September 16, 2019 • 47 mins
It once dominated the communications and broadcasting industries in the United States, but by 1986 it would be reduced to a name brand. What the heck happened with RCA?
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Episode Transcript
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Speaker 1 (00:04):
Welcome to Business on the Brink, a production from I
Heart Radio and how stuff Works. When last we left off,
the Radio Corporation of America or our CIA had just
become the r c A Corporation, so I guess it
was the Radio Corporation of America Corporation. President David Sarnoff
(00:24):
was relying on a combination of innovations and ruthless business
strategy to tune in to success. Ultimately, our CIA would
grow into an enormous company with its proverbial fingers in
many proverbial pies yumpie, until the when another company would
put a stop to it. This is our CIA in
Business on the Brink. Hey everyone, I'm Jonathan and I'm Ariel,
(00:56):
and we're going to continue our story with our c
A as we jin. So if you have not heard
the previous episode, you should probably go do that because
it will it will set the stage for what was
about to happen. But we had just talked about how
our CIA had become its own independent company after being
sort of a mutual partnership among many big big companies
(01:19):
like General Electric and Westinghouse. And we left off in
the year nineteen two. So we're gonna jump to nineteen
thirty four because this is when one of our CIA's properties, NBC,
the the at that point, the radio network it was
before TV networks, was the subject of some scrutiny. The
(01:40):
Mutual Broadcasting System said that NBC and CBS were essentially
a d wopoly, that these two networks of radio stations,
we're making it very difficult if you want to operate,
say an independent radio station, and the f c C,
the Federal Communications Commission said yeah. So they went up
(02:01):
to NBC, which technically was two radio networks, the Red
Network and the Blue Network, and said, here's the deal.
You've got to get rid of one of them. You
gotta sell one of these off, pick your favorite child. Yeah.
And r c A said, I'm gonna I'm gonna appeal this,
and the Appeals Court said, yeah, you're gotta do it.
(02:22):
So r c A said, I'm gonna take this as
a spring court and Supreme Court said, yeah, you gotta
do it. Yeah. Meanwhile, our CIA kept business going. Yeah,
it was no longer tied to General Electric or Westinghouse.
The Great Depression was still going on, but David Sarnof,
the leader of the company was still trying to innovate
(02:44):
and also still trying to use any kind of business
method whatsoever to keep competition well under his heel. Yeah,
but one of the things he was still trying to
push with this TV. Right. Yeah, you had been behind
the idea of electronic television since really the twenties, and
UM had been funding it directly since nineteen thirty and
(03:07):
in nineteen thirty nine, so after about a decade of
research and development, they debuted an electronic television at the
nineteen thirty nine World's Fair. They actually showed a live
broadcast of US President Franklin Delano Roosevelt. Is he drinking
a PBR? He was not those different World's Fair in
the eighteen hundreds, but he was. He was giving an
(03:30):
address live. And in fact, this was a live broadcast,
so live from camera broadcast to this television. And they
began our c A, the company to manufacture television sets,
giant ones like sixty. Divide that by five. There you go,
twelve inch TVs or well the screen was twelve inches.
(03:51):
The television sets were enormous. Yeah, there's a piece of furniture,
all those tubes in the back. These were big. This
before the transistor, so very large pieces of equipment. And
of course, just like we talked about in the last episode,
you've gotta have stuff to show on your thing or
(04:11):
nobody's gonna buy it. So they showed a baseball game,
right they did, between Columbia University and Princeton on Princeton
two to one, so not a bad game. Yeah, you
gotta think that Sarnov was probably proud of that because
the other university had the word Columbia, and and our
c A and the company Columbia were constantly bickering with
(04:37):
one another, fighting for domination. And then they showed a
Major League baseball game after that, right November of nineteen
thirty nine. It was actually a double header between two teams,
the Brooklyn Dodgers and the Cincinnati Reds. Each team won
one of those games, so um, if you were a
fan of Cincinnati or a fan of the Brooklyn Dodgers,
(04:58):
you were able to be happy at least half the time. Then, Uh,
the networks like NBC and CBS, we're getting into television
trying to push this, but it's hard getting a brand
new technology off the ground, specially one that was as
expensive as television's early TVs were, I mean, they were
(05:22):
prohibitively expensive for the vast majority of consumers out there.
Um And on top of that, even when the Great
Depression was going to start to come to an end,
something else was starting to boil up. And that's something else.
Was the Second World War? Yeah, world War two. That
would be it. That's the one. So yeah, they called
(05:44):
World War one the war to end all wars, and
then I guess world War two was Oops, I did
it again. Yeah, Brittany, leave Brittany alone. So our c
a's consumer electronics business would slow down during this time,
but there was money to be made because, as it
turns out, when a war is on, the military needs
(06:07):
lots of stuff. See I thought you're going to say,
when the war is on, the TV's on. Well would
have been, but there was no TV yet so at
least not really. So instead, our c A would start
to develop technology for the military. Now most of the
time it was like components that would go into larger
things like radar systems and stuff. So they were really
(06:28):
focusing on that. Um. You know, a lot of the
manufacturing power of the United States was being dedicated to
wartime efforts. This was across the board. If you operated
a factory, chances are you were trying to land military
government contracts, because otherwise you couldn't even get the raw
materials you needed to make your stuff, because the U
S would put, you know, very strict limitations on that
(06:51):
everything was going to the war efforts. Yes, yes, and
so uh. At this time, also during World War Two,
the FCC ruling would come down in Ninette and r
c A would have to split up those NBC networks,
the Red and Blue Network. So a guy named Edward J. Noble,
We're going to have to do an episode about Edward J. Noble,
(07:12):
it's the point. And he had made a fortune with
life savers, not the not the not the flotation device,
the candy, the candy, Lifesavers. He was a lifesavers fortune.
Lifesavers were his life saver. He made a lot of
money on those lifesavers. So he would buy the Blue
Network from NBC for the princely sum of eight million dollars,
(07:39):
and then a couple of years later he would rebrand
that network so that its official name became the American
Broadcasting Company or ABC. So in the last episode, I
referred to the fact that that r C as r
C A pretty much played a role in the creation
of three of the major networks in the United States
(07:59):
and made NBC outright, that was its subsidiary. Uh, it
inspired the creation of CBS, and then it spun off
half of NBC, which then became ABC alright. But also
during this time, so Sarnov was getting military contracts. What
do you do with the money? Well, he was pretty
(08:20):
I mean not just pretty smart, he was incredibly smart.
He used that money to increase our CIA's manufacturing capacity.
He started building out more manufacturing centers, more factories because
he knew that when the war was at an end,
there would be another market for consumer electronics as well
as industrial equipment, and in order to meet the need,
(08:42):
he would need better manufacturing facilities. So he was using
that money. And at the time they were still making
military stuff, but it was all with the eye of
converting this over back to civilian applications once the war
was over, which they did so they started making TV
sets in forty six, Yes, so wars over the year.
(09:03):
After the war is over, our Cia starts to really
manufacture television sets. Of course, these are black and white
TVs at this time, and again, like we've said before,
they had to make stuff for people to watch, like
those baseball games. They had to create stuff. So they
essentially told NBC, which at the time again was just
a radio network, to start working into television production as well.
(09:28):
So that's when NBC started to become not just a
radio network but a TV network. Meanwhile, CBS was trying
to do the same thing. William Paley, who was the
leader of CBS, he was the guy who had bought
CBS back when it was sort of a being made
in spite of NBC, so he bought it, and he
(09:49):
was also trying to turn CBS into not just a
radio network but a TV network. And uh, Paley would
do something very shifty. What this is Again, we talked
about in CBS the Great Talent Rate. Yes, so in
that episode we mentioned how CBS was able to secure
(10:10):
a whole bunch of very big names in radio because
the general wisdom was, what's the best way to create
really good TV content. Let's take the stuff we make
for radio and make it for TV. And so they
already had big radio stars that they could It's a
whole plot point in Singing in the Rain. Yes, yeah,
it's a. It's a it's one of those Hollywood stories
(10:33):
that has made its way into different tellings because it
was a big deal. So CBS came forward and offered
huge contracts, really really lucrative contracts to stars like George
Burns and Gracie Allen, who were a duo at the time.
You had Jack Benny. You had these big, big names
in radio who were starting to make the transition to television,
(10:55):
and CBS is, why don't you go and work for
us for a while, And they said sure, because these
are great contract and NBC was not happy. No. Sarnoff
he really liked to put his pressure on other companies.
He did not like it when the same was done
to him, so he got really upset. And apparently it
(11:17):
really illustrated the difference between Sarnoff's leadership style and philosophy
and Paley's leadership style philosophy. So Sarnoff reportedly he hated
the idea of advertising. He thought of it as vulgar.
