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The History of the Radio Industry in the United States to 1940

Carole E. Scott, State University of West Georgia

The Technological Development of Radio: From Thales to Marconi

All electrically-based industries trace their ancestry back to at least 600 B.C. when the Greek philosopher Thales observed that after it is rubbed, amber (electron in Greek) attracts small objects. In 1600, William Gilbert, an Englishman, distinguished between magnetism, such as that displayed by a lodestone, and what we now call the static electricity produced by rubbing amber. In 1752, America’s multi-talented Benjamin Franklin used a kite connected to a Leyden jar during a thunderstorm to prove that a lightning flash has the same nature as static electricity. In 1831, an American, Joseph Henry, used an electromagnet to send messages by wire between buildings on Princeton’s campus. Assisted by Henry, an American artist, Samuel F. B. Morse, developed a telegraph system utilizing a key to open and close an electric circuit to transmit an intermittent signal (Morse Code) through a wire.

The possibility of transmitting messages through the air, water, or ground via low frequency magnetic waves was discovered soon after Morse invented the telegraph. Induction was the method used in the first documented “wireless telephone” demonstration by Nathan B. Stubblefield, a Kentucky farmer, in 1892. Because Stubblefield transmitted sound through the air via induction, rather than by radiation, he was not the inventor of radio.

Transmission by radiation owes its existence to the discovery in1877 of electromagnetic waves by a German, Heinrich Rudolf Hertz. Electromagnetic waves of from 10,000 cycles a second to 1,200,000,000 cycles a second are today called radio waves. Eight years after Hertz’s discovery, an American, Thomas Alva Edison, took out a patent for wireless telegraphy through the use of discontinuous radio waves. A few years later, in 1894, using a different and much superior wireless telegraphy system, an Italian, Guglielmo Marconi, used discontinuous waves to send Morse Code messages through the air for short distances over land. Later he sent them across the Atlantic Ocean. On land in Europe Marconi was stymied by laws giving government-operated postal services a monopoly on message delivery, and initially only over water was he able to transmit radio waves very far.

Several Americans transmitted speech without the benefit of wires prior to 1900. Alexander G. Bell, for example, experimented in 1890 with transmitting sound with rays of light, whose frequency exceeds that of radio waves. His test of what he called the photophone was said to be the first practical test of such a device ever made. Although Marconi is widely given the credit for being the first man to develop a successful wireless system, some believe that others, including Nicola Tesla preceded him. However, it is clear that Marconi had far more influence on the shaping of the radio industry than these men did.

The Structure of the Radio Industry before 1920: Inventor-Entrepreneurs

As had been true of earlier high-tech industries such as the telegraph and electric lighting in their formative years, what was accomplished in the early years of the radio industry was primarily brought about by inventor/entrepreneurs. None of the major electrical and telephone companies played a role in the formative years of the radio industry. So this industry’s early history is a story of individual inventors and entrepreneurs, many of whom were both inventors and entrepreneurs. However, after 1920 this industry’s history is largely one of organizations.

Scientists obtain their objective by discovering the laws of nature. Inventors, on the other hand, use the laws of nature to find a way to do something. Because they do not know or do not care what scientists’ laws say is possible, inventors will try things that scientists will not. When the creations of inventors work in seeming defiance of scientists’ work, scientists rush to the lab to find out why. Scientists thought that radio waves could not be transmitted beyond the horizon because they thought that this would require that they bend to follow the curvature of the Earth. Marconi tried transmitting beyond the horizon anyway and succeeded. A typical scientist would not have tried to do this because he knew better and his fellow scientists might laugh at him.

Marconi

Marconi may not have been visionary enough to found the radio broadcasting industry. Vision was required because, while there was already an established market for electronic, point-to-point communication, there was no existing market for broadcasting, nor could the technology for transmitting speech be as easily developed as could that for transmitting dots and dashes. In point-to-point communications radio’s disadvantage was lack of privacy. Its competitive advantage was much lower cost than transmission by wire over land and undersea cable.

