When the net earnings of my fledgling network passed the golden mark of $2 million by September 1931, I heaved a sigh of relief and pleasure. I notified Paramount that CBS wanted it to fulfill its contractual obligation to buy back at $85 a share the Paramount shares it had given CBS shareholders in lieu of cash for its 50 per cent ownership of CBS. The network had fulfilled its contractual obligation to reach cumulative earnings of $2 million during two years and now wanted to be paid in cash, as promised. The catch was that Paramount was in no condition, financial or otherwise, to buy back its stock at $85 a share. Paramount stock, never having recovered from the 1929 crash, was selling on the open market at below $10.
Adolph Zukor and I had been two supremely confident men when the Paramount-CBS stock deal had been made in 1929. He had been certain that in two years, Paramount would be selling at $150 a share, and I had been equally sure CBS was worth the $5 million paid because it would have earned $2 million. My confidence had never been shaken, except possibly once in mid-1930 when the first of the Crossley ratingsI was published. Based upon telephone interviews with a small sample of the population, Crossley reported that just about everyone was listening to NBC programs. NBC’s Amos ‘n’ Andy had a Crossley rating of 53.4, Rudy Vallee Varieties got 36.5, the Lucky Strike Dance Orchestra got 27.8 and so on. As for CBS, with the exception of only two shows, the more popular of which had a 12.0 rating, no CBS program did better than 3.3. That first Crossley rating hit us like a blow to the solar plexus. There were cries of anguish in the CBS offices, but most of us were angry with disbelief. It just could not be so. We were certain that at least some of our programs were more popular than those of NBC. I was furious. The danger of losing advertisers was real, for no matter how talented our performers might be, who would want to sponsor a CBS program that only a few would listen to?
Paul Kesten came up with the solution and like all good solutions, it was simple. We hired the prestigious accounting firm of Price, Waterhouse and Company, whose integrity could not be questioned, to conduct an unbiased study of radio network popularity. Price, Waterhouse devised a simple survey which Fortune magazine later described this way: “So basic were their facts, so simple their presentation . . . the entire advertising fraternity was impressed.”
What Price, Waterhouse did was send out several hundred thousand postcards to random homes in cities and towns where CBS had affiliates, asking listeners simply to name their favorite radio station, tear off that portion of the card and drop it in the mail. The results were reassuring. In the ten largest American cities, the survey showed CBS stations were favored seven to three over one of the NBC networks and five to four over the other. In all sixty-seven cities covered by the CBS network, we rated 34 to 31 over the first NBC network and 32 to 31 over the other. Thus, the ratings war began between CBS and NBC; but at least we did not lose our advertisers.
Nor did we lose our momentum. Economic indicators for the whole radio industry pointed upward: radios in use, number of listeners and time sales to sponsors. The radio industry was growing despite the onset of the Depression. Radio gave people free entertainment, free education, and free information. Network radio gave manufacturers a lively coast-to-coast marketplace for their brand-name goods.
• • •
Ironically, when serious negotiations with Paramount got under way, I found myself face to face with John D. Hertz, a businessman of considerable substance, whom I had declined to hire at CBS. Hertz had built up one of the largest taxi fleets in Chicago, founded the concept of rental cars, and retired a rich man, only to be bored by retirement. Zukor had recommended that I hire him as my right-hand man at CBS. Although I had liked the man, I told Zukor that he might, because of the importance of the job, have a negative influence upon the ambitions of the young management team at CBS. So, I suggested that Zukor hire him instead. Now, with Paramount in trouble, Zukor was moved off to one side and Hertz, as chairman of the finance committee, had become the key man at Paramount. But in our negotiations, he tried to handle me the wrong way. I was barely thirty years old and he tried to overpower me into agreement, threatening again and again, to get a better price elsewhere on Wall Street than I was offering him. What I proposed was to buy back the CBS stock for the same amount that Paramount owed us on it, namely $4 million. Paramount wanted more.