He didn't like he didn't like running ads on his
and he certainly didn't like having to meet with ad
executives that was beneath him. So he would send direct
(11:39):
reports to those meetings whereas Paley was like this very gregarious,
outgoing guy who was happy to bring people in and
have them be part of the whole situation of uh
joining in and and and having a conversation about how
can we get your ads on your network? So Paley
(12:00):
was um, the like polar opposite of s. Yeah, but Pley,
it seems like Paley won that battle. He did win
that particular battle. Yeah, all right, So what does our
c A do next? So you remember I told you
they had established that movie theater chain and they had
created a movie studio r k O Pictures, and this
(12:24):
was all in an effort to get their audio technology
into theaters to create the standard. Well they they achieved that.
So once they achieved that, they're like, well there's no
reason for us to keep this movie business anymore. Too
much diversification. So they sold it, and you know they
sold it to because I got it in the nets. Yes,
another person will have to do an episode about That'll
(12:46):
be a truly eccentric episode, because when you have when
you're that rich, you get to be eccentric. Okay, So
you have this note in where we get to the
speed Wars and I'm so excited to hear about how
they got into the the bus industry. It's not yeah,
you have to explodes. No, this has to everything to
(13:09):
do with turntables. All right, I'm gonna make this super fast.
In the beginning, you had turntables that would play music
at seventy eight revolutions per minute, so the discs would
turn seventy eight times every sixty seconds. R c A
tried to introduce a thirty three and a third RPM
album about a decade earlier, but it was during the
(13:30):
Great Depression. Nobody butt it. Then Columbia, r c S
great rival comes up with two big things that help
change that. First, they start making records out of vinyl
as opposed to shellak, which is a much harder material.
Vinyl is much easier to work with. And they come
up with micro grooves, which means you could fit more
(13:52):
grooves per side of the disc, which means more audio, yeah,
more grooves yeah. So So it used to be that
you can only fit like five minutes on one side
of a seventy eight album. They were able to fit
way more than that on a thirty three and a
third album, which was about the same size in dimensions
(14:13):
as the old seven eights. Now Columbia said, we're willing
to license this design to you, r c A, because
you make turntables, you make discs. We'll we'll license this
to you. Starna does not like ever having to deal
with somebody else's intellectual property. He wants to own it all, yeah,
(14:33):
or or he wants to license it to somebody else exactly.
He wants to be on the other side of that deal.
So Starna says, pounds sand Columbia, and so he creates.
He directs our Cia to create their own format, which
is a forty five RPM album, and they're smaller. They're like,
you know, a seven inch disc as opposed to the
(14:54):
thirty three and a third, which is like a twelve
inch disk. So it can't hold as much music then
it can't. It holds about as much as old seventy
eights do. So this is what would be used for singles, right.
You would get a single on one side and then
you have the B side, whereas the thirty three and
a third would create the concept of the long playing
or LP album. And you had these two formats going
(15:14):
to war with one another. Eventually you had third party
manufacturers that would make turntables that could work at either speed.
So that's what would allow you to play either a
forty five or thirty three and a third. You just
had to select the right speed because I don't know, Ariel,
have you ever played with a record player? I have,
you're younger than I am. I just had to ask. Now,
I didn't know all that technical mumbo jumbo behind it,
(15:36):
but you know that's interesting, mambo jumpo. You know that
if you put say a forty five, but you set
it to three three and a third, it's not going
to sound right. It's going to be slow and low pitched.
If you put a thirty three in the third and
you set forty five, it's gonna be like the children. Yeah.
So these were the speed wars, and the two companies
would maintain this kind of adversarial approach for the next
(15:58):
several years. All too lee. They would both kind of
settle with each other and agree to make and they
would agree to make records in the other formats. But
it was ugly like these were two big companies that
were both vying to become the name in that particular industry.
(16:19):
But I mean Columbia Records eventually wins that war, right, Yeah,
I mean they thirty three and a third became like
the go to and then you would have these singles
on forty five. So it was kind of this weird
world where both were able to coexist. But I think Columbia,
because it created the micro grooves, really had the big advantage. Also,
their format came out about a year before our CNA
(16:40):
is they're also fighting on television. On the television front, right,
cool boy, Yeah, we'll get into that. In fact, let's
let's take a quick break, but when we come back,
we'll talk about how Columbia and r c A put
up a really good fight on that front. So we
(17:00):
had just talked about how they were going to have
this big fight in television. Specifically, it was going to
be in setting the standard for color TV. Just as
David Sarnov wanted to set the standard for audio on film,
he wanted to set the standard for color television. Now,
at first they started making what we're called mechanical color TVs.
(17:22):
There was one element inside the television that was on
a mechanical basis, not an electronic one. There's literally a
color wheel inside the TV sets. This had a disadvantage.
They'll get into in a second. But Columbia shows off
their version of this, the CBS Columbia version of color TV,
(17:44):
and it's a pretty good quality. Our c A shows
off their's and there's just wasn't quite as good as
CBS is. So the you then have the FCC deciding
what's going to be the standard, and they say CBS
is going to be the standard, but US it's a
better picture, so we're gonna go with CBS's approach to
color television was not super happy, not even a little bit.
(18:08):
But he had a couple of advantages on his side.
One was that he had already been dedicating some resources
in our c A to create an electronic version of
color TV. It just wasn't ready at the time when
the FCC was making this decision. The other advantage was
that this mechanical color TV was not compatible with the
(18:31):
already existing black and white broadcasts. Yeah, that is a problem. Yeah,
we if you're told, hey, you can buy this brand
new TV, um Sadly, nothing that's showing today will show
on your TV, but future shows will if we can
sell enough of these. That's not a great yeah. Yeah,
if yeah, you have to convince people that you're gonna
(18:51):
sell enough to make the content right. Well, that was
not a good enough market proposition for consumers to go
out and buy this brand new, very expensive color TV.
And at the same time, there was another UH problem
that was coming up. There was the Korean War, which
(19:12):
was making it harder for CBS to even get the
components needed to make its color televisions. It would end
up only making a couple of hundred and it just
never really took off. Then Starnoff essentially said, well, I've
got this electronic color television solution that was ready a
couple of years later, shows it to the FCC and says,
(19:32):
here's the advantage of mine. You can still watch the
old black and white stuff on here because it's using
the same methodology. It's just got if you are able
to show it in color, it will show it in
color well. And then he made cameras to produce some
materials as well. Yes, and that was another advantage. Our
c was in the business of both sides, both the
camera side and the screen side, so effectively our c
(19:55):
A would get the color television standard. Essentially, there was
a committee that was formed actually technically reformed the National
Television System Committee in t SC and they created the
standard for color TV and it was almost exactly our
c A specification. Yeah, but it took it still took
a long time for color TV to replace black and
white TV decades. Yeah, it was, so it was available.
(20:19):
The first r c A set was the c T
one hundred, which cost a thousand dollars in nineteen fifty four,
which would be about ten grand today. That's a extra
that's an extra, luxury, luxury idea. Yeah, no, I just
I can't imagine dropping ten ten g's on a television. Uh,
I can imagine dropping a ting g television and then
immediately wanting to hide somewhere. But anyway, it was, it
(20:43):
was an It meant that no one was able to
buy one, and because the black and white sets were
still good for a while, it wouldn't be until really
the nineteen seventies that you started seeing color TV. So
I'm guessing I'm guessing they still had to work on
their radio side of things as well. They did. And
here's where we get into another dark story and Sarnoff
(21:04):
being the ruthless businessman that he was, So Sarnov had
a friend and the effective word there was had a
friend named Edwin Howard Armstrong, and Armstrong came up with
a methodology for transmitting radio through what was called frequency
modulation or FM, whereas a M, which was the standard,
(21:28):
was amplitude modulation. AM has some great advantages that can
go really really far, like those broadcasts can travel great distances,
but they can't penetrate through stuff so well, So if
you lived in a city, you could have trouble picking
up a M stations. FM didn't have those problems, but
it had a much smaller range of broadcast. So Armstrong
(21:49):
and our c A had worked out an agreement way
back when that r c A would get the right
of first refusal if Armstrong came up with something that
was workable using FM, and Armstrong did so, he goes
to our c A and he says, I've got this
FM technology. It would require having to invest in all
(22:11):
new equipment because FM transmission and a M are not
compatible setting up new stations exactly. Yeah, you'd have to
build out a whole new infrastructure for this to work.
But it will work. So our c A looks at
this and says, well, we're really dedicating our resources right
now to trying to get television going exactly, so I'm
(22:34):
trying can go elsewhere? Yes, exactly, Yes, you're you're way
ahead of me. Armstrong goes, he makes some agreements with
some other folks, and then our CIA says, you know what,
on second thought, we totally do one that FM thing.
But you know you gave us the right at first refusal.
That's all good. So let's have an agreement where you
will license the technology to US royalty free, so you'll
(22:56):
get a flat fee for your technology, but it will
be non exclusive, so you'll be able to still go
to these other parties and use your FM technology. There
seem fair to the other parties who opted in first. Yeah,
and they were already opted into paying royalties. And Armstrong said,
you know, it's I don't feel good about making that
(23:17):
deal because if I say to you, yes, you get
this royalty free, whereas everybody else has to pay royalties,
that seems like it's not terribly fair. So he said,
you know, I don't think this is going to work out.
