The success of VHS over Betamax is often used as an example of market failure. The conventional wisdom is basically this: Betamax, the better format, failed in the marketplace, and the inferior VHS system became the standard, because of marketing. But as the Guardian says: “It’s an urban myth.”

When consumers chose VHS over Betamax, they made a rational choice. The introduction of Betamax into the market involved failures to provide customers what they wanted, forgotten by VHS’s critics. For a start, early Betamax tapes in the US only allowed an hour’s recording time, when VHS offered three hours. Anyone wanting to record a film would find that only VHS was suitable. Betamax was eventually able to record a whole film, but too late, and VHS tapes by then were able to record for even longer still.

JVC licensed its VHS technology cheaply to anyone who wanted it, whereas Sony was more protective; the result was that VHS recorders were cheaper than Betamax ones. VHS vs Betamax is not an example of market failure. All it reveals is that the priorities of consumers were different from the priorities of Sony and the experts who backed the Beta format.