The Sony MiniDisc
Brian Kang, Jaeshin Lim, Deeksha Mittal,
Pablo Munoz, Elizabeth Pomerantz
11/10/2011
Table of Contents
HISTORY AND PRODUCT OVERVIEW ............................................................................................................. 2
Advantages and disadvantages over competing technologies ................................................................. 3
THE SONY MINIDISC ECOSYSTEM ................................................................................................................. 4
The Sony Corporation: .............................................................................................................................. 4
Other Licensed Manufacturers: ................................................................................................................ 4
Record Labels: ........................................................................................................................................... 5
End Consumers: ........................................................................................................................................ 5
INNOVATION RISK ......................................................................................................................................... 7
ADOPTION CHAIN RISK ................................................................................................................................. 9
COMPETENCE TRAP .................................................................................................................................... 10
TECHNOLOGY ADOPTION CURVE ............................................................................................................... 11
WHAT WORKED IN JAPAN? ......................................................................................................................... 13
APPENDIX I: The Eco-System Map .............................................................................................................. 15
APPENDIX II: Benefit vs. Cost Analysis ........................................................................................................ 16
APPENDIX IV: Power to Influence Vs. Relative Benefit ............................................................................... 19
APPENDIX V: SONY MINIDISC ADVERTS AND PICTURES ............................................................................. 20
APPENDIX VI: Sources ................................................................................................................................. 21
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HISTORY AND PRODUCT OVERVIEW
In 1992, Sony ambitiously launched the MiniDisc (MD) with confidence that the MD would be
the next big hit after their Walkman. Their goal was to revolutionize the audio industry and
become the next standard to replace cassette tapes, and in the long-run, CDs. Such ambition and
expectations seemed realistic as the MD had clear advantages over existing technologies.
Sony had improved their rollout strategy of the MD technology after experiencing significant
failures in new technology introductions in the recent past. Having learned from the costly
failure in setting the video tape standard with its Betamax against VHS due to lack of support
from content providers, Sony acquired CBS records and Columbia Pictures in 1988 and 1989
respectively, to change its identity from a ‘consumer electronics manufacturer’ to a ‘global
media-device integrated firm.’ This allowed Sony to launch the new MD technology with a
library of music content using the MD format. Moreover, Sony licensed MD technology to other
manufacturers, including JVC, Sharp, and Panasonic, to increase the availability of players and
to create a network effect.
Lastly, Sony launched a very aggressive and unprecedented level of marketing campaign to
create awareness and drive sales of MiniDiscs. Sony ran extensive advertising on multiple
platforms and gave over 1 million MiniDiscs away to the public for free. In 1996, half of Sony’s
entire print advertising budget in the United States was devoted to MD.
Combined with the innovative technological superiority, availability of content and extremely
aggressive marketing campaign, MD seemed destined to succeed. However, MD never took off,
selling only 50,000 units in the first year. With the exception of Japan, MiniDisc sales never
reached Sony’s high expectations, selling 14 million units worldwide in the first ten years
(compared to cumulative sales of 321 million of iPod in same time span) and a total of 22 million
units before the product was officially discontinued in September 2011.
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Advantages and disadvantages over competing technologies

The MiniDisc was introduced at the beginning of the digital era and originally had three
major competing technologies, including two major conventional technologies
(audiocassette tapes and CDs) and one major new technology, Digital Compact Cassette
(DCC), introduced by Philips and Matsushita.

Despite disadvantages such as the high cost to produce MD players, the platform seemed
to combine the best qualities of both cassettes and CDs, a clear competitive advantage.

Compared to cassettes, MDs had far superior sound quality. The MiniDisc also offered
random access capability, which allowed the user to seek any content or any part of
content almost instantly, far superior to the system of fast forwarding and rewinding
associated with cassette tapes.

Compared to CDs, MDs had recording ability and portability. While ultimately CD
recording drives became commercially available at prices accessible to most consumers,
this was not until several years after the same technology was available for MiniDiscs.

Being a magneto-optical disc-based data storage device, MDs were able to be read and
rewritten repeatedly. Using Adaptive Transform Acoustic Coding (ATRAC), MDs held
same amount of content (74 minutes of audio) as CDs in nearly half the size (2.5” MD vs.
4.7” CD diameter), greatly enhancing the portability of the device.