Due in part to his Marconi Company’s purchase of competitors who had infringed on its patents, by the time World War I broke out, the American Marconi Company dominated the American radio market. As a result, it had no overwhelming need to develop a new service. In addition, Marconi had no surplus funds to plow into a new business. Shortly after the end of World War I, the United States’ government’s hostile attitude convinced Marconi that his British-based company had no future in America, and he agreed to sell it to the General Electric Company (GE). Marconi had wanted to create an international wireless monopoly. However, the United States government opposed the creation of a foreign-owned wireless monopoly. During World War I the United States Navy was given control of all the nation’s private wireless facilities. After the war the Navy wanted wireless to continue to be a government-controlled monopoly. Unable to achieve this, the Navy recommended that an American-owned company be established to control the manufacture and marketing of wireless in the United States. As a result, the government-sponsored Radio Corporation of America was created to take over the assets of Marconi’s American company.

The four chief players in American radio’s early years, Marconi, Canadian-born Aubrey Fessenden, Lee deForest, and John Stone Stone [sic] were all inventor/entrepreneurs. Marconi successfully exploited the interdependence among technology, business strategy, and the press. He was the only one of the four to have an adequate business strategy. Only he and deForest took full advantage of the press. However, deForest seems to have used the press more to sell stock than apparatus. Marconi was also more astute in his patent dealings than were his American competitors. For example, to protect himself from a possible patent suit, he purchased from Thomas A. Edison his patent on a system of wireless telegraphy that Edison had never used. Marconi never used it either because it was inferior to one he developed.

Fessenden

Fessenden, a very prolific inventor, first experimented with voice transmission while working for the United States Weather Bureau. In 1900 he left what is now the University of Pittsburgh, where he was head of the electrical engineering department, to develop a method for the U.S. Weather Bureau to transmit weather reports. That year, through the use of a transmitter that produced discontinuous waves, he succeeded in transmitting speech.

Although discontinuous waves would satisfactorily transmit the dots and dashes of Morse code, high quality voice and music cannot be transmitted in this way. So, in 1902, Fessenden switched to using a continuous wave, becoming the first person to transmit voice and music by this method. On Christmas Eve, 1906, Fessenden made history by broadcasting music and speech from Massachusetts that was heard as far away as the West Indies. After picking up this broadcast, the United Fruit Company purchased equipment from Fessenden to communicate with its ships. Navies and shipping companies were among those most interested in purchasing early radio equipment. During World War I armies also made significant use of radio. Important among its army uses was communicating with airplanes.

Because he did not provide a regular schedule of programming for the public, Fessenden is not usually credited with having operated the first broadcasting station. Nonetheless, he is widely recognized as the father of broadcasting because those who had gone before him had only used radio to deliver messages from one person to another. However, despite being preoccupied with laboratory work and being unsuited by temperament and experience to be a businessman, he chose to directly manage his company. It failed, and an embittered Fessenden left the radio industry.

deForest

Lee deForest, whose doctoral dissertation was about Hertzian waves, received his Ph.D. from Yale in 1896. His first job was with Western Electric. By 1902 he had started the DeForest Wireless Telegraph Company, which became insolvent in 1906. His second company, the DeForest Radio Telephone Company began to fail in 1909. In 1912 he was indicted for using the mails to defraud by promoting “a worthless device,” the Audion tube. He was acquitted. The Audion tube (later known as a triode tube) was far from being a worthless device, as it was a key component of radios so long as vacuum tubes continued to be used.

The development of a commercially viable radio broadcasting industry could not have taken place without the invention of the vacuum tube, which had its origins in Englishman Michael Faraday’s belief that an electric current could probably pass through a vacuum. (The vacuum tube’s obsolescence was the result of a study of semiconductors in 1948 by William Shockley, Walter Brattain, and John Bardeen. They discovered that the introduction of impurities into semiconductors provided a solid-state material that would not only rectify a current, but also amplify it. Transistors using this material rapidly replaced vacuum tubes. Later it became possible to etch transistors on small pieces of silicon in integrated circuits.)

