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158 HARVARD BUSINESS REPORTS
On the other hand, there was much to be said for selling pictures with sound on disc. A factor of prime importance was that a great many exhibitors were not equipped to reproduce sound on film. The cost of such equipment was still very high. A great many disc installations, however, were available at substantially lower prices. Many exhibitors, moreover, resorted to low-price disc equipment in a desire to capitalize on the novelty demand for sound pictures, when they were unable to finance the purchase of the best disc equipment. Furthermore, other companies, competitors of RKO Productions, Incorporated, were offering these exhibitors disc pictures. It could be reasoned, therefore, that this equipment would continue in the market even though RKO Productions, Incorporated, did not support it, and at the same time the sale of product by this company would suffer through failure to meet the requirements of this class of exhibitors.
Another factor of major importance lies in the fact that with the introduction of sound the market for motion pictures ceased to be a single unit. It now became a market first for silent pictures, secondly for pictures in which sound was reproduced on the film, and thirdly for the pictures in which sound was reproduced on the disc. Considering that the cost of making sound pictures in any form was heavy and that the market was thus divided into various segments, it would appear that it was necessary for a distributor to cultivate each segment as intensively as possible. In this way, if in the course of time the disc equipment improved or exhibitor preference shifted from sound on the disc to sound on the film, then the distributor would be in a position to^adjust his product accordingly.
Another influence of some importance in reaching a decision was the fact that the Victor Talking Machine Company was controlled by the same interests that controlled RKO Productions, Incorporated. Naturally a decision favoring disc reproduction would tend to insure a substantial market for the product of this affiliated company, both through the sale of RKO pictures and through the sale of records required by other producers.
Under the circumstances the decision of the company to supply sound on disc as well as sound on film was wise. November, 1929 H. T. L.