SIC 3695 Magnetic and Optical Recording Media

SIC 3695

This classification comprises establishments primarily engaged in manufacturing blank tape, disk, or cassette magnetic or optical recording media for use in recording audio, video, or other signals. Excluded from this classification are establishments primarily engaged in manufacturing blank or recorded records and prerecorded audio tapes, which are included within the scope of SIC 3652: Prerecorded Records & Tapes. Also excluded are establishments primarily engaged in manufacturing prepackaged computer software and those establishments manufacturing prerecorded video tape cassettes and disks. The former are classified in SIC 7372: Prepackaged Software and the latter are classified in Industry Group 78: Motion Pictures.

NAICS CODE(S)

334613

Magnetic and Optical Recording Media Manufacturing

INDUSTRY SNAPSHOT

The magnetic and optical recording media industry manufactures blank audio and video recording tape, computer tape, and both rigid and floppy computer disks, utilizing either magnetic or optical recording technology. To an extent, the magnetic and optical methods of recording data, images, and sound are competing technologies: the magnetic method offers the user quick retrieval of recorded material, while the optical method benefits those with large storage requirements. However, by the mid-2000s optical recording was making deep inroads into the magnetic recording market for audio and video. Although magnetic data storage continued to be popular among PC users, new technologies such as media storage cards and flash drives were infiltrating the marketplace and posed a challenge to the future of the media storage industry.

Before 1987, the U.S. Census Bureau did not recognize manufacturers of blank audio and videotapes and manufacturers of floppy and rigid computer disks as composing a distinct industry. Instead, these manufacturers were grouped together with manufacturers of such products as phonograph needles, radio headphones, and microwave components. In 1987 the U.S. Census Bureau began separately tracking the recording media manufacturing industry, which had emerged as a significant force, generating $3.5 billion in revenue and comprising 181 manufacturing companies scattered throughout the United States. Annual industry revenues increased by 70 percent within ten years, surpassing $5.9 billion.

The industry's growth from 1987 through the end of the twentieth century was founded not in sales volume, which was modest, but in technological progress. With announcements of improvements in both the production of data storage products and the production of audiotape and videotape occurring almost monthly during the final decade of the century, the industry underwent repeated periods of flux. The introduction of new high-density writable optical formats in the mid-1990s launched a dramatic upsurge in the volume of optical media sold, while projections for sales of magnetic media turned flat. Manufacturers of magnetic and optical recording media poised themselves to garner an appreciable share of the revenue realized from the enormous popularity of home audio and video entertainment and the increasing use of computers for both professional and personal needs.

Conflicting forecasts pelted the industry. Some called for its collapse in anticipation of competing technology that would render magnetic and optical recording technology obsolete, while others promised a meteoric rise in sales. Without question, financial success in the industry is predicated on a manufacturer's continued ability to remain at the forefront of technology, to consistently develop new products that stimulate public interest, and to keep pace with the evolving sophistication of audio, video, and computer equipment.

After peaking in the late 1990s, the industry suffered from a sluggish economy during the first years of the 2000s. From $4.74 billion in 1998, total shipment values fell steadily over the next five years, reaching $2.14 billion in 2003. As the economy began to slowly revive by the mid-2000s, the industry as a whole was poised to grow again. However, technologically advanced optical recording would continue to lead as magnetic recording remained sluggish. Also, the industry faced challenges from new, emerging data storage technology.

ORGANIZATION AND STRUCTURE

By the mid-2000s, approximately 165 U.S. companies were involved primarily or exclusively in the manufacture of magnetic and optical recording media, down from more than 240 in the late 1990s. More than 30 percent of establishments were located in California, which accounted for about 38 percent of the industry's total shipment values. Other states with significant involvement in the industry included Massachusetts and New York, and to a lesser extent, Georgia, Oregon, and Virginia. The bulk of the industry's revenues lie in the hands of the biggest manufacturers. In 2002 the twelve largest establishments—those having 250-plus employees—accounted for 77 percent of the industry's total shipment values.

BACKGROUND AND DEVELOPMENT

The magnetic and optical recording media industry is a modern phenomenon, its emergence stemming from technological advancements that began following World War II. First came dictating and audio recording machines, which required blank audiotapes. Next, computers and video tape recorders created a need for tape recording information. As equipment relying on magnetic media became more advanced, magnetic media evolved as well, with improvements in both sound, image, and data recording capabilities occurring alongside advances in the way the tape itself was housed: first on reels, then inside cassettes and cartridges. Eventually, during the 1970s, magnetic recording technology advanced to disks, a response to the advent of personal computers.

Just as the pursuit of better ways to manufacture magnetic media created entirely new forms of magnetic media, the push for progress also led to the discovery of an entirely new method of recording and storing data, images, and sounds: optical recording. Emerging during the 1970s, but experiencing its most appreciable growth during the 1980s, optical recording technology promised to greatly increase recording and storage possibilities for the industry and enrich manufacturers along the way.

The origin of magnetic recording technology dates back more than fifty years before magnetic media became a commercially viable product in the 1950s. The principle of magnetic recording was first developed in 1893 by a Danish inventor, Valdemar Poulsen. Poulsen's encouraging discovery led twelve years later to the formation of a U.S.-based company called the American Telegraphon Company, organized especially to manufacture Poulsen's recording machines. This initial attempt to employ magnetic recording technology failed, largely because the wire Poulsen's design used had a tendency to become twisted, which produced unsatisfactory and irregular results.

For the next fifty years, magnetic recording development remained practically at a standstill, at least in the United States. However, in Germany experiments continued, particularly during the two decades bridging World War I and World War II, when Karl Bauer and A. Nasavischwily designed the "Magnetophone," a recording machine that used magnetized plastic tape.

Toward the end of World War II, U.S. soldiers discovered the German Magnetophones and brought them back to the United States, recognizing that the German recording machines were capable of much higher fidelity than the wire recorders used in the United States. Once the German tape recorders became the property of the U.S. Government, they were given to the Brush Development Company, which was to begin production of the far superior tape recorders. Brush Development began marketing tape recorders in 1946, which obviously created a need for magnetic tape, a need first filled by Minnesota Mining & Manufacturing (3M) one year later, when the company introduced its Scotch brand magnetic recording tape.

The 3M production of magnetic recording tape formally launched the magnetic media industry in the United States. Other manufacturers soon entered the...

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