In addition, MDs also were considered superior to its relatively new rival DCCs.
Although DCC had the advantage over MDs for backward compatibility with
conventional cassette tapes, DCC’s physical tape mechanism and lack of instant access
feature made DCC appear inconvenient and outdated.
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THE SONY MINIDISC ECOSYSTEM
Following is a brief description of the major players in the Sony MiniDisc (MD) eco-system and
the relative benefit (if any) they can derive from MDs. Please refer to Appendix I for an
illustration of the ecosystem, Appendix II for a cost vs. benefit analysis as well as Appendix III
for an innovation classification breakdown.
The Sony Corporation:
(Power to influence adoption in eco-system: Low; Relative Benefit from MDs: Very High)
The Sony Corporation was already the dominant player in the portable music player industry
with the Sony Walkman. However, Sony invested huge amounts of money in the development of
the MiniDisc and the MiniDisc Player and hence, it is of very high benefit for Sony for the
MiniDisc to be successful. Since the MDs, by design, were incompatible with other music
players, the success of the MDs would have made Sony Corporation almost a monopolistic
player in the portable music player industry. Although Sony had a dominant position in the
market, it did not have the power to influence adoption in the eco-system. It could neither
convince the record labels (other than Sony) to launch their content in the new MD format nor
could it influence end consumers to buy the MDs and the MD players. In order to ensure that
content was available in the MD format, Sony Corporation’s subsidiary, Sony Music, released
content on MiniDiscs. Also, Sony managed to convince Time Warner to launch part of their
content on the MDs. However, Time Warner agreed only reluctantly and ultimately the total
content available on the MDs was not large enough to drive end consumer demand. Hence,
though Sony had a great product, it did not have the right elements in place to build the
necessary ecosystem around it and guarantee success.
Other Licensed Manufacturers:
(Power to influence adoption in eco-system: Low; Relative Benefit from MDs: Low)
In order to ensure that the production and availability of MDs was not limited, Sony licensed the
technology to other manufacturers to make the blank MDs that could then be used by record
labels and end consumers to record content. The value derived from the MDs for these
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manufacturers would depend on the levels of adoption of the MD by the end consumers. Higher
MD sales in the market generated more revenue for the manufacturers and hence the incentive to
produce these MDs was higher. However, these manufacturers had no power to influence the
adoption of the MDs and hence the relative benefit they would derive from the MDs would
largely depend on the success of the MDs as a product with the end consumer.
Record Labels:
(Power to influence adoption in eco-system: High; Relative Benefit from MDs: Low)
The Record Industry Association of America (RIAA) and the record labels in general were
always concerned with issues of piracy in digital media, an issue Sony had experienced before
with previous products such as DAT and BetaMax. To avoid any piracy debates, Sony created
discs that were incompatible with existing formats and other music players. The result was an
MD audio disc could only be used with a Sony MD player and could not be played on the normal
CD-R drive of a computer. Also, an MD data disc could only be used with Sony-approved
formats on computers with the right CODECS. Though this helped alleviate some of the piracy
concerns, the fact that a consumer could re-record an MD was still an issue. However, the same
threat was present with audiocassettes. Consumers could just re-record music on any
audiocassette, but the record labels still launched their content on cassette tapes because there
was huge consumer demand for cassettes. In the case of MDs, the consumer demand was not
high enough to incentivize the record labels to launch their original content on the MiniDiscs. As
mentioned in the previous section, the only record companies to support MDs were Sony Music
and Time Warner. Of the two companies, Time Warner was the weaker supporter, publicly
wavering in its support and releasing only 500 pre-recorded MD titles by 1999. This amount was
paltry compared to the thousands of CD labels already available in the market. The lack of
availability of pre-recorded content also caused end consumers to hesitate to MD players as they
could easily continue to use their existing audiocassette and CD players.
End Consumers:
(Power to influence adoption in eco-system: High; Relative Benefit from MDs: Low)
The end consumers cared for the following attributes in their music players:
1. Sound Quality: sound quality as compared to existing alternatives
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2. Portability: ability to listen to music outside of the home or office
3. Convenience : ease of use and availability of content
4. Price: price of the player and content as compared to existing alternatives
Along all these dimensions, MDs did not provide any significant benefit to the consumers. The
sound quality was significantly better than that of audiocassettes, but slightly inferior to CD
quality. One clear benefit was that MiniDiscs were highly portable. However, it was highly
