How CBS Got Its Start

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We then had a problem before us. We had to organize a chain before the chain could operate. Our chain consisted of nothing but stations and of course we had to find these and persuade them to join us. I put up the money for George Coats to go out on the road and sign up units for our network. We decided we would have to have ten or twelve or fifteen stations before we began to operate. After considerable travel, he came back, having signed contracts with, I think, eleven organizations at $500 an hour for the hour we used. At the same time, we agreed to furnish sustaining music and programs for those stations without payment.

We then negotiated with WOR, which was under the control of the Bamberger’s stores at Newark, for WOR to be the head station. Our contracts with all units in the network were for one year only.

The stations were signed up some time around—before and after—April of 1927.

We now had the stations, but before we could operate we had to have telephone lines. We held a good many rather hectic meetings to discuss the question of getting them. We applied to the telephone company and were informed that all of their lines were in use and that it would be impossible to furnish lines for at least three years. We argued with them but got nowhere.

Finally, Coats, who was from Indiana, said, “I think I’ll go down to Washington. I know some Indiana people in Washington.”

He came back and said, “There’s a friend of mine down there.”

I said, “Who is he?”

“Well,” he said, “he’s just a man about Washington who fixes things. He has contacts.”

Coats went down to Washington again, came back and said: “If you give him two checks, one for $1,000, and the other for $10,000, he will guarantee that you will get the wires.”

I didn’t ask him who was to get the $10,000.

After he went to Washington, the Bell Telephone Company sent two representatives, an executive and an engineer, to demonstrate to me, with the help of the engineer, that the lines could not be furnished in less than three years. Fortunately, the engineer sat somewhat behind the executive, and all the time the latter was explaining that the wires could not be furnished, the engineer was motioning that they could! 1

In the midst of the conversation, a telegram was handed to me which said, “We have the wires.”

So I turned to the executive and said, “You don’t need to stay any longer. We’ve got the wires and you don’t need to make any more excuses.”

That ended it; we had the wires.

Now in the meantime, while we had been negotiating, we had had a good many staff meetings. At one of those meetings, Mrs. Christian Holmes, formerly of Cincinnati, but then of New York, a staunch friend of the Philharmonic, happened to come into the office as one of these meetings was going on. She asked, “What are you doing?”

“Well,” I said, “we are losing our shirts.”

She said, “Tell me about it.”

I told her about the broadcasting. “Well,” she said, “I’m a good sport. I want to come in. What will it cost me?”

I said, “Mrs. Holmes, you keep your money for the Philharmonic, I’m not going to lose it for you.”

“Well,” she said, “you can’t stop me. I’m coming in.”

“All right,” I said, “we need $6,000 to send George Coats on the road.”

She said, “All right, here’s a check.”

So George went on the road and got the stations.

In the meanwhile, Mrs. Holmes from time to time put in more money until she had about $29,500, as I recall it, in the business.

We figured it would cost us about $100,000 a month to operate this system. We began then to explore the possibility of getting someone to cooperate. We visited a good many people.

The first one was the Victor Company. We negotiated with the lawyers and had the forms of the contracts practically completed. While we were there, the announcement was brought into the room of the sale of the Victor Company to the RCA. That completely stopped the Victor negotiations.

We then began to open up other possibilities. The most important of these was Paramount Pictures, who requested a thirty-day option.

We were very brave and refused it. It was not that we wouldn’t have liked to wait but we couldn’t.

So we then began to develop one other idea that we had. That was to sell our network to the Columbia Phonograph Company, which had been in pretty difficult straits some years before but which had been pulled out of its difficulties by a man by the name of Louis D. Sterling. (He now lives in London and is Sir Louis Sterling.) Sterling was a business promoter of tremendous ability. He organized companies in England, Japan and all over the world. He was and still is a man of farsighted vision.

Finally we had an arrangement whereby the Columbia Phonograph Company took over the operating broadcasting rights of the United Independent Broadcasters. I think the initial payment was $163,000. The sum was probably arrived at by the amount of money that we needed