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‘When you hit a wall with a sledgehammer, you do tend to think more
clearly,’ says Gerry Wirtz, recalling the day in 1988 when he was knocking
down a wall in his house. Wirtz is an electronics expert who had been pulled
out of his work on security devices at Philips, the Dutch electronics group
based in Eindhoven, to head a group to predict the future of digital
recording and plan the new products that Philips should be making. As he
worked on his wall, ‘I asked myself what my neighbours would buy,’ he
recalls. ‘They might have a CD player at home, and a cassette player in the
car. They would not be interested in a completely new recorder just because
it was digital. But if I came to them with a digital machine that would play
a new type of cassette and it also played their old tape – now that they
might like.’

Out of this moment of inspiration was to come the Digital Compact Cassette
recorder. Launched late last year, DCC offers consumers the opportunity to
make digital recordings on a new kind of tape with the quality of a compact
disc. And just as Wirtz dreamt, it has ‘backwards-compatibility’, so that
it can play conventional analogue tapes. All eyes are now on the battle for
market share between DCC and Sony’s new Minidisc system (see ‘Head to head
in the recording wars,’ New ÐÓ°ÉÔ­´´, 17 October 1992). But behind DCC is
an even more fascinating series of struggles as Wirtz and his supporters
fought to win Philips’s support for the machine, research engineers battled
to find new ways to compress data onto tape without losing sound quality,
and Philips executives tried to win support in the music industry.

The story started in 1987, when Cor van der Klugt, Philips’s president,
brought in Jan Timmer to take charge of consumer electronics. As head of
Polygram, the record company of which Philips owns 80 per cent, Timmer had
an excellent track record. At Philips, his brief was to make the division
more profitable – a great challenge because all consumer electronics
companies were facing hard times, even before the recession. Most people who
wanted and could afford a colour TV, video recorder and hi-fi, already had
several. Equipment was now built to last, so manufacturers could only make
money by continually persuading people to buy new products.

At the time of Timmer’s appointment, Philips was still pinning its hopes for
future profits on DAT, the digital audio tape system intended to replace the
analogue compact cassette by providing two hours of CD quality stereo from a
cassette the size of a thick credit card. It had DAT recorders ready to
sell, but the record companies were angry about the new technology. They
said it made home copying of CDs too easy and would let people ‘clone’
music, with each digital copy as good as the original. The leading record
companies refused to release prerecorded music on DAT until the copyright
issue was resolved, forcing Philips to delay the launch. All the Japanese
electronics companies were holding back, too, for fear of triggering a wider
trade war with the West.

Concerned that DAT would never take off, Timmer started looking for other
new products. The Japanese tend to throw as many new ideas at the home
entertainment market as their research laboratories dream up, in the hope
that some stick. But Trimmer wanted a more focused approach. Market
research told him that consumers wanted digital recording machines, so at
the beginning of 1988 he set up a working party to predict the likely future
of digital recording. He took Wirtz away from the DAT project, and made him
coordinator of this Future Digital Audio Recording Group.

Inside Philips there was a strong feeling that the future home recorder
would use blank CDs. Everyone expected the working party to confirm this
within six weeks. Instead the party took four months over its deliberations,
and then said that Philips should reject the CD option altogether. This
decision did not go down well with the CD divisions within Philips, which
had invented the technology. But the facts spoke for themselves.

A recorder that uses 12-centimetre discs would not be portable. The
high-power lasers needed to record onto a disc are expensive, and so the
technology would attract only small numbers of well-heeled enthusiasts. What
Philips wanted was a mass-market product. To Wirtz, once the sledgehammer
had concentrated his mind, the answer was a digital cassette recorder that
was ‘backwards-compatible’, so that people could play their old analogue
tapes on the new digital machines. The working party quickly saw the logic.
More than 200 million analogue cassette mechanisms are sold every year,
most for use in personal stereos and cars. Backwards-compatibility would
allow a new machine to fill the replacement slot in the market. If the new
digital players were not too expensive, the public – and car manufacturers
– would pay the extra for a player that plays both types of tape.

