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