I knew that Paramount could not raise $4 million on its own and I thought that no one else would make such an offer as long as CBS stockholders had the first-refusal right to match any offer. I challenged Hertz to find another buyer, if he could, and I stuck to my price.
As we came up to the deadline for those negotiations, Paramount brought in Otto Kahn, the famous investment banker, and he tried the reasonable approach. “Mr. Paley, the people at Paramount are having trouble with you,” he declared. “They want to sell their CBS stock to you, but you are offering them only $4 million for it, and they think it’s worth much more than that. After all, you just made your $2 million.”
I was just as reasonable. “Mr. Kahn,” I said, “they have a right to ask what they please and they have a right to go out and get a higher offer. All you have to do is go out and get that offer, and then as you know from the provisions of the contract, if you get that offer, you have to give me the right to meet it. It would then be up to me to meet it or not.”
“You know damn well that it’s very hard to get another bid under these circumstances,” he said.
“I don’t really know about that,” I retorted.
“Well, I’m telling you it is. I think you ought to pay them more.”
“No,” I insisted, “I won’t do it.”
“In other words, you’ve made up your mind, you’re not going to offer any more.”
“That’s right.”
“Young man, you’re too much for me,” said Otto Kahn, “I am authorized to act for Paramount and I accept your offer.”
So, the CBS stock returned to its original shareholders in an approximate exchange for the Paramount stock held by us. We paid $4 million for the CBS stock and Paramount used that $4 million to buy back its shares at $85 a share, as agreed upon. Various amounts of shares had been sold on both sides since the original purchase, so that only those stockholders who still held their shares participated in the buy-back.
On behalf of the thirteen early CBS stockholders and myself as the major stockholder, I decided to convert about half of the returning CBS stock into cash. In these negotiations, I brought in three investment banking firms—Brown Brothers, Harriman; Lehman Brothers; and Field, Glore. They bought back half of the stock held by Paramount at $82.21 a share, part of which they sold to their clients at a later date.
So, when all the negotiations ended and the legal papers were signed and the exchange made, I walked away from that final meeting with a check from the investment bankers for $2,000,004.88 and CBS stock worth slightly more than that for me and the other CBS stockholders. My share amounted to a substantial amount of that cash and 10,577 additional shares of Class A CBS stock. Aside from all this, of course, the other half of CBS was represented by 63,250 shares of Class B stock, of which I individually owned 39.7 per cent and was the voting trustee of another 27.7 per cent.
I was on my way to becoming a truly rich man and yet it did not seem to touch me emotionally. There were no celebrations. I walked out of that meeting alone shortly before midnight, stopped at an all-night restaurant, had a cup of coffee, and went home to bed. The Paramount-named directors duly resigned from the CBS board and I named four new directors of my own choosing, three of them from the Wall Street investment banking firms. We planned, when the time was right, to list CBS on the New York Stock Exchange. CBS was on its own merry way. And I began planning my own retirement from the network.
The year before I had told a reporter for the London Daily Mirror that I intended to retire at age thirty-five, and over the next three or four years I told others, all in an attempt to reinforce for myself the vow I had taken at eighteen to get rich and retire. And when that fateful day of my thirty-fifth birthday approached in September 1936, I truly faced one of the most dreadful dilemmas of my life. Because of the success of CBS, I had all the money I had ever hoped for, more than enough to quit work and live a life of leisure. And yet I did not really want to retire. But how sacred is a solemn vow and promise one has made to oneself? Even at the age of eighteen? Would I be punished if I broke the vow? Would my luck run out? Would something really terrible happen to me? Those were serious thoughts in those days. I carefully analyzed the alternatives and concluded that I really did not want to become a beachcomber or pick oranges off trees. Life was not meant to be devoted to the acquisition of money, followed by a lazy life of leisure. At eighteen, I had been too young, too immature, too unknowing to set an unalterable path for myself. Now, at thirty-five, I knew that life was meant to be lived to the fullest, day by day to the very last one. Money was not the issue. My life with CBS was fascinating, adventurous, and even of some social significance. Radio was reaching into the homes of millions and millions of Americans across the country; the average listening family had its radio turned on for more than five hours a day, and CBS was a major source of entertainment, information, and news for so many Americans. How could I quit? I loved my work. I was thoroughly involved in selling and organizing and programming and constantly looking for new station affiliates. I also spent a good deal of time in Washington, testifying before congressional committees of one kind or another, talking with various congressmen about the rights of broadcasters, and I traveled to the West Coast at least once or twice a year to try to develop new programs. It seemed that I had to be everywhere. There was hardly ever any let-up and I enjoyed the pace and the excitement. So, my thirty-fifth birthday came and went and I never looked back. Besides, we were making some exhilarating strides in our competition with NBC. In the 1934–35 season, radio’s top five programs all were on NBC; in the 1936–37 season, four of the top five were on CBS!
