list of Top 10 bestselling videos of all time, and Disney had an entirely new stream of profits.

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