inconvenient to obtain music to listen to on the go, as one would have to convert music to the
MiniDisc format or repurchase content on a MiniDisc. Since MDs were incompatible with CD
players, cassette players, and could not be used with computers one would have to attach the
MiniDisc player to a VHS player and play the music real time. This detracted from audio quality
and took significant time and effort, compared to recording on audiocassettes. Additionally, the
MDs and the MD players came at a price premium to CD players, making the switching costs for
consumers extremely high. The first-generation MD players were priced at $549 while the firstgeneration MD recorders were priced at a whopping $750. Alternatively, a consumer could
purchase a Sony WalkMan for $30 and blank tapes for $1 per tape. After weighing the alternatives,
consumers overwhelmingly preferred to tape their CDs on a blank cassette and listen to lower
quality audio as their portable music instead of paying top dollar for the ‘near-CD’ quality music
on MDs. Although Sony later reduced prices of the players and MiniDiscs, by that time other
music formats like the MP3 and the CD-RW had already taken over the market and consumers
were not willing to reconsider and switch back to MDs.
At the time of launch of the MiniDisc (1992), cassettes accounted for 50.8 percent of all the
music record sales in the United States, CDs accounted for 46.7 percent of sales, and records
comprised 2.5% of sales. In 1997, cassette sales were 20.7 percent of sales and CDs comprised
78 percent of total sales. This exemplifies the rapid shift toward CDs as a replacement for
cassettes. As the vast majority of consumers had already adopted the CD did not see value in
switching to a new format that was expensive and was not compatible with the record player,
tape deck, or CD player they already had in their stereo system.
Furthermore, only 500 pre-recorded MD titles were available, making it extremely difficult for
music lovers to find the content they were looking for. Hence, consumers overwhelmingly did
6|Page
not see any benefit in adopting MDs and did not purchase them, a major reason why MiniDiscs
did not fare well in the United States market.
INNOVATION RISK
As stated previously, Sony had a clear vision for the future of the MD: it was supposed to be the
next standard in how consumers stored and played music in portable devices. At the beginning of
the 90’s, there was a sense that technology was changing fast, and the existing formats would
become obsolete with the development of newer formats that would offer higher quality, more
reliability, better portability and improved functionality. These four factors constituted the main
drivers that companies such as Sony and Philips considered necessary to convince consumers to
adopt a newer supporting technology.
In this section we will analyze the innovation risks that Sony faced in developing, marketing, and
selling the MD and how the company approached each of these issues.
Developing the MiniDisc
Since 1989, sales of cassette tapes had been decreasing, and there was a common feeling that the
cassette was approaching the end of its cycle. CDs were widely used, but it was difficult for CDs
to gain territory in the portable market, as there was no reliable replacement for the Sony
Walkman. CDs were too sensitive to vibrations to be used in portable devices, while cassettes
were resilient and did not skip or stop playing when moved. The Sony MiniDisc was Sony’s
attempt to offer a quality audio sound that was also resilient enough to be used in a portable
device.
Sony began to develop the MiniDisc in 1986, aiming to develop a format similar in quality to
CDs and cassettes but better in terms of portability and functionality (recordable). The company
achieved these dual goals when they developed the MiniDisc, overcoming two major challenges.
The first challenge Sony faced was to develop a device with the same storage density as that of
CDs, on a much smaller disc. Sony solved this problem using a high-quality audio compression
technology called ATRAC (Adaptive Transform Acoustic Coding), which allowed the system to
hold the same amount of data as a regular CD by compressing the data in a ratio of 5:1.
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Second, Sony needed to come up with a solution to make the MD portable without experiencing
the mistracks, or skips, that CDs suffered. Mechanical suspension, the system used to prevent
mistracks in car-mounted CD players, required too much space for a portable device. Sony
solved this issue by employing semiconductor memory as an electric data buffer. Using 4
megabytes of memory, 12 seconds of compressed audio sound are stored in memory. In normal
playback situations, data is intermittently read, keeping the memory fully loaded all the time.
When a shock occurs and the flow of data is interrupted, playback can continue for
approximately 12 seconds, while the system only needs 1 second after the shock to resume data
transfer.
These two innovations made possible for Sony to launch the MiniDisc to market in 1992.
Marketing the MiniDisc
Sony launched the MiniDisc in December 1992, and ran a strong marketing campaign
highlighting the distinctive features of the MiniDisc: 1) MDs were re-writable, 2) offered the
same playback time as CDs (74 minutes) in a smaller format, 3) allowed the user to quickly
access a song by using a menu (similar to CDs), and 4) the MD was protected by a cartridge