The reason behind this turnabout was simply that I had managed in the season in-between, 1935–36, to lure away three of the most popular entertainers from NBC—Major Bowes, Al Jolson, and Eddie Cantor. Major Bowes’s original Amateur Hour was the most popular radio program of its time: listeners loved to empathize with the amateur performers and to try to second-guess who would win the competition for the most applause and who would get the gong that cut short the performance. When Major (Edward) Bowes switched sponsors and signed up with the Chrysler Corporation, I cultivated our relationship, even going to watch his broadcasts and attending the parties which followed in his luxurious apartment on top of the Capitol Theater building, of which he was part-owner. When I thought he would agree that it made no difference to him which network he went on, I made my sales pitch to Walter Chrysler. By then I had a set sales talk as to CBS’s youth, energy, good affiliate stations, competitive coverage with NBC, and our better promotion plans. Walter Chrysler was a business man. He asked a good many pointed questions and I answered them as best I could. I tried to impress on him how progressive and how fast-growing CBS was and how much we could do for Chrysler. But the decision was entirely his and he did have a big investment involved in sponsoring Major Bowes. Why should he switch? Major Bowes had been a proven winner on NBC. I’ll never forget my fear or my bad case of nerves when I came to him for his final answer.
Chrysler faced me grimly from behind an enormous desk. “Sit down, Bill, I’ve got some bad news for you,” he said.
I sat down and thought, Oh, Lord.
“I don’t know how you’re going to take this. I like you, but I’ve been thinking about it and thinking about it, and I might as well blurt it out. I’ve decided . . .” He paused for a terrifying second. “I’ve decided to put Major Bowes on CBS.”
I jumped out of my seat, ran around his desk, threw my arms around him and hugged him. He grinned. My emotions sent tremors up and down my spine. This was the coup of coups. Major Bowes on CBS!
We also took the Lux Radio Theater away from NBC. Created in 1934 to do adaptations of Broadway plays, the Lux Radio Theater was moved by us to Hollywood for the 1936-37 season to do adaptations of motion pictures. With Cecil B. DeMille, the movie director, as host, the Lux Radio Theater enjoyed tremendous popularity for many years—many of them, in the top ten.
• • •
Taking Lux to Hollywood was a sign of a major change in broadcasting, linking the entertainment worlds of radio and motion pictures. In late 1936, in anticipation of technological improvements in transmitting, we took steps to establish a permanent CBS base in Hollywood. We bought our own radio station in Los Angeles, KNX, and its studios. We also bought the 1,500-seat Vine Street Playhouse, and then, needing still more studio space, we leased the Music Box Theater on Hollywood Boulevard. The idea was for CBS to have the capability of originating radio shows from the West Coast, serving that area and time zone more effectively and, more important, having ready access to motion-picture stars. Our biggest venture, however, was a plan to build a new radio center of studios, offices, and theaters on Sunset Boulevard between Gower and El Centro streets, renaming the site “Columbia Square.” When the new complex, designed by William Lescaze and built at a cost of $1,750,000, was opened on April 30, 1938, Radio Daily described it as “technically and physically . . . perhaps the most advanced radio home in the world today.”