In 1910, deForest broadcast, probably rather poorly, the singing of opera singer Enrico Caruso. Possibly stimulated by the American Telephone and Telegraph Company transmitting from the Navy’s Arlington, Virginia facility in 1915 radio telephone signals heard both across the Atlantic and in Honolulu, deForest resumed experimenting with broadcasting. He installed a transmitter at the Columbia Gramophone building in New York and began daily broadcasts of phonograph music sponsored by Columbia. Because in the late nineteenth century the new electrical industry had made some investors multimillionaires almost over night, Americans like deForest and his partners found easy pickings for awhile, as many people were eager to snap up the stock offered by overly optimistic inventors in this new branch of the electrical industry. The quick failure of firms whose end, rather than their means, was selling stock made life more difficult for ethical firms.

Amateur Radio

In the United States in 1913 there were 322 licensed amateur radio operators who would ultimately be relegated to the seemingly barren wasteland of the radio spectrum, short wave. By 1917 there were 13,581 amateur radio operators. At that time building a radio receiver was a fad. The typical builder was a boy or young man. Many older people thought that all radio would ever be was a fad, and certainly so long as the public had to build its own radios, put up with poor reception, and listen to dots and dashes and a few experimental broadcasts of music and speech over earphones, relatively few people were going to be interested in having a radio. Laying the groundwork for making radio a mass medium was Edwin H. Armstrong’s invention based on work he did in the U.S. Army during World War I of the super heterodyne that made it possible to replace earphones with a loudspeaker.

In 1921, the American Radio Relay league and a British amateur group assisted by Armstrong, an engineer and college professor, proved that contrary to the belief of experts, short waves can travel over long distances. Three years later Marconi, who had previously used only long waves, showed that short-wave radio waves, by bounding off the upper atmosphere, can hopscotch around the world. This discovery led to short wave radio being used for long distance radio broadcasting. (Today telephone companies use microwave relay systems for long-distance, on-shore communication through the air.)

After 1920: Large Corporations Come to Dominate the Industry

In 1919, Frank Conrad, a Westinghouse engineer, began broadcasting music in Pittsburgh. These broadcasts stimulated the sales of crystal sets. A crystal set, which could be made at home, was composed of a tuning coil, a crystal detector, and a pair of earphones. The use of a crystal eliminated the need for a battery or other electric source. The popularity of Conrad’s broadcasts led to Westinghouse establishing a radio station, KDKA, on November 2, 1920. In 1921, KDKA began broadcasting prizefights and major league baseball. While Conrad was creating KDKA, the Detroit News established a radio station. Other newspapers soon followed the Detroit newspaper’s lead.

RCA

The Radio Corporation of America (RCA) was the government-sanctioned radio monopoly formed to replace Marconi’s American company. (Later, a government that had once considered making radio a government monopoly followed a policy of promoting competition in the radio industry.) RCA was owned by a GE-dominated partnership that included Westinghouse, American Telegraph and Telephone Company (AT&T), Western Electric, United Fruit Company, and others. There were cross-licensing agreements (patent pooling) agreements between GE, AT&T, Westinghouse, and RCA, which owned the assets of Marconi’s company. Patent pooling was the solution to the problem of each company owning some essential patents.

For many years RCA and its head, David Sarnoff, were virtual synonyms. Sarnoff, who began his career in radio as a Marconi office boy, gained fame as a wireless operator and showed the great value of radio when he picked up distress messages from the sinking Titanic. Ultimately, RCA expanded into nearly every area of communications and electronics. Its extensive patent holdings gave it power over most of its competitors because they had to pay it royalties. While still working for Marconi Sarnoff had the foresight to realize that the real money in radio lay in selling radio receivers. (Because the market was far smaller, radio transmitters generated smaller revenues.)

Financing Radio Broadcasts

Marconi was able to charge people for transmitting messages for them, but how was radio broadcasting to be financed? In Europe the government financed it. In this country it soon came to be largely financed by advertising. In 1922, few stations sold advertising time. Then the motive of many operating radio stations was to advertise other businesses they owned or to get publicity. About a quarter of the nation’s 500 stations were owned by manufacturers, retailers, and other businesses, such as hotels and newspapers. Another quarter were owned by radio-related firms. Educational institutions, radio clubs, civic groups, churches, government, and the military owned 40 percent of the stations. Radio manufacturers viewed broadcasting simply as a way to sell radios. Over its first three years of selling radios, RCA’s revenues amounted to $83,500,000. By 1930 nine out of ten broadcasting stations were selling advertising time. In 1939, more than a third of the stations lost money. However, by the end of World War II only five percent were in the red. Stations’ advertising revenues came both from local and national advertisers after networks were established. By 1938, 40 percent of the nation’s 660 stations were affiliated with a network, and many were part of a chain (commonly-owned).

