'Make it with MD' - Sony's MiniDisc 'rallying cry.'

Television Digest with Consumer Electronics, Jan 5, 1998

"Make it with MD" will be theme and "rallying cry" of Sony's 1998 ad and promotional effort, keyed by largest ad campaign ever waged for Sony audio products in U.S., including network TV commercials, said Mark Viken, Sony senior vp-personal AV products. He said effort is based on Sony's belief that MD is poised to repeat same phenomenal growth rate in U.S. as in Japan and Europe. Moreover, Viken said, MD fills AV industry's need for "something new and exciting" to lure consumers back to stores and invigorate audio business that has been dogged by declining average prices and sales volumes of mature categories such as cassette hardware.

Multimillion-dollar MD ad expenditures planned by Sony this year will account for more than 10% of what entire industry typically spends on ads in given year, Viken said: "We're very serious about making MiniDisc take off." He said campaign will emphasize MD as "cutting edge" product with "very high 'cool' factor."

Consumer AV Pres. John Briesch said campaign will target "sweet spot" of potential MD customers -"new generation" of audio consumers who are successful in careers, grew up with CD, aren't buying analog tape and have independent tastes when it comes to recording music. Viken said kickoff will be prime-time MD commercial airing Feb. 5. He said commercial would be "piece of creative work that is well beyond the ordinary," but wouldn't elaborate.

In Japan, where MD sales have "exploded," Viken said, household penetration has reached 25%, and about 70% of all audio products being sold include "some sort" of MD component. He said average of 8-10 blank discs are sold for every new MD component purchased in Japan. Average of 4-5 discs per player are owned in Japan based on installed base of MD hardware, Sony said.

Sony Recording Media Pres. Robert Striano said MD blank disc sales there account for 50% of total consumer recording AV media sold. Viken said Europe "has taken on the same kind of growth curve as Japan," and hardware sales there were expected to approach 1.2 million in 1997. Ratio of blank discs sold per player has been same in Europe as in Japan, he said.

Bricsch said Sony MD hardware introductions for 1998 are "covering all the bases" in home, portable and car configurations. MZ-E40 playback-only portable remains in line at selling price of $199. "Full range" of portables being introduced at this week's show includes MZ-R50 recorder at $499, positioned as step-up from existing MZ-R30 ($399). New model has smaller size and enhanced features, such as 40-sec. shock memory mid longer battery life. Home MD introductions include 3 new component recorders and DHC-MD515 ($699) shelf system with synchronized dubbing between dual built-in 3-disc MD and CD changers.

In car MD, Sony will reach new $399 price point with MDX-C7900 head unit, available in Feb. Ron Boire, Sony MobilComm vp-mobile electronics, said unit replaces $499 component that has been backordered since summer. New MDX-62 6-disc changer module, $499, is controllable by number of other CD and cassette components available in existing Sony car audio line. MDX-8900 is first MD car player in company's limited-distribution ES line. Boire said $600 model will be available in summer.

As for recordable MD media, Striano said emphasis in 1998 will be on "closing the gap" between pricing of blank discs and "traditional" compact cassettes. He said "huge" price gap in 1996 - $8.99 for average 74-min. blank MD vs. $1.88 for high-bias 90-min. cassette - "has come down quite a bit." In 1998, he said, pricing differential will narrow to $5.49 for average MD vs. $1.53 for blank cassette, and by 2000 cassette will command same $1.53 average selling price, but blank MD will fall to $4.49. Striano said threefold pricing differential between MD and cassette is "probably where it should be."

Striano said colorful new packaging concepts and "added-value promotions," including 8-disc multipacks with storage cases, will emphasize MD as "cool and fun" product. He said Sony also plans high-performance ES-branded blank discs at high end of line with heavier shell and added static protection to assure that "we've got the entire marketplace covered." He said ES pricing hasn't been finalized yet, but discs will be "premium-priced." Striano said Sony is projecting that recordable MDs by 2000 will account for 30% of industry dollars spent on blank media, which he said would be "pretty significant" growth compared with MD's current 5% share.

Viken said industry sales reached 250,000 in U.S. in 1997 and are expected to double each year through 2000, when Sony projects household penetration of 5%. He said effort through 2000 will play up MD recordability. However, he said, "very strong market" for prerecorded MD albums could materialize within 3 years if large installed hardware base develops.

AS we have reported, aggressive effort to jump-start MD in U.S. is in works by several Japanese companies, with kickoff expected at this week's CES (TVD Nov 10 p12). Aiwa, Denon, JVC, Kenwood, Sanyo and possibly others will launch broadened product lines, joining MD stalwarts Sharp and Sony, whose own offerings and marketing will be bolstered significantly.