And Starnoff did not react well to being turned. It
doesn't seem like he does that very often, like Sarnof,
(23:38):
like getting his own way. Yeah, so uh so he
makes his own technology. Yes, he pushes our c A
Research and Development to develop their own FM technology, and
they wanted to have at least enough plausible deniability to
say that they did this completely independently of Armstrong and
(23:58):
that none of their technology violated any of the patents
that Armstrong held. Yeah, I mean, we've seen instances where
companies have reverse engineered things and they've made their own
version of stuff, and they or they'll they'll look at
a patent and they'll be very careful to try and
get the same result without infringing on the patent. But
(24:20):
with something like this, it was very questionable that our
ci A could do this without Armstrong at all. So
Armstrong would end up bringing a lawsuit against our CIA
and this lawsuit stretched on for years. And you know,
we talked about how Philo Farnsworth suffered essentially an emotional
(24:40):
breakdown due to the length of the legal battle he
went through. It was worse for Armstrong. Uh. Not only
did his mental health deteriorate, his physical health deteriorated. His
wife separated from him after he lost his temper and
Uh physically assaulted her, so she leaves him. He in
(25:04):
a deep sense of guilt and shame, takes his own
life and his widow. His his estranged wife and now
widow would continue to pursue the lawsuit against our ci A,
which ultimately settled with her for one million dollars, which
just happened to be the exact amount that our CIER
(25:25):
had offered Armstrong in that royalty free deal. Yeah. So, Uh, Sarno,
from what I can understand, never seemed to indicate that
he felt he had anything to do with Armstrong's deterioration,
but every other source I read outside of Saranov seemed
(25:46):
to suggest otherwise. So a very dark portrayal of this
particular person. Yeah, he's still working in the military and
scientific areas at this time, right, our CIA was still
making components for for things like electron microscopes. Uh. They
also contributed components to the United States Ballistic Missile Early
(26:08):
Warning System I mean important Yeah yeah, and also to
UH satellites and things like that. The space race was
taking off in our c A was one of many
companies that were contributing components to that. Uh. They even
created a special division called the r c A Astro
Electronics Division, which has an awesome name. Uh. And it
(26:29):
was also really well. Our c A wasn't like the
dominant player in making televisions, but it was the dominant
player making television cameras. And you can't you know, shoot
stuff for television without cameras. So r c A was
doing really well on that front. So this was more
of a business to business kind of thing, like TV
(26:50):
stations were buying these um. And keep in mind, like
early days of TV, everything was live to broadcast. Uh,
it was only later that would be you know, save
to videotape, and so um, this was an interesting time.
And yeah, I was getting old though, Yeah, yeah, he
(27:11):
was getting old, and he was getting sick. He had
he started getting health problems. So in n his son
Robert would become the president of the company. David Sarnov
was still the chairman of the company, but it was
clear that David was sort of you know, queuing up
Robert to become the heir apparent to our c A.
(27:33):
And and Robert had already served as president of NBC.
It's not like he was you know, sitting at home
all the time, saying in the giant mansion or something. Yeah,
so he comes in and he's the president and then
um he starts making some decisions that would you could argue,
lead to our c as eventual decline. So this is
(27:55):
where we have our conversation about succession planning. Even when
you been in the family, it's not necessarily going to
all be wine and roses. So we get into some
some diversification and of questionable um merit. So you have
a note here and I skipped over it by accident
(28:16):
that R C. A was behind the development of the
eight track tape. That wasn't what brought them down, was it. No, no, no,
So the eight track tape, the consumer side of the
A track tape, had a short life, but a track
tape in general has had a lot of life. Outside
of those tapes you would find in like an old
car that nobody listens to anymore. Uh. Yeah, that that
(28:39):
was not what brought him down. But one thing that
really hurt the company was in six five they started
building computers. They got into the computer business. So their
first computer was called the Spectra seventy and these were
mainframe type computers, like big centralized computers that would be
used for business. So this is, you know, a decade
(28:59):
before we into personal computers. But it was an expensive
business to get into. There was already competition from much
more um grandfathered in companies that had been part of
the rise of computers from the beginning. It seemed like
Robert wanted to diversify, but he didn't really put a
(29:22):
lot of thought into or or maybe he didn't. Yeah,
he didn't consider what the consequences could be if the
if the businesses weren't going so well, because like, I
don't think trying to diversify into computers was necessarily the
worst idea. Yeah, but buying Random House in Hurts Yeah, now, okay,
So they bought Random House the publisher in nineteen sixty five.
(29:43):
They bought the rental car company Hurts in nineteen sixty seven. Uh.
In sixty nine, they started fighting against CBS again. They
were both CBS and r c A were trying to
create a video playback device for the home, essentially a
predecessor to what would be the vc ARE, So before
VHS or Beta max, they were both trying to create something.
(30:04):
Spoiler alert, neither of those took off, so both efforts
would end up falling short of their goal because the
VCR would end up taking that place. So that ended
up being a bad business deal as well. And in
nineteen seventy, David Sarnoff, at age seventy eight, would retire
as chairman, and I get the feeling that he didn't
(30:26):
want to do it. He did not want to say goodbye.
But like we had talked about since the mid sixties,
his health had been in decline and by this point
he was essentially confined to his home. He could not
go to the office, and his doctor, when asked by
the board of directors ken Sarnov continue in his role
(30:48):
as chairman, his doctor said, I don't think there's any
way he could oversee the day to day operations of
a company, because he passed away the next year. The
next year, Yeah, he he turned eighty and then passed away.
So he was seventy eight and seventy. But that was
early in nineteen seventy when he retired. It was late
(31:08):
in nine when he passed away, and he was eighty
years old. Now, as we have seen in lots of
our episodes, when a company loses a leader, and really
they had lost Sarnov, you could argue in sixty five, right,
like David Sarnov had had stepped down as president by
then when you lose someone as iconic and as someone
(31:30):
who's whose personality kind of infuses the company's strategy, someone
like David Sarnof, it can often leave a company in
a vulnerable position. So how would that turn out for
our c A Uh I think you said not well? Oops? Yeah,
I think uh, I think I've already indicated that this
does not turn out well. But we'll explain exactly how
(31:53):
things went wrong and just a moment. But first let's
take a quick break. Okay, So after David passed away,
our ci A wasn't done acquiring things. Yeah, so this
one hits close to home for us Ariel. They bought
a company called Coronet Industries. Are you calling me a carpetbagger? No,
(32:15):
but I am saying that Cornet Industries was had headquarters
in Dalton, Georgia. If you've ever gone up to Dalton,
like you've passed through too on your way to Tennessee,
you see all the billboards for carpet. Yeah, that's because
of this. It's because of Coronet Industries. So yeah, our
CIA buys a carpet company, so on top of the
rental cars, and then they end up purchasing banquet foods,
(32:39):
which is known for TV dinners, just casting a wide
net there. I got to the point where the joke
was our ci A would stand for rugs, chickens, and automobiles.
So some things were not going great from a from
a like a company culture perspective. And then they lose
their computer division, right, Yeah, it had been losing money,
(32:59):
It was never profitable. They decided to sell it off
for a substantial loss to a different company called Universal
Automatic Computer or univac UH and they hope that maybe
that would get the company back on track, but didn't know.
So our Cier was starting to suffer. Its performance was
(33:20):
much below what their expectations were based upon their past performance,
and they weren't really sure how to run all these
businesses they had acquired through Robert Sarnoff's leadership. Yeah, but
they knew, how do you get rid of the person
who kept getting them? Yeah? Yeah, yeah. So board of
directors comes together in nineteen and they say this, just
(33:43):
you listen, it's not us, it's you. It's you, and
they say goodbye to Robert Sarnoff. He effectively is fired
from the role of president and chairman. And so then
Anthony Conrad, who had been an r c A in
play since nineteen forty six, would come over and become
the new head of our c A. Yeah, but that's
(34:05):
not quite succession planning, and he resigned shortly after. Yes. Uh,
turns out Conrad had made a little bit of a
boo boo. He had failed to report his income taxes
for about five years in a row, and once that
became public knowledge, he felt compelled to step down. In
(34:25):
September nine, so essentially the year after he had become
the leader, he has to step down, and then Edgar H.