Radical thinking

In 1988 this was a radical idea. Both DAT and CD were incompatible with
previous technologies. Research engineers tend not to worry about catering
for the past. They also have scant regard for copyright problems, or the
need to design a product with such a clear commercial target. Wirtz
anticipated these developments in 1987, shortly after he started working on
DAT, when he remarked: ‘Digital technology is so powerful that you cannot
just do as we have done before and throw it over the wall of the laboratory
and into the marketplace, to see what happens. Decisions have to be taken
before the technology goes on sale. Once it escapes into the marketplace it
is too late.’

Philips’s working party came to three conclusions. First, the price of a
digital recorder that was backwards-compatible had to be as low as possible
though not less than that of existing cassette recorders. This criterion
ruled out DAT because of its complexity. Secondly, a new recorder could not
succeed without a deal on copyright – the public would not buy new equipment
without prerecorded music. Thirdly, the decision to build the new system on
tape, rather than disc, meant the project might become bogged down in
company politics.

Timmer quickly gave the working party the go-ahead to see if it was
feasible to produce a backwards-compatible digital recorder. He also helped
to solve problems. His crossover from a record company to an equipment
manufacturer was the start of a bridge between the two copyright factions.
Working through the International Federation of the Phonographic Industry,
he persuaded the two sides to discuss digital copying. Timmer also recruited
Angelique Hoogakker, a young lawyer working for the IFPI, as manager of
public affairs. She was responsible for liaising with Timmer’s office, the
music industry and the new digital cassette working party. Hoogakker
understood copyright law and knew the record companies. The working party
understood the technology and talked to Hoogakker who talked to Timmer who
talked to the group. So the working party obtained the resources it
needed, without time-consuming formal meetings and without breaching the
Philips tradition of talking only to the higher management through middle
managers, often with vested interests to protect.

Wirtz, meanwhile, became the crusader for DCC within Philips. He also made
it his business to find out what expertise was available within the company,
making sure that the right people came together at the right time.
Membership of the working party was deliberately kept fluid, with Wirtz
pulling in specialists on demand. He had learnt the benefits of such a
strategy the hard way, during his time on the DAT project.

With the mass market in mind, the working party decided that its new digital
cassette machine should use recording heads that remain stationary while the
tape moves over them. Stationary heads are potentially much cheaper to make
and more reliable than the rotary heads used in the DAT recorder. This
machine worked like a miniature video recorder, with its heads mounted on a
drum that spins rapidly to scan the slow-moving tape, recording and reading
tracks narrower than a human hair. Another advantage of stationary heads is
that tapes can be copied at more than 64 times faster than normal speed. DAT
music tapes cannot be duplicated by running the master and copy tapes at
high speed and copying from one to the other, because the drum speed is
already so high.

In late 1988, Wirtz asked Philips’s research laboratory – the Naturkundig
Laboratory, or Nat Lab as it is known – to make a prototype stationary
head. The laboratory was able to do this in two months because, as Wirtz was
aware, it had already designed stationary heads for multi-track sound
recorders used to log police calls.

The working party wanted the new digital tape to run at 4.76 centimetres a
second – the same speed as analogue cassette tape. This would mean that
factories would not have to redesign the tape mechanisms already being built
into analogue recorders. But CD-quality sound requires 1.4 million bits of
data a second, which cannot be crammed onto such a slow-moving tape. The
data had to be compressed to a quarter of the amount. The compression
system the working party devised for DCC was born of a mix of natural
curiosity, good fortune and hard work.

In 1985, Raymond Veldhuis was working at the Philips Nat Lab looking at ways
of compressing digitally encoded speech. He would break down the
20-kilohertz spectrum of the audible sound signal into narrower sub-bands,
and encode each one separately. (Veldhuis now works for the Institute for
Perception Research in Eindhoven, funded partly by Philips and partly by the
Eindhoven University of Technology.) He recalls how ‘I was just interested
in what I heard, and saw no commercial application’. When he heard that
researchers at the University of Duisburg in Germany had been trying to
compress music in a similar way, he decided to try his speech encoder on
music. The results were encouraging; instead of using the CD standard of 16
bits to encode the music, his encoder needed only 3 bits.

