Actually, LaserDisc was superior in quality to VHS. Some players did have S-Video outs as well, and a properly made disc didn't degrade like SVHS. (It wasn't a better picture than ED-Beta, but the best discs were equal in quality).
Also, Pioneer introduced their first industrial players no later than 1979.
It wasn't just a format for letterbox (there are a LOT of P&S discs out there), it was a format for videophiles. There's a lot more players and discs out there than most people think, but anyone I knew with a home theatre setup (or even a big screen TV) in the 80's up to the late 90's had a LaserDisc player.
Take a look at MAME. The goal there is complete accuracy. In implementing LaserDisc games, they judged MPEG-2 (which DVD uses) to be insufficient for preserving the quality of the discs used in the games.