Griffith's would take over our CIA. So we've done other
episodes where we've talked about rapid changes in leadership that
you already are having a problem when you're your visionary
(34:46):
leader has either passed away or retired. Often it's very
difficult to continue a company following that vision because the
person who was defining it is no longer there. It's
even harder when you're going through this rapid change in
executive leadership. But Griffiths at least knew what their issue
was with the company, so he started getting rid of
(35:07):
all of those very randomly acquired companies. Yes, he started
selling off companies, sold off Banquet Foods, he sold off
Hurts rental cars. I think United Airlines bought them. He
sold off some of the others. However, Cornet Industries, the
carpet company, would still be part of our c A
all right. He also did some acquisitions to Yeah, he
(35:28):
did a one point three billion dollar acquisition for a
company called Commercial Investment Trust or c I T, which
was an investment company. Now c I T also had
its own share of odd companies under its owner umbrella,
including a furniture company and a greeting card company. Two
(35:49):
steps forward, three steps back. Now I did get rid
of some of those before the acquisition happened, so it
divested itself of some of those companies. But still it
seemed a little odd. Now that ended up hurting our
Cier's credit rating as a company, and the board of
directors already antsy because of the problems with Robert Sarnoff
(36:12):
and and the problems with Conrad. They felt this was
not the right spot for our CIA. So they demanded
that Griffith's hand in his resignation, which he did in
ninety one. And then we get Thornton F. Brad Shaw. Yeah,
he was an old caccoon. Yeah. He he had also
served on the board of our CIA, so he was
(36:34):
already familiar with the operations of the company. And he
became the chairman and then uh, a guy from General
Electric named Robert R. Frederick came over and became president
of our CIA, And they continued to try and shed
these subsidiary companies that had been added to our and
(36:55):
they got rid of all of them, well not Coronet Industries,
the carpet company, because that sucker stuck ours. Those carpet
tacks are hard to get out. Have you ever pulled
up carpet? It's hard. I I have, in fact pulled
up carpet, and you know how hard it is. I
imagine how hard it is to get rid of a
whole company of that, it seems like RCA is really
(37:16):
floundering at this point. It was, and so it was
weird because on one hand, by divesting itself of all
these companies, it actually was cash rich. At that point.
They had like two billion dollars in cash, but that's
because they had gotten rid of all these other little companies.
So they have two billion dollars in cash, but their
(37:39):
business isn't doing so well. It's only because they sold
all these companies that they have any cash in the
first place. And they had really defined a lot of
the previous generations technologies. But in the current generation things
had not been going well. Right. They tried to come
out with a thing called a capacitance electronic disc or
(38:01):
C E D player, which did not do well. But
I own one. I have one of the few in
my house right now, next to a couple of different
CE ED discs. By the way, you referenced one of
the two movies I own on C E D Singing
in the Rain, I have it. I was gonna say Speed.
(38:21):
I didn't think that would be no. Speed did not
go out. That Speed was far after the C E
D era. But on top of all that, so the
corporate leadership had been a real issue for our c A.
So that was still a problem for the company. Um
and so this led to a weird situation. General Electric,
(38:44):
which is as you'll remember, was one of the partners.
It was actually the biggest of the partners too as
far as ownership goes. When our c A first came
into being. Yeah, General Electric, the old buddy comes by
and says, I see you've been having a hard times, friend,
how abould you come into the fold? General Electric makes
a bid to acquire our c A. So our c
(39:05):
A has a tough decision to make. Right. On the
one hand, they've just finished divesting themselves of all these
other businesses. They have two billion dollars in cash. They
are able to now focus on their primary business and
hopefully turn it around. Things are starting to look promising,
but it's still pretty shaky ground. Do they say yes
(39:27):
or no to this deal? Well, if they thought about it.
But here's the problem. This is also in the eighties,
and something else was going on in the eighties to
a crazy degree that our hair was awesome. Lots of
Neon I had hair in the eighties also awesome. I
(39:48):
don't see what you're not saying anything wrong? So I
like all those things. Okay, boy bands maybe, but anyway, No.
In the nineteen eighties there were there was this culture
of hostile takeovers business. And a hostile takeover is when
a company goes in to acquire another company. They can't
do it through normal acquisition, so they appeal to shareholders
(40:10):
and they essentially try to get more shares of the company,
like a controlling interest. Amount of shares of ownership of
the company and then they effectively can tell the board
of directors to go yeah, it's a work around to
get your own way. Yeah. So the board of our
Cia said, well, we could say no to this deal,
(40:32):
but that would potentially set up a hostile takeover situation
and then we'd have to defend ourselves from GE and
that could be a lengthy and expensive and ultimately it
could be an unsuccessful task. Or we could agree to
the acquisition. So they agree yes, and that two billion
dollars in cash was actually a strike against our Cia,
(40:55):
which seems counterintuitive, but the reasoning was this, if g
were to go after our Cia for a hostile takeover,
they could go after our Cia super hard because if
they took over our ci A, then they would get
that two billion dollars and they could use that to
pay off any debts that they accrued in the process
(41:16):
of going after our Cia. Well, thankfully they didn't have
to do that. They only spent six four billion dollars. Say,
they just bought at six point four billion dollars. And
this is why I say that our c A effectively
stopped being a company in nineteen eight six because General
Electric would bring our ci A under the fold, so
(41:38):
it's no longer an independent company at all, and then
either liquefied and sold off our CIA assets or consolidated
r c A assets with existing General Electric or g
E assets, So all the divisions of our CIA that
weren't sold off became part of other existing g E divisions.
I like this note you have about our Cia Records
(41:59):
because they were sold off, they didn't become a part
of g E. Right, Yes, so g did sell off,
like I said, some of the components, one of those
being our Cia Records. R CIA Records is what had
evolved essentially from the Victor Talking Machine company Victor Records.
We had talked about them in the previous episode. So
our Cia Records is the one that has Nipper as
the in the logo. They got sold off to a
(42:23):
company called the Bertelsman Music Group, better known as b MG.
So BMG buys our Cia Records. But then BMG would
merge with Sony Music in two thousand four, Sony the
parent company company of Columbia Records. Yeah, so r c
A and Columbia, which had been the fiercest of competitors
(42:47):
in the old gramophone days and the speed Wars of
the figuring out the album Speed now belonged to the
same company. It's it's similar to I think we've talked
about this with board games and toys as well, right later,
toy companies that were in fierce competition with each other
that now ultimately belonged to the same parent company. Well,
(43:09):
it certainly seems it's like that old adage they said
about the thunderstorm. The the faster it comes on, the
faster it goes away. It seems it seems like our
ci A grew really strong and really hard and really fast,
and then and then and then fizzled out, had a
mighty fall. Did that in the course over the course
(43:29):
of almost eighty years. So it was a good long
run and really seventy years. And while you know our
ci A, the brand calls this it's centennial, that's a
hundred years old. You could make the argument that the
brand has very little connection to the company that gave
it its name because it's just gone through so many
(43:52):
different changes in ownership. Either it's you know, there are
our c A branded products out there, there are records
out there, but there it's it's like it's a flavor.
It's not like it belongs to the same lineage necessarily
as this established company that came together in in you know,
nineteen nineteen. Well, it certainly is a very interesting and
(44:15):
dramatic story. Yes, it's it's a phenomenal one. You know. Again,
to to see a company that I would say our
c A was one of those that you would described
too big to fail at its height, and like the Titanic, Yeah, yeah,
I mean it was the distress signal from exactly in
(44:35):
nineteen twelve. That's a good call back. Yeah, it was.
It was established as a monopoly by the United States
government and then ultimately it had to be swallowed up
by one of the companies that helped establish it in
the first place. Uh. It's I think really you could
in retrospect lay a lot of this at the decline
(44:57):
of health of David Sarnoff and the fact that Roberts
and Off while he was ambitious and was trying to
diverse I mean, he was trying to diversify the company's
holdings in order to give it more stability, but it
just didn't work out. He just went to random. He
went too far and wide and probably didn't have quite
(45:19):
the same force of will as his father did. And
that's a that's not to say that David I don't
think I would like David Sartos very much. It's not
necessarily saying it's a bad thing. Yeah, for the purposes
of establishing a corporate empire, it might not work out
so well. But I I have a feeling that, UM,
(45:41):
I would find David Sarnoff to be uh, not my
kind of person. Not to say like he's necessarily good
or bad, but some of the decisions he made are
ones that would be very difficult for me to reconcile.
I agree with that, UM, but that is all we
have in our c A. So UM, if you guys
have any companies you want us to talk about, uh,
(46:02):
email them to us, you know, or you can just
email to say hi. We do get all of those
suggestions and we are working through them. Yes, where we
have an actual spreadsheet that Aeriel maintains that has all
the different suggestions and who made them, and we're thankful
for all of them. Keep them coming in because it's awesome.
It lets us know exactly what you guys want to
hear about, and otherwise it's Ariel and I just sitting
(46:25):
down and saying, so, what's the company you know? Yeah? Um,
So if you have those companies where you just want
to say hi, email us at Feedback at the Brink
Podcast dot Show. Yep, and you can pop to our website.
That's the Brink Podcast dot Show. That's why there's an
archive of all of our past episodes. There's some information
about your beloved hosts who belove you right back and
(46:46):
until next time. I'm Jonathan Strickland and I'm aerial Casting.
Business on the Brink is a production of I Heart
Radio and How Stuff Works. For more podcasts for my
heart Radio at the I heart Radio app, Apple Podcasts,
or wherever you listen to your favorite shows.