which made it more resilient and gave it a longer life than CDs.
The new format was a strategic move by Sony to retain the “portable” music segment once
cassettes were completely outdated. But despite several large and expensive marketing
campaigns, sales of MD were about only 50,000 units in the United States after one year. There
are several reasons for this failure.
Sony planned to position the MD as an on-the-go format, noting that only 25 percent of CD
owners played their discs outdoors. But the initial advertising campaign was directed to the MTV
generation, a segment of younger consumers who did not have the resources to pay $ 550 / $ 750
for an MD player. Also, the MiniDisc was just one of at least four competing technologies in the
market at the same time: traditional audiocassettes, CDs, the MiniDisc, and Philips’ Digital
Compact Cassette (DCC). This generated confusion among consumers about which of these
newer technologies, if any, would ultimately dominate the market. Additionally, Sony and
Philips based their marketing campaigns on an attack of the other company’s technology and
continuously highlighted the weaknesses of its competitor. MDs had a lower sound quality than
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CDs, and this weakness was quickly exploited by Philips to undermine the MD potential. Sony
responded in turn with an attack on Philips’ DCC, which also failed to establish itself as a
platform.
Another issue to consider is the value proposition for consumers offered by Sony. Although the
portability benefit was evident, there were no other clear benefits. Content, for example, was not
developed in such a scale that consumers could easily replace their Walkman with an MD player.
At the time of its introduction, MDs were not only competing with Philips’ DCC and CD
players, but with Sony’s Walkman, the standard in portable audio.
Sony had a difficult time proving the superiority of MDs mainly because all of these formats had
comparable advantages. DCCs had higher sound quality, but lacked instant track access, a
feature that had become a standard with the popularization of CDs, and had spools and tape,
which can be damaged by usage. MDs had instant track access and were much more durable
because didn’t have moving parts and were sealed, but had inferior quality and were not
compatible with existing cassette-based players.
ADOPTION CHAIN RISK
Although the MiniDisc format and ATRAC were Sony patented inventions, the company
licensed the technology to other manufacturers in a move to spur adoption of MDs by the public.
This gave all the big players in the consumer electronics segment the ability to develop their own
MD players. But another major player was vital to make the MD successful: the recording
industry.
In the United States, MiniDiscs did not appeal to the mass market because there wasn’t an
adequate supply of pre-recorded content. Record companies simply didn’t accept the value
proposition and chose not to create content. Consumers were used to the quality and price
provided by audiocassettes, and also had the option to upgrade to CDs for incremental quality at
a premium price. When confronted with the more expensive MiniDisc player and lack of content
available, they chose not to buy it. The record companies declined to release music in this
format because they had no incentive to do so. Until consumers bought enough players to create
enough demand, it was more economical for the large record companies to simply continue
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releasing music on audiocassettes and CDs rather than investing in recording equipment
compatible with MiniDiscs and inventory in the format. This also allowed them to avoid the
potential downside of making their music collections easier to pirate. Further, the record
companies had the option of investing in DCC, which offered a much clearer picture in the sense
that could be adopted as the replacement format for cassettes, especially since these were
compatible with old-technology cassette players. For all these reasons, there was simply no
compelling reason for record companies to make any commitment to the MiniDisc format. The
primary action Sony could have taken was to subsidize MiniDisc production for the other major
record labels, guaranteeing them a certain return up to a minimum level of sales. This would
have removed the monetary risk for record companies and given them an incentive to make
certain albums available in the format.
Consequently, record companies supported the DCC and a large prerecorded DCC catalog was
available at launch. MDs didn’t have that large a catalog, with only 200 prerecorded labels. This
caused Sony to add emphasis to the existence of a pre-recorded catalog, when that was not a
necessary requirement for the MD to succeed. MD’s allowed you to record your music and even
create a particular mix of songs, which was initially the campaign’s motto. This confused
consumers and for a while, people wouldn’t buy MDs mainly because there was not enough
content.
Finally, even Sony was concerned about the ability for consumers to “rip” tracks from
MiniDiscs. Their software restricted consumers from ripping each track more than one time, and
while there was no possibility of sharing music over the internet in the early 1990s when
MiniDiscs first came out, there was still the possibility of being able to copy tracks more easily
