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The History Of The VHS Movie Industry

Watching movies at home has become one of the biggest pastimes of families in recent years. The battle between VHS and Beta was a classic fight and VHS finally became the top medium. VHS was the most popular way to watch movies for almost 30 years. No one could predict that the home video business would become such a giant industry that would reshape movie making.

The first VHS recorder was released to the public in Japan by JVC in 1976. The first one hit the United States in 1977. Little did anyone know at the time that this would be the beginning of one of the biggest industries that the world has ever seen.

The Birth Of VHS

When Sony released their Betamax machine to the market, they tried to make it the industry standard for home video. Some companies such as JVC were not happy with Sony trying to force their machine on them and JVC came out with their own system which came to be known as VHS. VHS was inferior to the Beta machine in picture quality but it became popular with the public because you could record 2 hours of programming on one tape instead of just 1 hour on Beta. This one major difference would surprisingly lead to the eventual downfall of Beta in the United States.

Magnetic Video was a small video duplication company that was established in 1968. The head of the company, Andrew Blay, came up with up with unique idea at the end of 1977. He approached 20th Century Fox about obtaining a licensing agreement to put 50 of their films on VHS and Beta. 20th Century Fox was in financial trouble at the time and agreed to license the films to him. Magnetic Video sold the movies through a mail order club and it became a success for the company. The titles included classics such as Sound Of Music, Patton, and MASH. The original titles were distinguished by a list of the titles on the back of the box rather than a synopsis of the movie in later printings. Magnetic Video enjoyed great success the first two years and convinced other smaller studios to license other movies. Fox purchased Magnetic Video in 1979 and started releasing more of their movies under that label. Fox merged the label with CBS Video Enterprises in 1982 and the result was CBS/Fox Video which was the video label for Fox for many years.

Warner Brothers decided to get into the home video business in 1979 under the label of WCI Home Video. WCI Home Video launched 20 movies in late 1979 including Superman.  Because of the technology of the time, most movies than ran over 2 hours had to be shortened. The 143 minute theatrical version of Superman was originally released on VHS at 127 minutes. This situation was eventually resolved and a full version was later released. Warner first releases their movies in cardboard “book style” boxes before switching to plastic clamshell cases in 1981. The company switched to the cardboard sleeves in 1985 that become a staple of VHS movies for years to come.

Disney came on board to home video in 1980 by releasing some of their live action classics such as The Love Bug, Pete's Dragon, The Black Hole, 20,000 Leagues Under the Sea, Escape to Witch Mountain, Bedknobs and Broomsticks, and The Apple Dumpling Gang. Dumbo was the first animated classic released in 1981 and Disney started releasing a classic at $29.95 once a year in the fall. The tradition was finally broken when they released Pinocchio in July of 1985.

The Video Rental Stores Pop Up

After Magnetic Video released their titles, George Atkinson of Video Station in Los Angeles bought a Beta and VHS Copy of the 50 titles are started to rent them to his customers. He charged $10 per day and his video rental business was born.

As more studios started to release movies, more and more rental stores started to pop up. At first it was just the “mom and pop” stores but then large chains started to move into this lucrative business.

Blockbuster was founded in the northern part of Texas in 1985 and grew into the biggest rental chain in the country. Hollywood Video got its start in 1988 and grew into a major competitor for Hollywood. Movie Gallery got its start in 1985 just like Blockbuster and also grew into a huge retail chain. Their purchase of Hollywood Video would later start the company’s downfall.

Fighting Video Piracy

As the popularity of home video started to climb, so did the prices of VHS movies. Studios at first tried to stop the rental of videocassettes by filing a lawsuit stating that renting was infringing on copyrights. Disney even went so far as to place the caption “Not Sale Only – Not Intended For Rental” on some of its cassette labels. The courts ruled that rentals were legal and not infringing on the rights of studios. The studios then countered by raising the prices of the movies and by 1983, some titles were up to $79.99 SRP. The rising prices also meant an increase in illegal copying.