Welcome to Business on the Brink, a production from I
Heart Radio and how stuff Works. When last we left off,
the Radio Corporation of America or our CIA had just
become the r c A Corporation, so I guess it
was the Radio Corporation of America Corporation. President David Sarnoff
(00:24):
was relying on a combination of innovations and ruthless business
strategy to tune in to success. Ultimately, our CIA would
grow into an enormous company with its proverbial fingers in
many proverbial pies yumpie, until the when another company would
put a stop to it. This is our CIA in
Business on the Brink. Hey everyone, I'm Jonathan and I'm Ariel,
(00:56):
and we're going to continue our story with our c
A as we jin. So if you have not heard
the previous episode, you should probably go do that because
it will it will set the stage for what was
about to happen. But we had just talked about how
our CIA had become its own independent company after being
sort of a mutual partnership among many big big companies
(01:19):
like General Electric and Westinghouse. And we left off in
the year nineteen two. So we're gonna jump to nineteen
thirty four because this is when one of our CIA's properties, NBC,
the the at that point, the radio network it was
before TV networks, was the subject of some scrutiny. The
(01:40):
Mutual Broadcasting System said that NBC and CBS were essentially
a d wopoly, that these two networks of radio stations,
we're making it very difficult if you want to operate,
say an independent radio station, and the f c C,
the Federal Communications Commission said yeah. So they went up
(02:01):
to NBC, which technically was two radio networks, the Red
Network and the Blue Network, and said, here's the deal.
You've got to get rid of one of them. You
gotta sell one of these off, pick your favorite child. Yeah.
And r c A said, I'm gonna I'm gonna appeal this,
and the Appeals Court said, yeah, you're gotta do it.
(02:22):
So r c A said, I'm gonna take this as
a spring court and Supreme Court said, yeah, you gotta
do it. Yeah. Meanwhile, our CIA kept business going. Yeah,
it was no longer tied to General Electric or Westinghouse.
The Great Depression was still going on, but David Sarnof,
the leader of the company was still trying to innovate
(02:44):
and also still trying to use any kind of business
method whatsoever to keep competition well under his heel. Yeah,
but one of the things he was still trying to
push with this TV. Right. Yeah, you had been behind
the idea of electronic television since really the twenties, and
UM had been funding it directly since nineteen thirty and
(03:07):
in nineteen thirty nine, so after about a decade of
research and development, they debuted an electronic television at the
nineteen thirty nine World's Fair. They actually showed a live
broadcast of US President Franklin Delano Roosevelt. Is he drinking
a PBR? He was not those different World's Fair in
the eighteen hundreds, but he was. He was giving an
(03:30):
address live. And in fact, this was a live broadcast,
so live from camera broadcast to this television. And they
began our c A, the company to manufacture television sets,
giant ones like sixty. Divide that by five. There you go,
twelve inch TVs or well the screen was twelve inches.
(03:51):
The television sets were enormous. Yeah, there's a piece of furniture,
all those tubes in the back. These were big. This
before the transistor, so very large pieces of equipment. And
of course, just like we talked about in the last episode,
you've gotta have stuff to show on your thing or
(04:11):
nobody's gonna buy it. So they showed a baseball game,
right they did, between Columbia University and Princeton on Princeton
two to one, so not a bad game. Yeah, you
gotta think that Sarnov was probably proud of that because
the other university had the word Columbia, and and our
c A and the company Columbia were constantly bickering with
(04:37):
one another, fighting for domination. And then they showed a
Major League baseball game after that, right November of nineteen
thirty nine. It was actually a double header between two teams,
the Brooklyn Dodgers and the Cincinnati Reds. Each team won
one of those games, so um, if you were a
fan of Cincinnati or a fan of the Brooklyn Dodgers,
(04:58):
you were able to be happy at least half the time. Then, Uh,
the networks like NBC and CBS, we're getting into television
trying to push this, but it's hard getting a brand
new technology off the ground, specially one that was as
expensive as television's early TVs were, I mean, they were
(05:22):
prohibitively expensive for the vast majority of consumers out there.
Um And on top of that, even when the Great
Depression was going to start to come to an end,
something else was starting to boil up. And that's something else.
Was the Second World War? Yeah, world War two. That
would be it. That's the one. So yeah, they called
(05:44):
World War one the war to end all wars, and
then I guess world War two was Oops, I did
it again. Yeah, Brittany, leave Brittany alone. So our c
a's consumer electronics business would slow down during this time,
but there was money to be made because, as it
turns out, when a war is on, the military needs
(06:07):
lots of stuff. See I thought you're going to say,
when the war is on, the TV's on. Well would
have been, but there was no TV yet so at
least not really. So instead, our c A would start
to develop technology for the military. Now most of the
time it was like components that would go into larger
things like radar systems and stuff. So they were really
(06:28):
focusing on that. Um. You know, a lot of the
manufacturing power of the United States was being dedicated to
wartime efforts. This was across the board. If you operated
a factory, chances are you were trying to land military
government contracts, because otherwise you couldn't even get the raw
materials you needed to make your stuff, because the U
S would put, you know, very strict limitations on that
(06:51):
everything was going to the war efforts. Yes, yes, and
so uh. At this time, also during World War Two,
the FCC ruling would come down in Ninette and r
c A would have to split up those NBC networks,
the Red and Blue Network. So a guy named Edward J. Noble,
We're going to have to do an episode about Edward J. Noble,
(07:12):
it's the point. And he had made a fortune with
life savers, not the not the not the flotation device,
the candy, the candy, Lifesavers. He was a lifesavers fortune.
Lifesavers were his life saver. He made a lot of
money on those lifesavers. So he would buy the Blue
Network from NBC for the princely sum of eight million dollars,
(07:39):
and then a couple of years later he would rebrand
that network so that its official name became the American
Broadcasting Company or ABC. So in the last episode, I
referred to the fact that that r C as r
C A pretty much played a role in the creation
of three of the major networks in the United States
(07:59):
and made NBC outright, that was its subsidiary. Uh, it
inspired the creation of CBS, and then it spun off
half of NBC, which then became ABC alright. But also
during this time, so Sarnov was getting military contracts. What
do you do with the money? Well, he was pretty
(08:20):
I mean not just pretty smart, he was incredibly smart.
He used that money to increase our CIA's manufacturing capacity.
He started building out more manufacturing centers, more factories because
he knew that when the war was at an end,
there would be another market for consumer electronics as well
as industrial equipment, and in order to meet the need,
(08:42):
he would need better manufacturing facilities. So he was using
that money. And at the time they were still making
military stuff, but it was all with the eye of
converting this over back to civilian applications once the war
was over, which they did so they started making TV
sets in forty six, Yes, so wars over the year.
(09:03):
After the war is over, our Cia starts to really
manufacture television sets. Of course, these are black and white
TVs at this time, and again, like we've said before,
they had to make stuff for people to watch, like
those baseball games. They had to create stuff. So they
essentially told NBC, which at the time again was just
a radio network, to start working into television production as well.
(09:28):
So that's when NBC started to become not just a
radio network but a TV network. Meanwhile, CBS was trying
to do the same thing. William Paley, who was the
leader of CBS, he was the guy who had bought
CBS back when it was sort of a being made
in spite of NBC, so he bought it, and he
(09:49):
was also trying to turn CBS into not just a
radio network but a TV network. And uh, Paley would
do something very shifty. What this is Again, we talked
about in CBS the Great Talent Rate. Yes, so in
that episode we mentioned how CBS was able to secure
(10:10):
a whole bunch of very big names in radio because
the general wisdom was, what's the best way to create
really good TV content. Let's take the stuff we make
for radio and make it for TV. And so they
already had big radio stars that they could It's a
whole plot point in Singing in the Rain. Yes, yeah,
it's a. It's a it's one of those Hollywood stories
(10:33):
that has made its way into different tellings because it
was a big deal. So CBS came forward and offered
huge contracts, really really lucrative contracts to stars like George
Burns and Gracie Allen, who were a duo at the time.
You had Jack Benny. You had these big, big names
in radio who were starting to make the transition to television,
(10:55):
and CBS is, why don't you go and work for
us for a while, And they said sure, because these
are great contract and NBC was not happy. No. Sarnoff
he really liked to put his pressure on other companies.
He did not like it when the same was done
to him, so he got really upset. And apparently it
(11:17):
really illustrated the difference between Sarnoff's leadership style and philosophy
and Paley's leadership style philosophy. So Sarnoff reportedly he hated
the idea of advertising. He thought of it as vulgar.
