The audiocassette was another revolutionary new recording format, released in 1963 by Philips. Smaller than the bulkier cartridge introduced a few years earlier, its monaural, 1/8" magnetic tape construction offered poor sound quality compared to the high-fidelity LP, and as a result, posed no great threat to the format.

The cassette format became a major force in the record industry for a number of other reasons - mainly because Philips allowed everyone access to manufacturing rights, provided they followed Philips" own specifications. Another reason why the audio cassette became popular despite its apparent is that it was the first truly portable pre-recorded music system, since the player required for the format was small, relatively inexpensive and could be battery-powered. As a result, a new market was created which could not be satisfied previously by the bulkier ¼" tape players and LP hi-fi systems.[7] The market was greatly increased with the introduction of Sony's Walkman in 1979 and the boom in car stereo sales. Sales of the audiocassette peaked in the US in 1988 with sales of 473 million units.[8]

Another significant aspect of the audiocassette format was that it allowed home recording through both microphone inputs and from pre-recorded disks and radio broadcasts. This development threatened the record industry's economic makeup, since pre-recorded music could now be manufactured and/or circulated outside what was once a closed, controlled market . While the audio cassette did expand the market for blank tape and encouraged fresh competition between record companies and format manufacturers, illegal taping and distribution of music became one of the main concerns of the industry, and remains so to this day.

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