to MiniDiscs if the form took off. In fact, this is the main explanation for why the MiniDisc took
off in Japan; record companies weren’t a major player in the adoption chain for that market.
COMPETENCE TRAP
What Sony did not realize and promote was the main benefit to consumers of the MiniDisc.
Rather than providing incremental value over the CD to mass market music listeners, the
MiniDisc allowed those looking to record either unique tracks or commercial music content to
create a high quality copy. In addition, the MiniDisc was more portable and flexible than all
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other higher-quality recording equipment in its price range. Examples of the MiniDisc’s ideal
consumer includes radio station managers assembling mixes, semi-professional musicians
looking to record in different locations, Japanese teenagers taking advantage of CD rental shops
in Japan to borrow a CD for a short time and copy the tracks, and many other professional
consumers. While these consumers were able to buy a portable MiniDisc player, and soon after
the initial release, a recorder device that worked, Sony never developed their software to fully
meet the needs of the professional consumer.
Japanese teenagers learned early on that they could rent a CD, copy the track to a MiniDisc, and
simply delete the track weeks later when there was a new hot single they wanted to listen to. The
Sony software, while not the easiest interface to work with, allowed for this transfer onto the
device without issue, a major reason why MiniDisc sales took off in Japan.
In the United States, where CD rental shops did not exist, and before many public libraries
invested in collections of CDs, professional consumers looking to record unique content
immediately saw the value proposition of the MiniDisc. But since Sony was targeting the music
mass market, they had put restrictions on the number of uploads from the MiniDisc to a
computer, limiting it to one copy. This made it more difficult to pirate music from MiniDiscs. It
also made it significantly more difficult for musicians to upload their original music, and for
professional journalists, sound engineers, radio stations, and others to create usable audio tracks
that they could distribute flexibly among their own sound equipment and to customers. Many of
these professionals who also had the requisite skill level working with computers ultimately
hacked the software and were able to use their MiniDiscs flexibly. This explains why until the
summer of 2011, when Sony announced they were discontinuing production of the MiniDisc
player, there was still a niche demand for devices and discs. However, if Sony had tailored the
MiniDisc system to work flexibly and fulfill the needs of the professional market, they would
have created a successful product from the start.
TECHNOLOGY ADOPTION CURVE
When the MiniDisc was first introduced, it had three advantages and one slight disadvantage
against the CD. While the sound quality of CD’s was slightly better than a MD, MD’s were more
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affordable, convenient, and quicker. However, throughout the nineties, the improvements in CD
technology shrank MD’s advantages from several flanks.
First of all, recordable CD’s were expensive in the early 90’s. In 1992, a single CD-R disc cost
nearly $40. As CD recording technology improved, the price of a CD-R dropped to just $8 in
1996 but still was expensive relative to a blank recordable MD which retailed at about $3.50.
However, unlike the MD, because CD-R’s could not be erased and re-recorded, the actual cost a
user had to bear in order to use CD as the dominant method of music recording was still higher
than that of using the MD format. It was not until 1997, with the introduction of CD-RW into the
market, that the MD value proposition faced its biggest threat. CD-RW enabled users to re-use
recordable CD’s by overwriting pre-recorded data or music with new content. Although the CDRW had a short rewriting cycle of just 1,000 compared to 10,000 or 100,000 of other media, it
was sufficient to serve the daily needs of most consumers. In addition, with continuous
improvements in production, the price of CD-R and CD-RW continued to drop to just 30 cents
and 70 cents, respectively, in 2001.
Secondly, it was becoming less and less expensive for a consumer to acquire the necessary
equipment to record CD’s. When the MD was first launched in the early 90’s, the price of CD-R
recorders was significantly higher than MD recorders at several thousands of dollars. Only in
1995 was Hewlett-Packard able to introduce the 4020i, developed by Philips, at $995, the first
CD recorder to be priced at below $1000. In addition, unlike the MD player, which can act as a
standalone recorder, CD-recording drives also required a PC to operate them on and the actual
price consumers had to pay for the capability to record CD’s was significantly higher. However,
as the market for CD-R’s and CD-RW’s continued to grow rapidly, the price of CD recording
devices decreased quickly to reach around $250 by the end of the 90’s. By this time, personal
computers were common in most households and the incremental cost of buying the necessary
equipment to record CD’s as opposed to MD’s was either on par or lower than MD recorders.
The gap between CD-R’s and MD’s with regard to the time required to record music was also
shrinking. Recording an MD requires real time recording but when CD recorders were first