The need for studio space and facilities nearly doubled in the latter half of the thirties, not because of additional programs but rather to accommodate the need for more rehearsals and technical equipment. Radio broadcasting was becoming more sophisticated. The rather slapdash broadcasts of the early days began to give way to better sound and better programs.
Radio drama ran the gamut of aesthetic tastes from thrillers, to melodramatic daytime serials, to adaptations of classical theater, to news and experimental forms of serious drama. All types of radio drama developed, becoming more sophisticated in form and technique. The thrillers, suspense stories, and daytime serials were commercially successful. They suited the fancy of most listeners, attracted sponsors, and helped pay for the more serious and experimental programs which appealed to the minority of listeners with the so-called “highbrow tastes.” In the early days, listeners made it a point to listen to The Shadow every week just to hear that cynical laugh and the voice which said, “The Shadow knows . . .” And then there was Gangbusters, with its special sound effects, a long-running success and a forerunner of the cops-and-robbers shows on television. In time, dramas written especially for radio developed into an art form, which received high critical acclaim.
But it was the daily daytime serials which attracted the most loyal audience on radio, as they would later on television. They became part of the fabric of life for housewives across the country; they generally sold brand-name products in proportion to their popularity; and for the radio stations then, as for television stations now, the degree of success of their daytime programs could well determine the profit-and-loss statement at the end of each year. In the radio days, that success depended largely upon two people, Frank and Anne Hummert, who were without question the most prolific producers of daytime serials.
For most of the thirties, this husband-and-wife team created just about half of all the serials on the air. Hummert, who had been one of the top writers in the advertising business, perfected the genre of soap opera, the to-be-continued melodramatic depicting of the troubles and woes of so-called ordinary people. Virtually every program Frank Hummert created was eagerly bought by one or another advertiser, and Hummert had much influence on which network got his newest brainchild. He had married his young assistant, Anne, a most attractive and capable woman who ran their large staff of writers and production people. Frank himself was rather eccentric and crotchety, instilling fear in most people, because he controlled so much of his segment of the business. But I liked and admired him as a person and a real professional. I made it my business to join them for lunch two or three times a month at the Park Lane Hotel, where Frank always ate raw vegetables and complained of a stomach ailment and of people he did not like. We talked mostly about daytime serial plots, truly his favorite subject, never about business, and I believe this relationship helped bring to CBS some of our most popular, long-running serials, such as Just Plain Bill, The Romance of Helen Trent, Our Gal Sunday, Ma Perkins, and others. Daytime serials, often referred to as soap operas, became an American phenomenon.
Then as now, the sponsors of programs usually sought the widest possible audience for the advertising of their products. Defining and mapping these sales markets by age, income, region, and other categories became a specialization of the advertising agencies, and of course a matter of bread-and-butter interest to us.
From the beginning I saw that the business side of broadcasting required us to reflect in our programming the taste of the majority. But at the same time I also realized that we should balance popular entertainment with programs which would attract the minority tastes. So while I chased the top entertainers, talent, and sponsors, my associates and I worked equally hard to bring serious drama, classical music, and educational broadcasts to CBS. I wanted CBS to represent the finest quality in broadcasting and in programming, and through these years we sought and embraced the opportunities for bringing something new and important to the public via radio. The Cavalcade of America, a series of historical dramas, was one of the few such programs to attract a sponsor, the Du Pont Company, despite its small audience.
Most of these more serious programs never won sponsors or did so for only a short time. They were too “highbrow” for most listeners, and so CBS would pay to put them on the air, always hoping to find a sponsor and seldom succeeding. Orson Welles was a case in point. I was astonished by his extraordinary ability when he appeared at a charity fund-raising party and at the last minute, without rehearsal, put on a stunning dramatization. We brought Welles to CBS to form a dramatic group called the Mercury Theater of the Air, which competed at 8 p.m. Sunday with NBC’s popular Edgar Bergen and Charlie McCarthy on The Chase and Sanborn Hour. Then Orson Welles made radio history on October 30, 1938, with his broadcast of The War of the Worlds, in which he simulated news bulletins reporting the landing on earth of men from Mars. So real was his dramatization that millions of Americans panicked. CBS was sued by people who claimed they had suffered from shock and in some cases, heart attacks, because of the program. The Mercury Theater became famous. And Orson Welles soon found a sponsor, Campbell Soup, and was launched on a career of numerous triumphs on the air, in the theater, and in the movies.
