CBS, a broadcasting empire built on radio, decides to sell off its radio division.
Here’s the story of its founding, almost 90 years ago (excerpted from my book Covering America.)
To set the scene. . . in 1927, Congress decided to regulate the new field of broadcasting, primarily through a system of licensing stations and assigning specific frequencies to transmitters. This was a key move in making commercial broadcasting profitable. . . .
. . .At just this moment another innovator came along to challenge NBC. He was William Paley, the son of an immigrant cigar maker. (Sam Paley had come from Kiev, not far from Sarnoff’s birthplace near Minsk.) Bill Paley was a young man in a young business.
Born in 1901 in Chicago, he moved when his father decided to relocate his Congress Cigar company to Philadelphia, where the cigar workers were not unionized. Bill transferred from the University of Chicago to Penn, where he set out to enjoy himself before entering the family business. After graduation, his job was to help the company fend off the threat posed by the growing popularity of cigarettes. To do that, he plunged into a campaign to boost sales of the company’s La Palina brand by using the new medium of radio.
Working closely with advertising agencies in New York, Bill Paley saw firsthand the impact that radio could have on sales. The mass medium soon boosted sales of La Palinas past 1 million a day. In 1926, Sam Paley sold Congress Cigar for $13.75 million. Young Bill’s share was $1 million. He was just twenty-five.
Two years later Bill Paley learned that a fledgling radio network, Columbia, was for sale. Tapping his inheritance, he rounded up smaller investments from his father and other relatives, and, on September 28, 1928, bought the Columbia network for about $1 million. Control of the company remained in private hands until 1937, when Paley took Columbia public as a corporation listed on the New York Stock Exchange. After the stock began trading publicly, Paley kept enough shares to ensure his control of CBS.
When CBS went public, this meant that the two leaders in radio were in the hands of large, profitable corporations whose first duty was to maximize the return on their stockholders’ investments. How that legal obligation would square with operating in the “public interest” was an open question.
Throughout the 1930s, as the economic depression deepened, radio kept growing. The share of American households owning a radio went from less than 25 percent in 1927, to nearly half in 1930, to more than 65 percent in 1934 — or from 6.8 million homes to 20.4 million. In some cities, by 1936 as many as 93 percent of all households had a radio.
Radio was a craze if there ever was one. Even as economic conditions deteriorated, Americans clung to their radio sets. Many Americans gave up telephone service first or sold off all their other possessions before giving up that old Philco or Atwater Kent. One reason was simple economics: once you had bought a radio, it was essentially free after that to keep using it. Unlike with a newspaper or magazine, you did not have to pay any continuing newsstand price or subscription fee.
Congress, meanwhile, having decided that there was no constitutional bar to legislating in the field of radio, decided to go further, passing the Communication Act of 1934. With Democrats now in control of the White House and Congress,
the law could have provided the vehicle for a New Deal makeover of federal policy, perhaps by breaking up NBC or by giving nonprofit broadcasters more clout. But the Democrats were in no mood to pick a fight with Sarnoff or Paley.
In fact, Democrats believed that they had gotten a pretty fair shake from radio, especially in contrast to the editorial opposition the New Deal was getting from most newspapers. The new radio law renamed the FRC the Federal Communications Commission, a body with seven members, and expanded its scope to include the power to regulate telephone, television (still in the laboratory), and future electronic media as well.
One notable provision went further than ever in the direction of regulating the content of radio programming. That was Section 315, which called for “equal time” for political candidates vying for the same office. Broadcasters hated it and started fighting immediately to repeal it, or at least to exclude newscasts, a campaign that took until 1959. Other provisions said that candidates must be allowed to buy broadcast time at the station’s lowest rate; that if a station sells time to one candidate, it must sell time to all; and that stations cannot censor what candidates say. Many of the 1934 rules were written by politicians, for politicians, and were not of direct interest to the general public. Still, the government’s regulation of broadcasting was becoming broader and deeper.
On the airwaves, meanwhile, NBC and CBS were battling for talent, for listeners, and for advertisers. The bulk of the programming involved popular entertainment like the Amos ’n Andy Show as well some fairly highbrow offerings such as the NBC Symphony Orchestra conducted by Arturo Toscanini. (During the daytime, when the audience was presumed to consist largely of housewives, many serial dramas were sponsored by soap companies; hence the term “soap operas.”)
The presentation of news on radio was much slower to get started. At first, during much of the 1920s, it consisted of men with deep voices reading newspaper stories over the air. But nobody was very happy with the results. Broadcast news requires its own style and pacing. Still, there were some key events during the 1920s that hinted at what was possible in radio news. October 5, 1921, marked the first World Series broadcast, featuring the Giants playing the Yankees at New York’s Polo Grounds. In June 1924 radio carried coverage of a national political convention for the first time. The next year, radio was part of the media horde that descended on Dayton, Tennessee, for the Scopes trial over the teaching of evolution. And in 1927 radio scooped newspapers on one of the most dramatic stories of the century — Charles Lindbergh’s solo flight across the Atlantic. Shortly after he was spotted over Dingle Bay in the west of Ireland, radio flashed the news. . .