launched, the drive speed was also 1X meaning it took 80 minutes to record 80 minutes of music.
At this time, there was no clear disadvantage of using an MD recorder but soon, faster CD
recorders were launched out into the market. By the end of the decade, CD-ROM drives that
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boast 12X write speed which enables recording 80 minutes of music in just 6.7 minutes, had
been released. At the turn of the century, MD’s were fast becoming too slow to satisfy the
consumer needs of quicker recording.
The final blow to the MiniDisc technology was the rise of digital audio, such as MP3’s. Due to
the low penetration of MP3 players in the late 90’s, MD’s were still considered to have several
advantages above MP3 players. In 1999, CNN reported an article citing the limitations of MP3’s
such as “poor content of music and books” and “limitation in recording time…can’t download an
entire book…” (source: http://www.cnn.com/TECH/computing/9905/20/totetunes.idg/) MP3
players at this time had limited capacity which resulted in the user only being able to carry
around 64 megabytes of songs. On the other hand, an owner of an MD player had to simply carry
more MD’s. Increasing capacity in a MP3 player could only be achieved by buying a new player
that had a bigger hard drive, which is much more costly than buying some more blank MD’s.
At the turn of the century, several firms released digital audio players with significantly
increased capacity. More importantly, Apple launched the iPod in late 2001. The iPod boasted
an internal storage capacity of 5GB. The original iPod was designed solely for the Macintosh but
Apple quickly launched its second generation iPod, a Microsoft-compatible version, in the
following year. Other companies launched numerous similar products and it was clear MD will
no longer be able to compete with the enhanced functionalities of digital audio players.
WHAT WORKED IN JAPAN?
While the MD had clear limitations, it was fairly successful in Japan and select niche markets. In
1995, 1.08 million MD players and 10 million blank MD discs were sold in Japan alone. Those
figures jumped to 2.5 million MD players and 25 million blank MD discs just a year after in
1996. MiniDisc sales in Japan benefited from the unique market structure of CD music.
First, MD’s cost less than CD’s for consumers. In Japan, a pre-recorded CD commanded a price
of $30, as opposed to the $15 price tag for the same content on a MD format. There was a clear
value proposition to the consumers in terms of price. Even with the introduction of MD’s, thr
average price of a pre-recorded CD continued to remain higher than an MD at around $20. Due
to the low price point of pre-recorded MD’s, it was estimated that in 1997, 60% of hi-fi sales in
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Japan were in MD format. In 1998, sales of MD players for the first time exceeded sales of CD
players.
Second, there was the unique system of CD rental in Japan. Due to the fact that CD’s were
expensive in Japan, there were stores where one could walk in and “rent” a CD overnight for
roughly $2. It was widely known that once the CD’s were rented, the renter would then copy the
content onto a tape cassette or an MD. Since there was considerable degradation of sound quality
when copying the content onto a tape cassette, MD’s were the prime choice for many renters for
copying the content in near-CD quality.
Lastly, Japanese consumers are more open to embracing new technologies than consumers in
other countries. The fact that the new technology was being rolled out by Sony, the iconic
Japanese company of the 90’s, encouraged Japanese to quickly transition to the MD technology.
The 90’s were also an era when the economy in Japan was still booming and many Japanese had
abundant disposable income. As a result, many Japanese “early adopters” spent a considerable
amount of their income on the latest technology regardless of the price. Transitioning to MD was
a significant investment because it meant purchasing a new MD player and a new set of MD
content. However, the “early adopter” mindset of Japanese helped to quickly grow the MD
market at least within Japan.
Interestingly, despite the commercial flop in the United States, the MiniDisc technology did
appeal to a small group of American users. In the US, MD’s were widely used as the backup
recorder for professionals with portable recording needs such as broadcasters, musicians, and
theater producers. Equipment required to record live music or audio content onto CD’s were still
heavy and bulky at the time the MD technology came to market and MD recorders provided
quick, reliable, near-CD quality recording capabilities for recording interviews, outdoor events,
and performing arts. In fact, MD recorders were widely used in radio broadcasting stations to
quickly record content for immediate playback where burning a CD would take too long.
Essentially, the MD technology was used as an improvement to the existing cassette tape
recorders. Unfortunately, this niche market also quickly disappeared with the introduction of
MP3 recorders that provided superior quality with exceptional portability.
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APPENDIX I: The Eco-System Map
OTHER
MANUFACTURERS
SONY CORPORATION
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RECORD LABELS
END CONSUMERS
APPENDIX II: Benefit vs. Cost Analysis
Value Partner
Benefit
Sony Corporation


