A Legendary Chairman

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At one point in the 1960s, according to a story told in David HaIberstam’s mammoth history of twentieth-century media giants, The Powers That Be, William Paley, the chairman of CBS, was puzzled by the failure of a restaurant he had opened in the CBS headquarters building in Manhattan. He suggested to the restaurant’s manager that perhaps they should turn it into a supper club for people who wanted a late dinner after a play or concert. “Bill,” his manager informed him sadly, “there ain’t no supper business in this town.”

“No?” said the man who ran CBS. “Why not?”

The explanation was simple: “Because everyone’s home watching the tube.”

If you were home watching the tube in September 1986, then you saw William Paley, at the age of eighty-four, playing a central role in one of the most dramatic business stories of our time. It was a drama that Shakespeare might have relished, featuring the deposition of an embattled king and the restoration of his legendary predecessor—an episode from the Wars of the Roses enacted in the boardroom at Black Rock, the CBS headquarters in New York City.

When the dust settled, Thomas Wyman, who had succeeded Paley as chairman of CBS in 1983, was out as chairman, president, and chief executive officer. Paley returned as acting chairman, while Laurence Tisch, the chairman of Loews Corporation and owner of 24.9 percent of CBS—a stake worth nearly a billion dollars at the time of the struggle—took over as acting CEO. (In January 1987 the board of CBS made both appointments permanent.)

The return of Paley as chairman of one of America’s most glamorous corporations at the age of eighty-four added a remarkable chapter to a career that already loomed large in the history of American business. I would call it a “climactic” chapter, but who knows? Paley is one old soldier who seems to intend neither to die nor to fade away. Retirement homes are full of ex-CBS executives who thought they would outlast him.

 

Paley’s story follows a classic American pattern—not from rags to riches but from riches to megabucks. Yet it is not merely the story of a man who took advantage of inherited wealth. It is the story of an entrepreneur who, at a very early age, saw and seized opportunities that were far from obvious to other businessmen.

Paley’s father and his uncle, Samuel and Jay Paley, were immigrants from Russia who established a highly successful cigar company in Chicago in the 1890s. In his teens, working in his father’s factory, Bill Paley learned how to put bands on the cigars and how to mix different blends of tobacco—a perfect apprenticeship for a man who had every reason to expect that he would spend the rest of his life in the cigar business.

In his autobiography, As It Happened, published in 1979, Paley recalls a moment of illumination that occurred as he approached eighteen: “I...recognized that my father and men like him got caught up in the web of business and constantly postponed retirement and the pleasures of leisure. In order not to get caught that way myself, I made an oath to myself and a solemn vow that I would retire, no matter what, at age thirty-five.” But something happened on the way to retirement.

The power of an infant medium, radio, was brought home to Paley in an interesting way. In 1927, while his father and uncle were in Europe, he bought a one-hour program to advertise La Palina cigars on station WCAU in Philadelphia. The cost was fifty dollars per broadcast, and Paley’s uncle put a stop to his nephew’s “foolishness” as soon as he found out about it. A few weeks later Paley’s father realized that the market was sending him a message: “Hundreds of thousands of dollars we’ve been spending on newspapers and magazines and no one has ever said anything...but now people are asking me, ‘What happened to the La Palina Hour?’”

At about the same time, a friend of the Paleys, a Philadelphia building contractor named Jerome Louchheim, purchased a controlling interest in a struggling radio network, the United Independent Broadcasters. The network —sixteen stations—was backed by the Columbia Phonograph Company and known on the air as the Columbia Phonograph Broadcasting System.

In its first full year of operation the UIB ran up a net loss of $220,066. At that point, wishing to unload an apparent lemon, Louchheim approached Sam Paley with a memorable sales pitch: “Sam, why don’t you buy it from me? You at least have a cigar to advertise.”

The offer did not interest Sam Paley, but it thrilled his son. Neither the network’s shakiness nor the size of the gamble unnerved him. “I had about a million dollars of my own and 1 was willing to risk any or all of it in radio.”

After a brief negotiation Paley and his father purchased 50.3 percent of the company for $503,000, with $400,000 coming from Paley himself. At the age of twenty-seven William Paley was the president of his own company—a “patchwork, money-losing little company.”

Its main competitor, the much larger National Broadcasting Company, was backed by the immense resources of the Radio Corporation of America. RCA had created NBC in 1926 by merging its own network with a larger one that it bought from AT&T.