The Columbia Workshop was our own experimental theater of the air, a proving ground for new radio techniques. In order to keep it as flexible as possible, we decided never to offer it for sponsorship. Under the direction of Irving Reis, who had been a studio engineer, the Workshop was chartered to put on experimental radio dramas which would innovate special sound and electronic effects, music, direction—all “with no restriction save the essential and reasonable one of good taste.” And it did just that. Its new sound effects, which influenced the entire industry, simulated such things as a trapped fly buzzing against a window, a torpedo being fired from a submerged submarine, five hundred bombing planes in action. New voice effects were created with electronic filters for radio portrayals of ghosts, leprechauns, and all sorts of characters. Its performance of Archibald MacLeish’s The Fall of the City, a poetic drama featuring Orson Welles, was an all-time pinnacle of radio drama, an outstanding event in my own broadcasting experience and a sensation in 1937. By the time it left the air in 1942, the Workshop had made a remarkable record in the new genre of radio drama. Outstanding writers of the day, including W. H. Auden, Dorothy Parker, William Saroyan, Irwin Shaw, and Stephen Vincent Benét, had written half-hour dramas especially for the Workshop. Another genius of serious radio drama was Norman Corwin, who had a special following of listeners for his sensitive radio arrangements of the works of American poets, verse plays of his own, and a variety of documentaries uniquely contrived for radio. He was a genius of the medium and his radio dramas are among CBS’s classics.
Of all the arts, the one easiest to put on radio was music. One had only to play a record. Popular music flooded the airwaves at the beginning of broadcasting and then slowly gave way to comedy, drama, and variety. Classical music filled more than 25 per cent of all CBS broadcast time in the beginning, largely because of Arthur Judson’s influence as a concertmaster. But classical music throughout the thirties leveled out to about 10 per cent of our air time. I had lost out in bringing the Metropolitan Opera to CBS, but I already had signed the New York Philharmonic Symphony for CBS Sunday afternoon broadcasts. A succession of great conductors was presented to the American public via those Philharmonic broadcasts: Arturo Toscanini, John Barbirolli, Artur Rodzinski, Bruno Walter, Dimitri Mitropoulos, and Leonard Bernstein. CBS had its own Columbia Symphony Orchestra, directed by Howard Barlow. Deems Taylor served as our musical consultant. In the mid-thirties we commissioned twelve American composers—some well known, some obscure—to compose works specifically for radio performances. When we broadcast five of these original works on a single program, Aaron Copland, one of the composers, hailed it as “a red letter day for American music,” and commented: “It shows . . . that the Columbia Broadcasting System really believes in the native composer’s product and in the capacity of the radio audience to understand and enjoy it.”
At the start, it was not all that easy. I tried to persuade Jascha Heifetz, the great violinist, to perform on radio, but he turned me down, saying, like many others, “My music is for the elite, for those people who really understand it, and that means that it belongs in the concert hall.” In time, he and others like him came to see that radio concerts could attract and convert millions to the magical beauty of the world’s greatest music. The local affiliated stations also had to be persuaded to give hours of free air time to classical music, for such programs invariably received low ratings. In time, they came to understand the audiences’ appreciation for stations that would bring symphony orchestras, chamber music groups, famous conductors, and brilliant soloists into their homes. Thousands upon thousands of programs of classical music were presented on CBS radio through the thirties and afterwards, which considerably influenced the musical tastes of America.
