In 1974, L. Ottens, director of the audio division of Philips, started a small group with the aim to develop an analog optical audio disc with a diameter of 20 cm and a sound quality superior to that of the vinyl record. However, due to the unsatisfactory performance of the analog format, two Philips research engineers recommended a digital format in March 1974. In 1977, Philips then established a laboratory with the mission of creating a digital audio disc. The diameter of Philips's prototype compact disc was set at 11.5 cm, the diagonal of an audio cassette.

In what year did Philips institute a laboratory to create a digital audio disc?