He didn't like he didn't like running ads on his
and he certainly didn't like having to meet with ad
executives that was beneath him. So he would send direct
(11:39):
reports to those meetings whereas Paley was like this very gregarious,
outgoing guy who was happy to bring people in and
have them be part of the whole situation of uh
joining in and and and having a conversation about how
can we get your ads on your network? So Paley
(12:00):
was um, the like polar opposite of s. Yeah, but Pley,
it seems like Paley won that battle. He did win
that particular battle. Yeah, all right, So what does our
c A do next? So you remember I told you
they had established that movie theater chain and they had
created a movie studio r k O Pictures, and this
(12:24):
was all in an effort to get their audio technology
into theaters to create the standard. Well they they achieved that.
So once they achieved that, they're like, well there's no
reason for us to keep this movie business anymore. Too
much diversification. So they sold it, and you know they
sold it to because I got it in the nets. Yes,
another person will have to do an episode about That'll
(12:46):
be a truly eccentric episode, because when you have when
you're that rich, you get to be eccentric. Okay, So
you have this note in where we get to the
speed Wars and I'm so excited to hear about how
they got into the the bus industry. It's not yeah,
you have to explodes. No, this has to everything to
(13:09):
do with turntables. All right, I'm gonna make this super fast.
In the beginning, you had turntables that would play music
at seventy eight revolutions per minute, so the discs would
turn seventy eight times every sixty seconds. R c A
tried to introduce a thirty three and a third RPM
album about a decade earlier, but it was during the
(13:30):
Great Depression. Nobody butt it. Then Columbia, r c S
great rival comes up with two big things that help
change that. First, they start making records out of vinyl
as opposed to shellak, which is a much harder material.
Vinyl is much easier to work with. And they come
up with micro grooves, which means you could fit more
(13:52):
grooves per side of the disc, which means more audio, yeah,
more grooves yeah. So So it used to be that
you can only fit like five minutes on one side
of a seventy eight album. They were able to fit
way more than that on a thirty three and a
third album, which was about the same size in dimensions
(14:13):
as the old seven eights. Now Columbia said, we're willing
to license this design to you, r c A, because
you make turntables, you make discs. We'll we'll license this
to you. Starna does not like ever having to deal
with somebody else's intellectual property. He wants to own it all, yeah,
(14:33):
or or he wants to license it to somebody else exactly.
He wants to be on the other side of that deal.
So Starna says, pounds sand Columbia, and so he creates.
He directs our Cia to create their own format, which
is a forty five RPM album, and they're smaller. They're like,
you know, a seven inch disc as opposed to the
(14:54):
thirty three and a third, which is like a twelve
inch disk. So it can't hold as much music then
it can't. It holds about as much as old seventy
eights do. So this is what would be used for singles, right.
You would get a single on one side and then
you have the B side, whereas the thirty three and
a third would create the concept of the long playing
or LP album. And you had these two formats going
(15:14):
to war with one another. Eventually you had third party
manufacturers that would make turntables that could work at either speed.
So that's what would allow you to play either a
forty five or thirty three and a third. You just
had to select the right speed because I don't know, Ariel,
have you ever played with a record player? I have,
you're younger than I am. I just had to ask. Now,
I didn't know all that technical mumbo jumbo behind it,
(15:36):
but you know that's interesting, mambo jumpo. You know that
if you put say a forty five, but you set
it to three three and a third, it's not going
to sound right. It's going to be slow and low pitched.
If you put a thirty three in the third and
you set forty five, it's gonna be like the children. Yeah.
So these were the speed wars, and the two companies
would maintain this kind of adversarial approach for the next
(15:58):
several years. All too lee. They would both kind of
settle with each other and agree to make and they
would agree to make records in the other formats. But
it was ugly like these were two big companies that
were both vying to become the name in that particular industry.
(16:19):
But I mean Columbia Records eventually wins that war, right, Yeah,
I mean they thirty three and a third became like
the go to and then you would have these singles
on forty five. So it was kind of this weird
world where both were able to coexist. But I think Columbia,
because it created the micro grooves, really had the big advantage. Also,
their format came out about a year before our CNA
(16:40):
is they're also fighting on television. On the television front, right,
cool boy, Yeah, we'll get into that. In fact, let's
let's take a quick break, but when we come back,
we'll talk about how Columbia and r c A put
up a really good fight on that front. So we
(17:00):
had just talked about how they were going to have
this big fight in television. Specifically, it was going to
be in setting the standard for color TV. Just as
David Sarnov wanted to set the standard for audio on film,
he wanted to set the standard for color television. Now,
at first they started making what we're called mechanical color TVs.
(17:22):
There was one element inside the television that was on
a mechanical basis, not an electronic one. There's literally a
color wheel inside the TV sets. This had a disadvantage.
They'll get into in a second. But Columbia shows off
their version of this, the CBS Columbia version of color TV,
(17:44):
and it's a pretty good quality. Our c A shows
off their's and there's just wasn't quite as good as
CBS is. So the you then have the FCC deciding
what's going to be the standard, and they say CBS
is going to be the standard, but US it's a
better picture, so we're gonna go with CBS's approach to
color television was not super happy, not even a little bit.
(18:08):
But he had a couple of advantages on his side.
One was that he had already been dedicating some resources
in our c A to create an electronic version of
color TV. It just wasn't ready at the time when
the FCC was making this decision. The other advantage was
that this mechanical color TV was not compatible with the
(18:31):
already existing black and white broadcasts. Yeah, that is a problem. Yeah,
we if you're told, hey, you can buy this brand
new TV, um Sadly, nothing that's showing today will show
on your TV, but future shows will if we can
sell enough of these. That's not a great yeah. Yeah,
if yeah, you have to convince people that you're gonna
(18:51):
sell enough to make the content right. Well, that was
not a good enough market proposition for consumers to go
out and buy this brand new, very expensive color TV.
And at the same time, there was another UH problem
that was coming up. There was the Korean War, which
(19:12):
was making it harder for CBS to even get the
components needed to make its color televisions. It would end
up only making a couple of hundred and it just
never really took off. Then Starnoff essentially said, well, I've
got this electronic color television solution that was ready a
couple of years later, shows it to the FCC and says,
(19:32):
here's the advantage of mine. You can still watch the
old black and white stuff on here because it's using
the same methodology. It's just got if you are able
to show it in color, it will show it in
color well. And then he made cameras to produce some
materials as well. Yes, and that was another advantage. Our
c was in the business of both sides, both the
camera side and the screen side, so effectively our c
(19:55):
A would get the color television standard. Essentially, there was
a committee that was formed actually technically reformed the National
Television System Committee in t SC and they created the
standard for color TV and it was almost exactly our
c A specification. Yeah, but it took it still took
a long time for color TV to replace black and
white TV decades. Yeah, it was, so it was available.
(20:19):
The first r c A set was the c T
one hundred, which cost a thousand dollars in nineteen fifty four,
which would be about ten grand today. That's a extra
that's an extra, luxury, luxury idea. Yeah, no, I just
I can't imagine dropping ten ten g's on a television. Uh,
I can imagine dropping a ting g television and then
immediately wanting to hide somewhere. But anyway, it was, it
(20:43):
was an It meant that no one was able to
buy one, and because the black and white sets were
still good for a while, it wouldn't be until really
the nineteen seventies that you started seeing color TV. So
I'm guessing I'm guessing they still had to work on
their radio side of things as well. They did. And
here's where we get into another dark story and Sarnoff
(21:04):
being the ruthless businessman that he was, So Sarnov had
a friend and the effective word there was had a
friend named Edwin Howard Armstrong, and Armstrong came up with
a methodology for transmitting radio through what was called frequency
modulation or FM, whereas a M, which was the standard,
(21:28):
was amplitude modulation. AM has some great advantages that can
go really really far, like those broadcasts can travel great distances,
but they can't penetrate through stuff so well, So if
you lived in a city, you could have trouble picking
up a M stations. FM didn't have those problems, but
it had a much smaller range of broadcast. So Armstrong
(21:49):
and our c A had worked out an agreement way
back when that r c A would get the right
of first refusal if Armstrong came up with something that
was workable using FM, and Armstrong did so, he goes
to our c A and he says, I've got this
FM technology. It would require having to invest in all
(22:11):
new equipment because FM transmission and a M are not
compatible setting up new stations exactly. Yeah, you'd have to
build out a whole new infrastructure for this to work.
But it will work. So our c A looks at
this and says, well, we're really dedicating our resources right
now to trying to get television going exactly, so I'm
(22:34):
trying can go elsewhere? Yes, exactly, Yes, you're you're way
ahead of me. Armstrong goes, he makes some agreements with
some other folks, and then our CIA says, you know what,
on second thought, we totally do one that FM thing.
But you know you gave us the right at first refusal.
That's all good. So let's have an agreement where you
will license the technology to US royalty free, so you'll
(22:56):
get a flat fee for your technology, but it will
be non exclusive, so you'll be able to still go
to these other parties and use your FM technology. There
seem fair to the other parties who opted in first. Yeah,
and they were already opted into paying royalties. And Armstrong said,
you know, it's I don't feel good about making that
(23:17):
deal because if I say to you, yes, you get
this royalty free, whereas everybody else has to pay royalties,
that seems like it's not terribly fair. So he said,
you know, I don't think this is going to work out.