At the end of 1989, the Nat Lab hired Robbert van der Waal, a university
student from Duisburg, to do further research on compression coding, but
still with no commercial application in view. He looked at sub-band masking
– splitting sound into frequency bands and analysing which sounds will mask
others to the ear. Van der Waal’s research laid the groundwork for DCC’s
coding system, Precision Adaptive Sub-band Coding (PASC). It works on the
same principle as the human ear, which ignores a note swamped by a louder
note of the same or similar frequency.

Wirtz knew of the work by Veldhuis and van der Waal, and wondered if it
might be suitable for the digital cassette. Each year, the Nat Lab holds an
open day, to which all Philips employees are invited. There they see
demonstrations of work in progress put together by the researchers. Wirtz
made sure that the members of the working group were at the 1989 open day to
see a demonstration of sub-band coding. They thought it might work, and
mentioned it to Timmer. His immediate response was: ‘Make me a working model
in six months.’

The group used the hand-built stationary head that Nat Lab had made the
previous autumn, and a large rack of prototype digital compression
circuitry. To prove the feasibility of mass production they chose a cheap
and cheerful plastic cassette player, put in the head and connected it to
the external electronics. The make-shift recorder used ordinary tape in a
conventional cassette – and worked astonishly well. The working party made a
point of demonstrating it to Timmer in JJuly 1989, six months to the day
after receiving the instruction to make the prototype.

No wow or flutter

Abraham Hoogendoorn and Paul van der Plas, who had both moved to the digital
working party in 1988 as Philips pulled out of DAT, recall how the meeting
with Timmer went: ‘It was a marvellous demonstration. We used a very cheap
cassette deck, which gave terrible wow and flutter when playing analogue
tapes. Then we put in a digital cassette and shook the cassette deck
violently. There was no wow or flutter. The timing circuits of the digital
decoder just compensated for the errors.’

Timmer was thrilled with the DCC prototype. And he had some good news for
the working party about copyright. At an IFPI meeting in Athens during
June, the delegates hammered out a deal on copyright. Under the terms of
the Athens agreement, the music industry agreed to withdraw its objections
to the sale of DAT recorders provided that the electronics industry agreed
to incorporate technology that restricted copying. The technology, called
Serial Copy Management System or SCMS, lets the owner of a digital recorder
make one digital copy, but then prevents anyone making a digital copy of
that copy. Sony is now the chief supplier of DAT machines, mainly to
professional users who can afford them.

Although the Athens agreement covered mainly DAT, it was not long before it
was extended to embrace every conceivable method of making a digital
recording. Timmer, however, wanted to be absolutely certain that the music
industry would back the new recording format before giving the go-ahead for
the mass production of DCC. In late 1989, he arranged a demonstration for
Bhaskar Menon, then head of IFPI and EMI Music. At the IFPI’s next board
meeting, Menon advised the chief executives of all the world’s record
companies to go to Eindhoven and see for themselves what was on offer. One
by one they went and Timmer told them: ‘If you are interested, then help us
specify the system. Without your support we will not go ahead and make it.’
All were enthusiastic, except CBS.

Through his contacts, Timmer also persuaded a hardware manufacturer,
Matsushita of Japan, to come to Eindhoven to see the demonstration.
Matsu-shita was impressed and quickly gave its support to the DCC project –
support crucial to Philips if it wanted to sell the system in the
all-important Japanese market. Soon after, Timmer arranged for Sony
engineers to see the same demonstration. The Philips engineers recall how
the Sony engineers were ‘visibly shocked’ at the sound quality available.
But by then, Sony was secretly developing Mini Disc – a miniature,
recordable version of the compact disc – that was to be a competitor for
DCC. And Sony owns CBS.

In Japan, Hoogendoorn and van der Plas found Matsushita’s factory engineers
still busy with DAT and all the manufacturing problems that went with its
complex design. The Dutch engineers showed them their DCC prototype. ‘Very
simple, very simple, very simple,’ said the Japanese. ‘It was nice of them
to say that, but they were not so right,’ says Hoogendoorn.