Increased Sales,
Cost

Initial R&D and setup
Surplus

HUGE
Revenues and
costs plus costs
Surplus
Profits
associated with
benefit
Monopoly in the
marketing the product
music player
to encourage
becomes a hit
industry with
adoption. However,
in the market
closed formats
Sony did not have any
then Sony
and lack of
cost associated with
becomes a
compatibility
adoption of this
monopoly in
with other
product
the music

formats/players
If this
player
industry due
to closed
formats and
lack of
compatibility
with other
formats/player
s
Other Licensed

Increased Sales
Manufacturers

New Revenue

Set up cost for the
new technology

Slight surplus.
These
Streams for
manufacturer
existing
got take a
manufacturers
small share of
the growing
pie that Sony
would have
16 | P a g e
enjoyed had
the product
become a hit.
Record Labels


Increased sales
The manufacturing

No benefit
of their content
and distribution
surplus unless
through the new
cost of content in
the MD sales
format
the new MD
are high
format. The MD
enough for
sales should justify
the
the amount of
economics to
investment
work.
required to bring
the MDs to shelves
in retail stores.

The fear of piracy
in digital media
End Consumer

Higher quality

music than
Even more expensive
consumers as
than existing CDs
they have
Sound quality inferior
better quality
to CDs
media, more
Incompatibility of
conveniently
enabling the
formats and hardware
available at
users to play a
made it inconvenient
much lower
song of their
for users to record
prices.
choice without
MDs and play as they
having to play it
pleased

Highly portable

Random access
capability,
in a particular
sequence
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No Benefit
Surplus for
music at the time


than existing tapes
cassette tape

Much more expensive


Recordable
media which was
not possible with
CDs at the time.
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APPENDIX IV: Power to Influence Vs. Relative Benefit
LOW
HIGH
*End Consumers
HIGH
*Record Labels
Power to
Influence
*Sony Corporation
*Other Manufacturers
LOW
HIGH
Relative Benefit
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LOW
APPENDIX V: SONY MINIDISC ADVERTS AND PICTURES
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APPENDIX VI: Sources
Nahomi Morimura, T’12, Japanese consumer and owner of a MiniDisc player in the 1990s
http://www.sonyrumors.net/2011/07/21/sony-minidisc-walkman-productions/
http://quietamerican.org/links_diy-md.html
http://forums.reghardware.com/forum/1/2011/07/08/sony_to_can_minidisc_walkman/
http://saleshq.monster.com/news/articles/2655-the-20-worst-product-failures
http://www.minidisc.org/wsj_article.html
http://www.minidisc.org/econ113-paper.htm
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