How CBS Got Its Start


Thereafter, they were to pay the expenses of operating under the name of Columbia Phonograph Broadcasting System. They signed a contract which gave them the right of cancellation on thirty days’ notice.

At that time, the Columbia Phonograph Company had as its president a man by the name of Cox. We made a contract to furnish the talent for the chain. If I recollect properly, supplying the talent for ten hours’ program a day for the twelve stations was $50,000 a month. That was continuously paid until later on, under the Columbia Broadcasting System, when we cancelled that contract because there was then no longer any need for it.

Newman, who was the business head of Columbia Phonograph Broadcasting System and the advertising manager, succeeded in selling but one commercial hour by the time the chain was ready to open on September 19, 1927. We had also at that time some advertising from the Columbia Phonograph Company—a house advertisement.

We operated the first month and naturally, as Louis Sterling realized, we lost a very considerable amount of money. He figured before he left for Japan that we would probably have to operate for several months with no income and practically all loss.

As soon as the second month began, Cox served notice on us that the contract would be cancelled at the end of the month. At that time, I assumed it was because Cox felt that the company couldn’t afford to lose any money. I now think quite differently.

The reason was this. Cox operated it for the second month. When we had received the notice of cancellation, I had taken Major J. Andrew White, who was a Christian Scientist and was waiting for something to turn up—by the arm and up to Cox’s office. We sat there and in the Athletic Club for three days, but I came out with an agreement for thirty days’ leeway, making an additional month at a cost of $170,000 more to Columbia Phonograph Company.

During that time, we knew that if we did not end up with the controlling power and the ability to run the chain after the end of the thirty days, Cox would take it. We were then in great difficulties because we had exhausted our finances.

Mrs. Holmes, our investor, was in Europe. By investigating, I found that she was on a boat returning to the United States. I wirelessed her what the situation was and told her I needed between $40- and $45,000 to pay the telephone bill. She sent a wireless to her office and I had a check for $45,000.

This was the last day of the month, after which we would be in default. We had the telephone receipt and went down to the Columbia office and waited until the time expired—which was at eleven o’clock at night —and then walked into Mr. Cox’s office. He sat there with his thumbs in the armholes of his vest and said: “Well the chain belongs to us.”

We said, “Why?”

He said, “Well you can’t pay your telephone bills.”

“Well,” I said, “here is the receipt.”

He called us a number of violent names and then asked, “Well, what will you give me for it?”

I said, “We don’t owe you anything for it but we’ll give you $10,000.”

“No,” he said, “we’ve got to have more.”

“All right,” I said, “thirty hours of advertising for Columbia Phonograph Company.”

He said, “Sold.”

We made him out a check for $10,000 and an order for the thirty hours and again we owned the chain.

We still didn’t know what to do with it. We had paid the telephone bills for thirty days. Coats finally said, “I note that there is a man in Philadelphia by the name of Jerome Louchheim who is in the contracting business and that he is rated at nineteen millions of dollars. I’m going to see him.”

“Well, Coats,” I said, “I know Louchheim and you’re going to have your hands full.”

Nevertheless he went over to Philadelphia. Louchheim nearly threw him out of his office and finally did make it so uncomfortable for him that he got out of the Columbia System.

Louchheim then sent for me. “Now,” he said, “I’m interested in this. I think there is a lot of money in it. I’m going to buy it but I must buy the controlling interest.” Louchheim was a good solid substantial man who dealt with facts. Coats dealt with theories and promotion and Louchheim could not deal with a promoter.

After almost a month’s negotiation, we sold Louchheim about 1,020 shares of the United Independent Broadcasters. I kept my stock, Coats was forced to sell his, Ervin kept his and Mrs. Holmes kept hers.

After we had agreed upon the deal, we had a meeting to close the arrangements in the Columbia Phonograph System’s office. Louchheim’s lawyers and ours were both present. Just as we were about to sign the papers, Mr. Louchheim’s lawyer got up and in his best pontifical manner, said, “Now, Mr. Louchheim, you are putting a half million dollars in this thing. Next month, you put another half million, a month after that another half million, and it is just a bottomless barrel, I warn you.”

Our lawyer turned white and I thought, “Well, here it goes.” Louchheim looked at his lawyer over his glasses and said, “Whose money is it? Give me the pen.” So he signed.