DCC seemed very simple, and its backwards-compatibility reinforced this
impression. So the working party got a rude awakening when they tried
mounting their stationary head and compression circuitry on other cassette
machines – and discovered that the sound would mute unexpectedly. It took a
long time to find out why: in the demonstration model, the tape, which is
always slightly abrasive, had cut a channel into the plastic. The machine
worked only because the channel held the tape at exactly the right angle to
the tiny heads. Once the problem was identified, engineers arranged for
appropriate guides to be designed for mounting on the head.

Ready for production

Meanwhile, the electronics engineers thought that when they did get sound
from the tape, it was good. But when recording engineers from Polygram’s
Dutch recording studio in Baarn and from Decca in London heard the system in
action they said it sounded ‘awful’. Veldhuis and van der Waal continually
changed the compression coding algorithms, which Philips then checked with
the Polygram music engineers. But still the music engineers weren’t
satisfied. Then Wirtz enlisted the help of Adrianus Houtsma, professor of
psychoacoustics at the Institute for Perception Research, who identified the
problem in three days. The laboratory researchers had been testing each of
the stereo channels separately, while the music engineers were listening in
stereo. While the music signal that spreads between the two stereo channels
is correlated, any background noise is random and different in each channel,
standing out when both channels are heard together. The solution was to use
less compression in the low-frequency range, which produced a signal that
masked the noise.

Despite the setbacks, Hoogendoorn looks back with obvious pleasure. ‘It was
a marvellous time. We were just sitting together as if we had nothing to do
with Philips. We made all our own decisions. The important thing was that
Timmer believed in the project. If you do not have that kind of confidence
from the top then you get small groups opposing each other.’

At the end of 1990, Timmer, by then president of Philips, felt he had
enough support from the music industry to give the order to ‘build’ DCC.
Now the working party had to concentrate on the problems of mass production.

For encoding and compressing the audio signal, Wirtz took the large
prototype circuits designed by the Nat Lab to the Philips semiconductor
centre at Southampton. Here the circuits were converted into the photolithic
designs needed to make microchips at the Philips fabrication plant in
Nijmegen.

Philips could not afford to build its own factory to make the stationary
heads, but if the market for DCC took off it would need millions of heads a
year to satisfy demand from other firms wanting to make DCC recorders under
licence. The heads rely on thin-film technology, and are also made like
microchips: a thin layer of semiconductor material is deposited on a slice
of silicon, and etched in the shape of the heads. One of the members of the
working group saw that the DCC heads have a lot in common with the heads
produced by the computer industry for use in hard disc drives. Philips
struck a deal with Seagate, an American manufacturer of hard disc drives for
computers. Seagate now makes the thin-film microchips and Philips handles
the tricky task of assembling the head, which involves mounting the chips on
a block and connecting the etched parts to tiny wires with microscopic
accuracy. Everything was now in place to satisfy whatever demand exists,
with a head that was easy to insert into a mass-produced recorder.

The original plan was to launch DCC in spring 1992, and then September. But
as summer approached, it looked as if there would not be enough of the vital
thin-film heads. The manager of the Eindhoven factory that assembles the
head went to his workforce and asked them to cancel their summer holidays
and make heads instead. Eighty per cent agreed.

Then, with only weeks to go, Japanese engineers found that some of the
prerecorded digital music cassettes that Philips had made to support the
launch seemed faulty. In hot and humid conditions they sometimes shed
residue onto the heads, causing digital errors and muting the sound. So,
again, Philips delayed the launch, recalled all the cassettes and started
duplication all over again, with a slight modification to the inside of the
cassette.

No one yet knows whether DCC will be a success, or whether Sony will capture
the public imagination with its Mini Disc. But the outstanding feature of
DCC that could make the format a long-term winner is its
backwards-compatibility. Wirtz explains the sea change in policy: ‘Society
is now overloaded with innovation,’ he says. ‘Producing a nice little new
toy is not enough. Society is more competitive, so the window of opportunity
for getting a new product accepted is smaller. It took seven years for the
world to find out that the cassette recorder was not just a recorder, it
was also the ideal mobile source of prerecorded music. The early video
recorders did not even have a tuner to tape programmes off-air. In those
days the industry had some time to get it right. Now you have to shoot at
exactly the right time or you are out.’