By 1930 Paley had dropped the word Phonograph from the name of his company and expanded the CBS network to seventy stations, but he continued to feel like a “perpetual underdog” in his competition with NBC, which had fancier offices, larger studios, better equipment, and stronger financing.

A little incident helped Paley to attack his giant opponent. One day in the early 1930s, walking down Broadway, he noticed that a few people were waiting to see a mediocre movie at the luxurious Capitol Theater, while across the street a great many people had lined up to get into a run-down theater showing a very good movie.

“The analogy struck me so forcibly that I never forgot it,” Paley reports in his autobiography. “‘You know,’ I said to myself, ‘for radio, it’s what goes into a person’s house that counts. The radio listener doesn’t know what kind of office I have, what kind of studios I have...I just have to put things on the air that the people like more....I’ve got to find things that will be popular....”

This insight led eventually to what may have been the single most important business decision that Paley made in his long career. Until the end of World War II most of CBS’s entertainment shows were created by advertising agencies and outside producers. CBS had merely sold the air time.

“The answer for CBS was to originate, produce, and put on some of its own shows and to sell them to some of the advertisers or to the sponsors directly!...I would grant NBC its greater reputation, prestige, finances, and facilities. But CBS had and would continue to have the edge in creative programming. That, I thought, would be the key to success in post-war broadcasting.”

CBS produced some good programs, but it continued to trail NBC in the audience ratings, in large part because the top radio stars stayed with the more prestigious network. Then, in 1948, Gen. David Sarnoff, the head of RCA, made a big mistake. Recognizing that good programming could be bought as well as developed, Bill Paley put in a bid for NBC’s biggest star, Jack Benny, and Sarnoff did not meet it.

Benny switched to CBS. The failure to bid for Benny set a precedent that Sarnoff could not easily reverse, so other stars switched, including Edgar Bergen and Charlie McCarthy, Amos ’n’ Andy, Burns and Alien, and Red Skelton.

It was a drama that Shakespeare might have relished—an episode of the War of the Roses in the CBS boardroom in New York.

Sarnoff, David Halberstam comments, “believed that he owned the best theater in the nation...so he felt he could put on whatever he wanted....” Paley knew better.

Paley’s raid on NBC came at a critical time. The CBS television network began broadcasting in 1948, and by 1955 it had surpassed NBC to become the leading network in popularity and the world’s largest advertising medium. It stayed on top for twenty-one years.

Paley takes special pleasure in telling the story of CBS News. The first radio network news operation, the Columbia News Service, was organized by CBS Radio in 1933. Five years later CBS organized the first international radio news broadcast, the “CBS World News Roundup,” with Edward R. Murrow reporting from Vienna, William L. Shirer from London.

On March 12, 1938—the day that the German army marched unopposed into Austria—the CBS news staff in Europe consisted of those two men: Murrow and Shirer. An exceptional judge of talent, Murrow quickly put together a remarkable team of young reporters, including Eric Sevareid, Charles Collingwood, Richard C. Hottelet, Robert Trout, and Howard K. Smith. In the decades that followed, “Murrow’s boys” became familiar to millions of Americans.

It is interesting to compare the image of himself that Paley presents in his autobiography with the less flattering portrait in The Powers That Be. For instance, responding to Halberstam’s critical account of Paley’s relationship with Murrow in Murrow’s last years, Paley quotes a warm letter from Murrow’s widow that deplores Halberstam’s “dratted article.”

On the other hand, the reader of Paley’s autobiography learns nothing about the turmoil that surrounded CBS’s coverage of the presidential conventions in 1964. After NBC’s coverage of the Republican convention had routed CBS in the ratings, Halberstam reports, Paley pushed his news department to replace Cronkite—replace Cronkite!—with a Roger Mudd/Robert Trout anchor for the Democratic convention in Atlantic City. Mudd/Trout also was routed, Cronkite’s anger cooled, and eventually, according to Halberstam, Paley could wonder aloud why he had allowed the top executives in his news department to force such a poor idea upon him.

Oh, well. You can’t expect a man to put every little detail into his own autobiography. Paley also leaves out the well-known comment made by Truman Capote when a young woman marveled at how healthy Paley seemed—bursting with energy—in his seventies. “Yes,” said the novelist, “he looks like a man who has just swallowed an entire human being.” That was exactly the way Bill Paley looked, I thought, on the night he resumed command of the company he now had dominated for nearly six decades—the night he swallowed Thomas Wyman.