And Starnoff did not react well to being turned. It
doesn't seem like he does that very often, like Sarnof,
(23:38):
like getting his own way. Yeah, so uh so he
makes his own technology. Yes, he pushes our c A
Research and Development to develop their own FM technology, and
they wanted to have at least enough plausible deniability to
say that they did this completely independently of Armstrong and
(23:58):
that none of their technology violated any of the patents
that Armstrong held. Yeah, I mean, we've seen instances where
companies have reverse engineered things and they've made their own
version of stuff, and they or they'll they'll look at
a patent and they'll be very careful to try and
get the same result without infringing on the patent. But
(24:20):
with something like this, it was very questionable that our
ci A could do this without Armstrong at all. So
Armstrong would end up bringing a lawsuit against our CIA
and this lawsuit stretched on for years. And you know,
we talked about how Philo Farnsworth suffered essentially an emotional
(24:40):
breakdown due to the length of the legal battle he
went through. It was worse for Armstrong. Uh. Not only
did his mental health deteriorate, his physical health deteriorated. His
wife separated from him after he lost his temper and
Uh physically assaulted her, so she leaves him. He in
(25:04):
a deep sense of guilt and shame, takes his own
life and his widow. His his estranged wife and now
widow would continue to pursue the lawsuit against our ci A,
which ultimately settled with her for one million dollars, which
just happened to be the exact amount that our CIER
(25:25):
had offered Armstrong in that royalty free deal. Yeah. So, Uh, Sarno,
from what I can understand, never seemed to indicate that
he felt he had anything to do with Armstrong's deterioration,
but every other source I read outside of Saranov seemed
(25:46):
to suggest otherwise. So a very dark portrayal of this
particular person. Yeah, he's still working in the military and
scientific areas at this time, right, our CIA was still
making components for for things like electron microscopes. Uh. They
also contributed components to the United States Ballistic Missile Early
(26:08):
Warning System I mean important Yeah yeah, and also to
UH satellites and things like that. The space race was
taking off in our c A was one of many
companies that were contributing components to that. Uh. They even
created a special division called the r c A Astro
Electronics Division, which has an awesome name. Uh. And it
(26:29):
was also really well. Our c A wasn't like the
dominant player in making televisions, but it was the dominant
player making television cameras. And you can't you know, shoot
stuff for television without cameras. So r c A was
doing really well on that front. So this was more
of a business to business kind of thing, like TV
(26:50):
stations were buying these um. And keep in mind, like
early days of TV, everything was live to broadcast. Uh,
it was only later that would be you know, save
to videotape, and so um, this was an interesting time.
And yeah, I was getting old though, Yeah, yeah, he
(27:11):
was getting old, and he was getting sick. He had
he started getting health problems. So in n his son
Robert would become the president of the company. David Sarnov
was still the chairman of the company, but it was
clear that David was sort of you know, queuing up
Robert to become the heir apparent to our c A.
(27:33):
And and Robert had already served as president of NBC.
It's not like he was you know, sitting at home
all the time, saying in the giant mansion or something. Yeah,
so he comes in and he's the president and then
um he starts making some decisions that would you could argue,
lead to our c as eventual decline. So this is
(27:55):
where we have our conversation about succession planning. Even when
you been in the family, it's not necessarily going to
all be wine and roses. So we get into some
some diversification and of questionable um merit. So you have
a note here and I skipped over it by accident
(28:16):
that R C. A was behind the development of the
eight track tape. That wasn't what brought them down, was it. No, no, no,
So the eight track tape, the consumer side of the
A track tape, had a short life, but a track
tape in general has had a lot of life. Outside
of those tapes you would find in like an old
car that nobody listens to anymore. Uh. Yeah, that that
(28:39):
was not what brought him down. But one thing that
really hurt the company was in six five they started
building computers. They got into the computer business. So their
first computer was called the Spectra seventy and these were
mainframe type computers, like big centralized computers that would be
used for business. So this is, you know, a decade
(28:59):
before we into personal computers. But it was an expensive
business to get into. There was already competition from much
more um grandfathered in companies that had been part of
the rise of computers from the beginning. It seemed like
Robert wanted to diversify, but he didn't really put a
(29:22):
lot of thought into or or maybe he didn't. Yeah,
he didn't consider what the consequences could be if the
if the businesses weren't going so well, because like, I
don't think trying to diversify into computers was necessarily the
worst idea. Yeah, but buying Random House in Hurts Yeah, now, okay,
So they bought Random House the publisher in nineteen sixty five.
(29:43):
They bought the rental car company Hurts in nineteen sixty seven. Uh.
In sixty nine, they started fighting against CBS again. They
were both CBS and r c A were trying to
create a video playback device for the home, essentially a
predecessor to what would be the vc ARE, So before
VHS or Beta max, they were both trying to create something.
(30:04):
Spoiler alert, neither of those took off, so both efforts
would end up falling short of their goal because the
VCR would end up taking that place. So that ended
up being a bad business deal as well. And in
nineteen seventy, David Sarnoff, at age seventy eight, would retire
as chairman, and I get the feeling that he didn't
(30:26):
want to do it. He did not want to say goodbye.
But like we had talked about since the mid sixties,
his health had been in decline and by this point
he was essentially confined to his home. He could not
go to the office, and his doctor, when asked by
the board of directors ken Sarnov continue in his role
(30:48):
as chairman, his doctor said, I don't think there's any
way he could oversee the day to day operations of
a company, because he passed away the next year. The
next year, Yeah, he he turned eighty and then passed away.
So he was seventy eight and seventy. But that was
early in nineteen seventy when he retired. It was late
(31:08):
in nine when he passed away, and he was eighty
years old. Now, as we have seen in lots of
our episodes, when a company loses a leader, and really
they had lost Sarnov, you could argue in sixty five, right,
like David Sarnov had had stepped down as president by
then when you lose someone as iconic and as someone
(31:30):
who's whose personality kind of infuses the company's strategy, someone
like David Sarnof, it can often leave a company in
a vulnerable position. So how would that turn out for
our c A Uh I think you said not well? Oops? Yeah,
I think uh, I think I've already indicated that this
does not turn out well. But we'll explain exactly how
(31:53):
things went wrong and just a moment. But first let's
take a quick break. Okay, So after David passed away,
our ci A wasn't done acquiring things. Yeah, so this
one hits close to home for us Ariel. They bought
a company called Coronet Industries. Are you calling me a carpetbagger? No,
(32:15):
but I am saying that Cornet Industries was had headquarters
in Dalton, Georgia. If you've ever gone up to Dalton,
like you've passed through too on your way to Tennessee,
you see all the billboards for carpet. Yeah, that's because
of this. It's because of Coronet Industries. So yeah, our
CIA buys a carpet company, so on top of the
rental cars, and then they end up purchasing banquet foods,
(32:39):
which is known for TV dinners, just casting a wide
net there. I got to the point where the joke
was our ci A would stand for rugs, chickens, and automobiles.
So some things were not going great from a from
a like a company culture perspective. And then they lose
their computer division, right, Yeah, it had been losing money,
(32:59):
It was never profitable. They decided to sell it off
for a substantial loss to a different company called Universal
Automatic Computer or univac UH and they hope that maybe
that would get the company back on track, but didn't know.
So our Cier was starting to suffer. Its performance was
(33:20):
much below what their expectations were based upon their past performance,
and they weren't really sure how to run all these
businesses they had acquired through Robert Sarnoff's leadership. Yeah, but
they knew, how do you get rid of the person
who kept getting them? Yeah? Yeah, yeah. So board of
directors comes together in nineteen and they say this, just
(33:43):
you listen, it's not us, it's you. It's you, and
they say goodbye to Robert Sarnoff. He effectively is fired
from the role of president and chairman. And so then
Anthony Conrad, who had been an r c A in
play since nineteen forty six, would come over and become
the new head of our c A. Yeah, but that's
(34:05):
not quite succession planning, and he resigned shortly after. Yes. Uh,
turns out Conrad had made a little bit of a
boo boo. He had failed to report his income taxes
for about five years in a row, and once that
became public knowledge, he felt compelled to step down. In
(34:25):
September nine, so essentially the year after he had become
the leader, he has to step down, and then Edgar H.
