Wednesday, April 19, 2006

Radio Networks Week, part 3

The CBS Network
It was in the year 1927 that the United Independent Broadcasters was reorganized as Columbia Broadcasting System (CBS). Even at that early date they had an intimidatingly large network of 47 radio stations. At the time it was inprecedented. Not that it did them much good

United Independent Broadcasters corporation (UIB) had been formed in the wake of NBC. They, like NBC tried to get advertising sponsors to support their placement as a radio content provider. Arthur Judson, it's CEO was aping another companies successful business strategy. He and his partner George Coats had 16 radio stations and until then had been a concert promoters specializing in high-class concert artists on various New York stages.

Judson wasn't really interested in founding radio network. He was just looking for new outlets for his roster of musical artists. His first venture in this direction was the Judson Radio Program Corporation. His idea was to act as a middleman between sponsors and networks. He would be an independent packager of radio programming. He approached David Sarnoff with this idea and was booted right out the door. Sarnoff of course liked the idea. He just didnt want to pay this schlemiel. Sarnoff started NBC Artists Bureau, a year later.

Judson was ripping pissed of course. So he gave Sarnoff the finger and decided to start his own damn network. He already had a stable of talent. He just had no radio stations, or radio experience. So the obvious thing to do was to brazenly printed up stock certificates for UIB, even though it didn't exist. Then Coats hit the road to find affiliates. His idea was that UIB would pay each affiliate $500 a week for ten hours of airtime. With nothing but empty promises, he signed up a dozen affiliates. It was a minor miracle.

Then he got lucky again! The nearly insurmountable problem of getting access to phone lines from AT&T was looming. It was going to cost a lot of up front cash to lease those phone lines. Coats somehow convinced the president of the Columbia Phonograph company to buy $163,000 of radio air time from him.. even though he had not sealed the AT&T deal. But UIB still didn't really exist. So The Columbia Phonograph Broadcasting Company was set up as a paper corporation to handle this work. Details here.

But still no one inside the corporation knew jack about radio. Coats realized this was coming to a head so he sold Major J. Andrew White 200 shares of the then valueless stock in UIB in order to get access to his expertise. White was the editor of Wireless Age magazine and a pioneer broadcaster. White got on board just in time to see the Columbia Phonograph lose $100,000 on the project in the first 30 days. They had sold no sponsors whatsoever, and just bailed, committing only to pay for their previously agreed spots. That cut off the cash flow before the network was a month old.

With a pile of endless debt, no income and no prospects things looked pretty hopeless. But Coats was a brazen man who could lie, who could schmooze like no other. He took his worthless stock certificates down the road to Philadelphia and had a meeting with millionaire J. H. Louchheim. he sold him a minority interest in UIB and got him to agree to put up the money to keep it running. Imagine that in this era, radio looked like the internet did in 1991. In retrospect they look foolish and fiscally reckless, but really most of them were just over excited.

Louchheim snuck out the back door and pooled his minority interest with a couple others including the Levy family that owned WCAU and WHAMMO! they had a controlling interest. Coats might have put up a fight but really with out Louchheim UIB was worth zilch anyway. Louchheim continued to lose money on UIB for years. Finally in 1928 he unloaded the ugly dog at a loss for $400,000 on their biggest advertiser and personal friend. The buyer was William Paley of the Congress Cigar Co., the maker of La Palina cigars.

Paley was an actual business man unlike Coats who was just good at talking big. He reorganized the company completely and changed its name to Columbia Broadcasting Company. Paley opted not to kill Coates despite numerous requests from Louchheim. Coats kept a minority interest, got a salary and was allowed to procure programs. He gave up control of everything to Paley.
The networks inaugural broadcast was on September 18 1927. That night a powerful series thunderstorms rendered the entire program inaudible to most of America. To Coats, it began to appear that the network was cursed by gypsies. That night the network included the following stations: WOR New York; WEAN, Providence; WNAC, Buffalo; WFBL, Syracuse; WMAK Buffalo; WCAU, Philadelphia; WJAS, Pittsburgh; WADC, Akron; WAIU, Columbus; WKRC, Cincinnati; WGHP, Detroit; WMAQ, Chicago; KMOX, St. Louis; WCAO, Baltimore; KOIL, Council Bluffs; and WOWO, Ft. Wayne. The original network varied from a low of 22 stations to as many as 47 during the UIB years. But by 1938, Paley's consolidation efforts and incredibly successful promotional efforts had grown the network to 113 strong outlets in highly successful markets, despite the curse.

Paley built his CBS broadcasting empire by hand winning new staitons, programs, performers and sporsors often by himself. He also invented an industry practice called "sharking"or "poaching" wherein you just steal the good programs/talent from your competitors. he personally enjoyed sharking from NBC. Early radio stars such as Fats Waller, Bing Crosby, Fred Allen, Will Rogers, and Jack Benny each jumped from NBC to CBS at one point for a bigger payday. In 1938 he bought American Recordings and renamed it Columbia Records. In 1961 the NYC skyscraper called "Black rock" was built to house it. Info here.

During these years profits increased to such an extent that by 1974 the Columbia Broadcasting System had become CBS, Inc., and consisted not only of radio and TV networks but a publishing division (Holt, Reinhart and Winston), a magazine division (Woman's Day), a recording division (Columbia Records), and even for a time The New York Yankees (1964-73). Business week once said that "Paley was to broadcasting as Carnegie was to steel, Ford to automobiles, Luce to publishing and Ruth to baseball." It's damn right.