CES at 50: Lessons Still Not Learned

Gazing at faded black-and-white photos from the first CES, which occurred 50 years ago this week in New York, it’s tough not to laugh at the antiquated gear that was considered cutting-edge at the time—fat tube black-and-white TVs when 23 inches was considered “big screen,” giant wood console cabinet TV/record player/radio combos, “portable” TVs that weighed 45 pounds, 8-track car tape decks, portable “picnic” record players onto which teenagers stacked 45 RPM singles, and transistor AM radios twice the size of today’s smartphones.

But that first CES was actually forward-looking, not just for the newest products, but in establishing a template for how consumer electronics products and technologies would be developed, marketed and sold over the subsequent half century.

Today, for instance, the TV ecosystem is awaiting implementation of ATSC 3.0 broadcasting and advances on other platforms to fill the screens of their new expensive 4K UHD TV sets. Since not all 2K upconversion is created equal, message boards are filling with consumer complaints about how standard TV, and especially DVDs, look on their expensive new 4K sets.

It was a similar story back in 1967 with the transition from black and white to color. Thirteen years after the FCC adopted the RCA-sponsored NTSC color standard, the 1966-67 season was the first with completely color prime-time lineups on all three U.S. TV networks: ABC, CBS and NBC.

Once the networks fully embraced color, color TVs sales predictably hockey-sticked, illustrating for the first time the importance of content/hardware interdependence for a new format. By the end of the 1967, sales of color sets topped monochrome models for the first time.

Network adoption of color also prompted a wave of new vendors, just as the introduction of radio did 40 years earlier, just as TV had 20 years earlier, just as HD did 15 years ago and just as 4K has today. Fifty years ago, Japanese vendors such as Sony, Toshiba, Sharp and Hitachi brought their first color TVs to the U.S. market and actively promoted themselves at CES that summer while busily opening their first U.S. subsidiaries, just as some Chinese TV makers are doing today.

Understanding Disruption

In other examples of how disruptive-technology templates were established 50 years ago, the first CES featured the first tech format war.

In 1964, the 8-track, aka Stereo 8, tape format burst into the market, bringing personal music choice to the car. Nearly simultaneously two years later, Philips unveiled its compact cassette and MGM its Play Tape format. Play Tape was essentially a miniature version of 8-track—1/8-inch tape in a looped cartridge. But unlike both 8-track and compact cassette, Play Tape was limited to just 24 minutes of music, with its designers banking on the transfer of the 45RPM vinyl record “singles” market to tape.

Hardware suppliers and content companies were forced to choose sides, most obviously not considering how new formats change usage behaviors, consumption and product design, and vice versa. Hardware vendors in 1967 had only the example of the shift from radio to TV a generation earlier to see how new hardware formats require their own content structures, that a new format simply can’t be a new way to deliver the same old content, which is what both 8-track and Play Tape did. So not surprisingly, the compact cassette won the format war because it offered a distinct advantage—you also could record on it.

Seeing the Market

The 1960s were known for rapid and radical societal changes, one of which was the coming-of-consumer-age of the baby-boom generation. Consumer consumption was shifting toward a younger audience.

But this youth-oriented future met resistance from the CE industry’s 1967 conservative middle-aged, dark suit, male executives. For one thing, classical recordings on vinyl was the snobby demo source of choice, while that summer’s breakthrough musical hit, The Beatle’s “Sgt. Pepper’s Lonely Hearts Club Band,” along with all other “kids” rock n’ roll music, might as well have existed in another universe.

In an astounding—but too-frequently repeated—case of short-sightedness and famous last words, the VP and GM of the consumer electronics division of Philco-Ford (who shall remain nameless) advised a CES panel on the youth market that, “any manufacturer who becomes enchanted by the tremendous number of people in the 15 to 24 age bracket and gives this segment of the population his undivided attention is making a mistake.”

Then, as now, there was both niche and mass market myopia, and understanding the mistakes made 50 years ago provides an important product development and marketing lesson for today.

But Philco-Ford wasn’t and isn’t alone. Ignoring obvious market demographic, behavior and technology shifts has become a career- and company-ending compulsion ever since, binding today’s crowded tech world ever closer to that first CES 50 years ago.