In line with our obligation for social responsibility, we broadcast the Church of the Air, in which CBS provided free air time on Sundays for clergymen representing the Protestant, Catholic, and Jewish faiths, in proportion to their published membership. However, we did prohibit them from being sponsored or from making appeals for contributions or discussing secular subjects. This policy grew out of an earlier mistake we had made in dealing with Father (Charles E.) Coughlin. I had scheduled him in a program coming from his Shrine of the Little Flower, in Royal Oak, Michigan. Before that he had broadcast locally over our affiliated radio station in Detroit for some years and had organized the Radio League of the Little Flower for which he collected contributions. He was indeed a powerful, popular orator from the pulpit. But after a while he strayed far beyond his theological talks to messages of hate and extreme political views. We soon insisted upon seeing his scripts in advance. We then refused him air time for one especially inflammatory advance script and strongly suggested he confine himself to a religious theme. That Sunday he appealed to his radio audience to write me personally in protest against the restrictions imposed upon him. Almost 400,000 letters poured into CBS, almost all of them in protest against our action. Nevertheless, we canceled Father Coughlin forthwith. We could not allow anyone to violate our policy of forbidding the abuse of air time. Father Coughlin arranged to continue his particular radio sermons by buying time over a number of independent stations throughout the country and buying lines from AT&T connecting these stations for simultaneous broadcasts. He became rather a cause célèbre, but that is another story.
From the very beginning of the network, we had prohibited sponsors from mentioning the price of their products on the air. The theory was that this would somehow cheapen the image of radio. But in 1932, in the depths of the Depression, one advertiser in particular appealed to me directly with the argument that listeners had every right to know the price of an advertised product as an important factor in their decision to buy or not buy. That made sense to me. So, that same year, CBS lifted the self-imposed taboo, and sponsors from then on could advertise their prices as well as their products on the air.
We also inaugurated various types of informational and educational programs. We brought experts and authorities to the microphone to talk on books, business, history, astronomy, chemistry, music appreciation, and current subjects of interest. CBS formed an Adult Education Board of distinguished educators to advise us, and I met with them for a full day twice a year to hear and to discuss their recommendations. Our American School of the Air, an outgrowth of the early program sponsored by Majestic Radio, became a CBS non-commercial educating tool five days a week as a supplement to regular classroom instruction, and we distributed a teacher’s manual to go with it. Surprisingly, the program seemed to attract many adult listeners outside of the classroom, judging from the fan mail received. We also had an advisory board to help us set policy and choose programs suitable for children. But one year when we adopted the advisory board’s recommendations by canceling our so-called “blood and thunder” shows for children, our sponsors deserted us on the replacements. The children deserted us too, turning to the same type shows on other networks.
Out of necessity and based upon our past experience, we began to establish certain broadcasting policies covering the use of the CBS network for advertising and for the fair dissemination of information. In 1935, we set a fixed limit, specified in minutes and seconds, on the amount of advertising on any program. We barred the advertising of any products which we believed were socially taboo. And we set specified standards for broadcasts designed for children. On news and all public information broadcasts, we enunciated a formal policy based upon fairness and balance. We declared CBS to be “completely non-partisan on all public controversial questions, including politics.” We said we would sell time on the air only for the advertising of goods and services and would refuse to sell time for propaganda. We made one necessary exception: we would sell air time to a political party during a campaign for the election of candidates. For all other discussions of public issues, we would allot time at our own expense so that we could maintain a policy of fairness and balance. The fundamental, basic concept behind these policies—then as now—was that the broadcasters—not government regulators—should exercise editorial judgment and take editorial responsibility for what went out over the networks. These policies, first established in 1935, worked and worked well through the years. The mistakes we made, we wanted to correct ourselves. I enunciated that concept then and I believe in it even more strongly now.
Those years were truly the heyday of radio broadcasting. In the decade of the 1930s, radio grew from infancy to maturity. New ideas, improved ideas, experimental ideas could be implemented without fuss or immense expense within hours or days. Mistakes and poor judgments could be corrected as easily. The pace was fast and glorious. We learned as we went along, by trial and error, and in the end we established broad policies and sound traditions that govern radio and television today.
I. Organized by Archibald Crossley, the Crossley rating (officially called the Cooperative Analysis of Broadcasting) was the first national rating and represented the percentage of the entire radio-owning population listening to a program.