Radio Networks

On September 25, 1926, RCA formed the National Broadcasting Company (NBC) to take over its network broadcasting business. In early 1927 only seven percent of the nation’s 737 radio stations were affiliated with NBC. In that year a rival network whose name eventually became the Columbia Broadcasting System (CBS) was established. In 1928, CBS was purchased and reorganized by William S. Paley, a cigar company executive whose CBS career spanned more than a half-century. In 1934, the Mutual Broadcasting System was formed. Unlike NBC and CBS, it did not move into television. In 1943, the Federal Communications Commission forced NBC to sell a part of its system to Edward J. Noble, who formed the American Broadcasting Corporation (ABC). To avoid the high cost of producing radio shows, local radio stations got most of their shows other than news from the networks, which enjoyed economies of scale in producing radio programs because their costs were spread over the many stations using their programming.

The Golden Age of Radio

Radio broadcasting was the cheapest form of entertainment, and it provided the public with far better entertainment than most people were accustomed to. As a result, its popularity grew rapidly in the late 1920s and early 1930s, and by 1934, 60 percent of the nation’s households had radios. One and a half million cars were also equipped with them. The 1930s were the Golden Age of radio. It was so popular that theaters dared not open until after the extremely popular “Amos ‘n Andy” show was over.

In the thirties radio broadcasting was an entirely different genre from what it became after the introduction of television. Those who have only known the music, news, and talk radio of recent decades can have no conception of the big budget days of the thirties when radio was king of the electronic hill. Like reading, radio demanded the use of imagination. Through image-inspiring sound effects, which reached a high degree of sophistication in the thirties, radio replaced vision with visualization. Perfected during the thirties was the only new “art form” radio originated, the “soap opera,” so called because the sponsors of these serialized morality plays aimed at housewives, who were then very numerous, were usually soap companies.

The Growth of Radio

The growth of radio in the 1920s and 30s can be seen in Tables 1, 2, and 3, which give the number of stations, the amount of advertising revenue and sales of radio equipment.

Table 1
Number of Radio Stations in the US, 1921-1940

Year Number
1921 5
1922 30
1923 556
1924 530
1925 571
1926 528
1927 681
1928 677
1929 606
1930 618
1931 612
1932 604
1933 599
1934 583
1935 585
1936 616
1937 646
1938 689
1939 722
1940 765

Source: Sterling and Kittross (1978), p. 510.

Table 2
Radio Advertising Expenditures in Millions of Dollars, 1927-1940

Year Amount in Millions of $
1927 4.8
1928 14.1
1929 26.8
1930 40.5
1931 56.0
1932 61.9
1933 57.0
1934 72.8
1935 112.6
1936 122.3
1937 164.6
1938 167.1
1939 183.8
1940 215.6

Source: Sterling and Kittross (1978).

Table 3
Sales of Radio Equipment in Millions of Dollars

Year Sales in Millions of $
1922 60
1923 136
1924 358
1925 430
1926 506
1927 426
1928 651
1929 843

Source: Douglas (1987), p. 75

Impact of TV and Later Developments

The most popular drama and comedy shows and most of their stars migrated from radio to television in the 1940s and 1950s. (A few stars, like the comedy star, Fred Allen, did not successfully make the transition.) Other shows died, as radio became a medium, first, of music and news and then of call-in talk shows, music, and news. Television sets replaced the furniture-like radios that dominated the nation’s living rooms in the thirties. Point-to-point radio communication became essential for the police and trucking and other companies with similar needs. New technology made portable radio sets popular. Many decades after the loss of comedy and drama shows to television the creation of the Internet provided radio stations both with a new way to broadcast and gave then a visual component.

