How CBS Got Its Start

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As a result of that deal, all of this money of Louchheim’s went into the chain except the $40- or $45,000 to reimburse Mrs. Holmes for the advance to pay for telephone wires. She had an investment of just about 929,500 plus the cost of some additional stock, which she sold out just a little later on for approximately three and a quarter million dollars. So it wasn’t a bad investment.

I was at that time on the board of directors and Louchheim felt that he wanted to make me president of the broadcasting system. I did not want that as I was not interested in broadcasting I was interested in music.

I eventually resigned from the board but not before I had one experience with Mr. Louchheim. We were using Station WOR as one New York outlet on a one-year contract. Louchheim came to me one day and said, “Do you know these Bamberger people? Let’s go over to Newark—I want to renew that contract.”

So we went over to Newark and had a meeting there at lunch. The net result was that they said they just did not believe in chain broadcasting, that never in God’s world would it amount to a row of pins. They preferred to operate an independent station. Louchheim said, “All right.”

When we came back, I said, “Louchheim, why didn’t you insist a little more? You could have gotten that.”

“Well,” he said, “I didn’t want it. We’ll have to get another station.”

Stations then were as scarce as hens’ teeth. I asked him, “Where are you going to get it?”

He said, “I don’t know’do you know of one?”

I thought for a moment and said, “There is a little one-horse thing up in Steinway Hall-Station WABC. They don’t do any business. I think they would be glad to sell. All they have got is a license to operate.”

That same day we went up to WABC and inside of a week he had bought it—I think the price was pretty high. The station wasn’t worth anything but we had to have a New York outlet and there were no licenses available.

Shortly after that time, about a year or a year and a half later, Louchheim got tired of operating this system and kept telling me about a young man in Philadelphia named Paley, whose father had started the Congress Cigar business and who eventually divided it up amongst himself, his brother and his sons. Meanwhile Louchheim had further interested Ike Levy, a ‘Philadelphia lawyer, and his brother, Léon, a dentist, and owners of Station WCAU of Philadelphia.

In order to keep the chain operating, additional stock had to be sold and they insisted that I buy more stock. I told them I had no money and did not want more shares.

Then one day the bankers in Philadelphia sent for me and said, “We want to lend you $90,000.”

I said, “I don’t want it.”

“Well,” they said, “you’re going to take it and invest it in the Columbia Broadcasting System and take the stock.”

“All right,” I said. “It is your funeral.”

I made the investment and there is a sequel to that.

Louchheim got more money out of Ike Levy and Leon Levy. They had started Station WCAU in Philadelphia. Louchheim had paid the big losses and made the Levy brothers take their share although he had to loan them the money to do it. The Levy brothers are very rich men today because they were forced into this.

After a while, Louchheim got tired of running the network. He was an older man and the excitement wore off. He decided he wanted to interest a young man in it. He picked William Paley as the young man whom he knew. Eventually he sold the greater part of his interest—I don’t know quite how much—to Paley and left him in charge as president of the company.

Paley operated the company very successfully, but his first big deal was when he went back to Paramount with whom we had been negotiating years before. He sold a half interest to Paramount for a block of their stock worth $3,800,000. In other words, the network, inside of a year and a half, had risen in value from $100,000 to $7,600,000.

In back of this were few physical assets: just ideas, the Station WABC and the agreements with the stations comprising the chain. Really, it had all been built up on ideas and hustling ability.