Macrovision was invented in 1982 to deal with such situations. Studios started to encode their movies with Macrovision to help stop pirating. Movies with Macrovision would produce a copy that fluctuated brightness and would turn out fuzzy on the screen. This stopped some pirates, but the professionals still found a way around the system. Paramount started an innovative plan in the early 1990’s by releasing certain movies in different colored shells. The Hunt For Red October was in  red shell, The Firm was in a blue shell, and Ghost was released in a light gray shell. The battle would continue throughout the life of VHS and beyond.

The Studios Constantly Change Strategies

Since the studios could not stop rentals, they had to figure out a way to get the most money for themselves. They realized that video stores were opening at an alarming pace and did not want to deal with them directly. They decided to sell to wholesale distributors and then have the distributors sell to the video stores. The studios decided that they would only sell direct to the large chains like Blockbuster. As time went on, the studios slowly raised the prices of movies.

By 1983, VCRs were becoming a popular household item and Paramount decided to try a new strategy. They decided to release a few big theatrical titles at a reduced price. Paramount rolled out Raider Of The Lost Ark and Footloose at a reduced price to entice customers to buy instead of renting. Warner decided to release Purple Rain in the fall of 1984 at 29.95 SRP. These releases were a huge success and studios now adopted a two-part strategy.

Studios decided to releases their biggest hits at $29.95 and other titles at $79.95. Eventually the price gap would widen. Some new releases came down to $19.95 and the other titles started to climb. By the early 1990’s, the SRP on some titles had risen to over $105. This meant that the wholesale cost to video stores would be in excess of $77 per tape. Stores grumbled, but the market rose so fast, that everyone was still making money.

By the mid 1990’s, the home video market was so huge that everyone wanted a piece of the pie. Revenue from home video had overtaken the revenue generated from theaters. Small studios formed literally overnight and the fight for shelf space at the video store became quite a battle. Some studios took a novel approach to getting recognition. Some releases, mostly horror, would be released with novelty boxes such as hologram covers. The movie, The Pit, had a cover that featured a monster whose eyes lit up and made a buzzing noise.

The Changing Landscape

In the late 1990’s, the studios decided to offer the large chains revenue sharing deals. They would sell movies direct to the chains for a fraction of the normal cost in exchange for a split of the revenue. In order to appease the smaller stores, the studios offered a reduction in price if the stores purchased a certain quantity. If the store bought 5-10 copies of a certain movie, then the price would come down to about half of the regular price. The prices and quantities would change as the studios tried to figure out how to make the most money on the system. This system was in full swing as the studios started to release movies on DVD.

The release of DVD movies by studios was a quiet affair. Very few people could afford a DVD player in the first year of launch and the VHS recorders were so entrenched into the homes that a change of the guard would not happen overnight. Studios would only release catalogue titles on DVD and save the big sellers for VHS. Even as the 20th century came to a close, VHS was still number one.

The Demise Of VHS

As the 21st century started, the rise of DVD started to take off. Studios decided to price DVDs from $19.95 to $29.95 from the very beginning and this helped boost sales from the start. As the price of players fell, the number of players sold rose rapidly. The end of VHS was coming soon and everyone knew it.  In 2006, New Line Cinema released the movie A History Of Violence. This would become the last major theatrical release on VHS. A rollercoaster ride of almost 30 years was coming to a close.

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Comments (7)

This is a fascinating article. I did not know the history of VHS and why it replaced betamax. Tweeted because I am out of votes.

An interesting article on watching home movies. Thank you Mark. Voted. Hoping to avail your friendship.

Really nice post! I remember the war between the two...I have so many VHS movies and a few Beta. Thanks for posting the history of VHS. Voted up.

How fun to look back at the history of the VHS tape! Vote up

An interesting read, thanks!

I spent 15 years in the home video industry dealing with movie studios. It was interesting learning how they built their business model.

Interesting to see how the industry's evolved. Gave your article a Google +1.

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