Government Regulation

Radio’s Property Rights Problem

Because the radio spectrum is quite different from say, a piece of real estate, radio produced a property rights problem. Originally, it was viewed as being like a navigable waterway, that is, public property. However, it wasn’t long before so many people wanted to use it that there wasn’t enough room for everyone. The only ways to deal with an excess of demand over supply are either to raise price until some potential users leave the market or to turn to rationing. The selling of the radio spectrum does not appear to have been considered. Instead, the spectrum was rationed by the government, which parceled it out to selected parties for free.

The Free-Speech Issue

Navigable waterways present no free speech problem, but radio does. Was radio to be treated like newspapers and magazines, or were broadcasters to be denied free speech? Were radio stations to be treated, like telephone companies, as common carriers, that is, anyone desiring to make use of them would have to be allowed to use them, or would they be treated like newspapers, which are under no obligation to allow all comers access to their pages? It was also established that radio stations, like newspapers, would be protected by the First Amendment

Regulation and Legislation

Government regulation of radio began in 1904 when President Theodore Roosevelt organized the Interdepartmental Board of Wireless Telegraphy. In 1910 the Wireless Ship Act was passed. That radio was to be a regulated industry was decided in 1912, when Congress passed a Radio Act that required people to obtain a license from the government in order to operate a radio transmitter. In 1924, Herbert Hoover, who was secretary of the Commerce Department, said that the radio industry was probably the only industry in the nation that was unanimously in favor of having itself regulated. Presumably, this was due both to the industry’s desire to put a stop to stations interfering with each others’ broadcasts and to limit the number of stations to a small enough number to lock in a profit. The Radio Act of 1927 solved the problem of broadcasting stations using the same frequency and the more powerful ones drowning out less powerful ones. This Act also established that radio waves are public property; therefore, radio stations must be licensed by the government. It was decided, however, not to charge stations for the use of this property.

FM Radio: Technology and Patent Suits

One method of imposing speech and music on a continuous wave requires increasing or reducing the amplitude (modulating) the distance between a radio waves peaks and troughs. This type of transmission is called amplitude modulation (AM). It appears to have first been thought of by John Stone Stone in 1892. Many years after Armstrong’s invention of the super heterodyne, he solved radio’s last major problem, static, by inventing frequency modulation (FM), which he successfully tested in 1933. A significant characteristic of FM as compared with AM is that FM stations using the same frequency do not interfere with each other. Radios simply pick up whichever FM station is the strongest. This means that low-power FM stations can operate in close proximity. Armstrong was hindered in his development of FM radio by a Federal Communications Commission (FCC) spectrum reallocation that he blamed on RCA.

Astute patent dealings were a must in the early radio industry. As was true of the rest of the electric industry, patent litigation was very common in the radio industry. One reason for the success of Marconi in America was his astute patent dealings. One of the most acrimonious radio patent suits was one between Armstrong and RCA. Armstrong expected to receive royalties on every FM radio set sold and, because FM was selected for the audio portion of TV broadcasting, he also expected royalties on every TV set sold. Some television manufacturers paid Armstrong. RCA didn’t. RCA also developed and patented a FM system different from Armstrong’s that he claimed involved no new principle. So, in 1948, he instituted a suit against RCA and NBC, charging them with willfully infringing and inducing others to infringe on his FM patents.

It was to RCA’s advantage to drag the suit out. It had more money than Armstrong did, and it could make more money until the case was settled by selling sets utilizing technology Armstrong said was his. It might be able to do this until his patents ran out. To finance the case and his research facility at Columbia, Armstrong had to sell many of his assets, including stock in Zenith, RCA, and Standard Oil. By 1954, the financial burden imposed on him forced him to try to settle with RCA. RCA’s offer did not even cover Armstrong’s remaining legal fees. Not long after he received this offer he committed suicide.

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Citation: Scott, Carole. “History of the Radio Industry in the United States to 1940″. EH.Net Encyclopedia, edited by Robert Whaples. March 26, 2008. URL http://eh.net/encyclopedia/the-history-of-the-radio-industry-in-the-united-states-to-1940/