Griffith's would take over our CIA. So we've done other
episodes where we've talked about rapid changes in leadership that
you already are having a problem when you're your visionary
(34:46):
leader has either passed away or retired. Often it's very
difficult to continue a company following that vision because the
person who was defining it is no longer there. It's
even harder when you're going through this rapid change in
executive leadership. But Griffiths at least knew what their issue
was with the company, so he started getting rid of
(35:07):
all of those very randomly acquired companies. Yes, he started
selling off companies, sold off Banquet Foods, he sold off
Hurts rental cars. I think United Airlines bought them. He
sold off some of the others. However, Cornet Industries, the
carpet company, would still be part of our c A
all right. He also did some acquisitions to Yeah, he
(35:28):
did a one point three billion dollar acquisition for a
company called Commercial Investment Trust or c I T, which
was an investment company. Now c I T also had
its own share of odd companies under its owner umbrella,
including a furniture company and a greeting card company. Two
(35:49):
steps forward, three steps back. Now I did get rid
of some of those before the acquisition happened, so it
divested itself of some of those companies. But still it
seemed a little odd. Now that ended up hurting our
Cier's credit rating as a company, and the board of
directors already antsy because of the problems with Robert Sarnoff
(36:12):
and and the problems with Conrad. They felt this was
not the right spot for our CIA. So they demanded
that Griffith's hand in his resignation, which he did in
ninety one. And then we get Thornton F. Brad Shaw. Yeah,
he was an old caccoon. Yeah. He he had also
served on the board of our CIA, so he was
(36:34):
already familiar with the operations of the company. And he
became the chairman and then uh, a guy from General
Electric named Robert R. Frederick came over and became president
of our CIA, And they continued to try and shed
these subsidiary companies that had been added to our and
(36:55):
they got rid of all of them, well not Coronet Industries,
the carpet company, because that sucker stuck ours. Those carpet
tacks are hard to get out. Have you ever pulled
up carpet? It's hard. I I have, in fact pulled
up carpet, and you know how hard it is. I
imagine how hard it is to get rid of a
whole company of that, it seems like RCA is really
(37:16):
floundering at this point. It was, and so it was
weird because on one hand, by divesting itself of all
these companies, it actually was cash rich. At that point.
They had like two billion dollars in cash, but that's
because they had gotten rid of all these other little companies.
So they have two billion dollars in cash, but their
(37:39):
business isn't doing so well. It's only because they sold
all these companies that they have any cash in the
first place. And they had really defined a lot of
the previous generations technologies. But in the current generation things
had not been going well. Right. They tried to come
out with a thing called a capacitance electronic disc or
(38:01):
C E D player, which did not do well. But
I own one. I have one of the few in
my house right now, next to a couple of different
CE ED discs. By the way, you referenced one of
the two movies I own on C E D Singing
in the Rain, I have it. I was gonna say Speed.
(38:21):
I didn't think that would be no. Speed did not
go out. That Speed was far after the C E
D era. But on top of all that, so the
corporate leadership had been a real issue for our c A.
So that was still a problem for the company. Um
and so this led to a weird situation. General Electric,
(38:44):
which is as you'll remember, was one of the partners.
It was actually the biggest of the partners too as
far as ownership goes. When our c A first came
into being. Yeah, General Electric, the old buddy comes by
and says, I see you've been having a hard times, friend,
how abould you come into the fold? General Electric makes
a bid to acquire our c A. So our c
(39:05):
A has a tough decision to make. Right. On the
one hand, they've just finished divesting themselves of all these
other businesses. They have two billion dollars in cash. They
are able to now focus on their primary business and
hopefully turn it around. Things are starting to look promising,
but it's still pretty shaky ground. Do they say yes
(39:27):
or no to this deal? Well, if they thought about it.
But here's the problem. This is also in the eighties,
and something else was going on in the eighties to
a crazy degree that our hair was awesome. Lots of
Neon I had hair in the eighties also awesome. I
(39:48):
don't see what you're not saying anything wrong? So I
like all those things. Okay, boy bands maybe, but anyway, No.
In the nineteen eighties there were there was this culture
of hostile takeovers business. And a hostile takeover is when
a company goes in to acquire another company. They can't
do it through normal acquisition, so they appeal to shareholders
(40:10):
and they essentially try to get more shares of the company,
like a controlling interest. Amount of shares of ownership of
the company and then they effectively can tell the board
of directors to go yeah, it's a work around to
get your own way. Yeah. So the board of our
Cia said, well, we could say no to this deal,
(40:32):
but that would potentially set up a hostile takeover situation
and then we'd have to defend ourselves from GE and
that could be a lengthy and expensive and ultimately it
could be an unsuccessful task. Or we could agree to
the acquisition. So they agree yes, and that two billion
dollars in cash was actually a strike against our Cia,
(40:55):
which seems counterintuitive, but the reasoning was this, if g
were to go after our Cia for a hostile takeover,
they could go after our Cia super hard because if
they took over our ci A, then they would get
that two billion dollars and they could use that to
pay off any debts that they accrued in the process
(41:16):
of going after our Cia. Well, thankfully they didn't have
to do that. They only spent six four billion dollars. Say,
they just bought at six point four billion dollars. And
this is why I say that our c A effectively
stopped being a company in nineteen eight six because General
Electric would bring our ci A under the fold, so
(41:38):
it's no longer an independent company at all, and then
either liquefied and sold off our CIA assets or consolidated
r c A assets with existing General Electric or g
E assets, So all the divisions of our CIA that
weren't sold off became part of other existing g E divisions.
I like this note you have about our Cia Records
(41:59):
because they were sold off, they didn't become a part
of g E. Right, Yes, so g did sell off,
like I said, some of the components, one of those
being our Cia Records. R CIA Records is what had
evolved essentially from the Victor Talking Machine company Victor Records.
We had talked about them in the previous episode. So
our Cia Records is the one that has Nipper as
the in the logo. They got sold off to a
(42:23):
company called the Bertelsman Music Group, better known as b MG.
So BMG buys our Cia Records. But then BMG would
merge with Sony Music in two thousand four, Sony the
parent company company of Columbia Records. Yeah, so r c
A and Columbia, which had been the fiercest of competitors
(42:47):
in the old gramophone days and the speed Wars of
the figuring out the album Speed now belonged to the
same company. It's it's similar to I think we've talked
about this with board games and toys as well, right later,
toy companies that were in fierce competition with each other
that now ultimately belonged to the same parent company. Well,
(43:09):
it certainly seems it's like that old adage they said
about the thunderstorm. The the faster it comes on, the
faster it goes away. It seems it seems like our
ci A grew really strong and really hard and really fast,
and then and then and then fizzled out, had a
mighty fall. Did that in the course over the course
(43:29):
of almost eighty years. So it was a good long
run and really seventy years. And while you know our
ci A, the brand calls this it's centennial, that's a
hundred years old. You could make the argument that the
brand has very little connection to the company that gave
it its name because it's just gone through so many
(43:52):
different changes in ownership. Either it's you know, there are
our c A branded products out there, there are records
out there, but there it's it's like it's a flavor.
It's not like it belongs to the same lineage necessarily
as this established company that came together in in you know,
nineteen nineteen. Well, it certainly is a very interesting and
(44:15):
dramatic story. Yes, it's it's a phenomenal one. You know. Again,
to to see a company that I would say our
c A was one of those that you would described
too big to fail at its height, and like the Titanic, Yeah, yeah,
I mean it was the distress signal from exactly in
(44:35):
nineteen twelve. That's a good call back. Yeah, it was.
It was established as a monopoly by the United States
government and then ultimately it had to be swallowed up
by one of the companies that helped establish it in
the first place. Uh. It's I think really you could
in retrospect lay a lot of this at the decline
(44:57):
of health of David Sarnoff and the fact that Roberts
and Off while he was ambitious and was trying to
diverse I mean, he was trying to diversify the company's
holdings in order to give it more stability, but it
just didn't work out. He just went to random. He
went too far and wide and probably didn't have quite
(45:19):
the same force of will as his father did. And
that's a that's not to say that David I don't
think I would like David Sartos very much. It's not
necessarily saying it's a bad thing. Yeah, for the purposes
of establishing a corporate empire, it might not work out
so well. But I I have a feeling that, UM,
(45:41):
I would find David Sarnoff to be uh, not my
kind of person. Not to say like he's necessarily good
or bad, but some of the decisions he made are
ones that would be very difficult for me to reconcile.
I agree with that, UM, but that is all we
have in our c A. So UM, if you guys
have any companies you want us to talk about, uh,
(46:02):
email them to us, you know, or you can just
email to say hi. We do get all of those
suggestions and we are working through them. Yes, where we
have an actual spreadsheet that Aeriel maintains that has all
the different suggestions and who made them, and we're thankful
for all of them. Keep them coming in because it's awesome.
It lets us know exactly what you guys want to
hear about, and otherwise it's Ariel and I just sitting
(46:25):
down and saying, so, what's the company you know? Yeah? Um,
So if you have those companies where you just want
to say hi, email us at Feedback at the Brink
Podcast dot Show. Yep, and you can pop to our website.
That's the Brink Podcast dot Show. That's why there's an
archive of all of our past episodes. There's some information
about your beloved hosts who belove you right back and
(46:46):
until next time. I'm Jonathan Strickland and I'm aerial Casting.
Business on the Brink is a production of I Heart
Radio and How Stuff Works. For more podcasts for my
heart Radio at the I heart Radio app, Apple Podcasts,
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Business on the Brink News
Hosts And Creators
Jonathan Strickland
Ariel Kristen Kasten
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