Money for Minutes

(See Cover)

One of the newest and lustiest youngsters in the industrial nursery is network radio. There are plenty of observers who would not look upon it in its 13th year and find the mark of genius. But last week, as the industry totted up its fall bookings, added the spring's and summer's and estimated income to year's end, nobody could deny that as a business proposition, radio was indeed a thriving youngster. It had come out of its second depression with more money than it entered it with.

Born of the boom and orphaned in 1929, network radio grew up lustily through the lean decade without ever having to go to a foundling home. In only one year, 1933, did it fail to pile up gross revenues to top all previous years. In 1934, gross incomes exceeded 1933's by 35.4%, 1932's by 9%. Radio's 1933 depression was not only brief, it was also noteworthy for being tardy, for other industries were near bottom as early as 1932. So network-sales experts have derived from that experience their characteristically optimistic axiom that in times of slump radio is the last industry to slip in, the first to scramble out.

Last year, when the ground started sliding away from under industrial feet, the axiom seemed due for testing. The networks began 1938 handsomely, ran up the biggest first quarter of their careers (11.4% above 1937's first quarter). The pinch came in April and some heads began to shake. But the axiom seems to be holding true. With an August boom, the networks began pulling out. Last week, gross revenues of the three major chains --MBS, NBC, CBS,--for the first eight months of 1938 came to $46,971,173, neatly topping the $45,551,198 of 1937's first eight months. With no more than the fall contracts already on the books, the networks could shut up their sales offices this week, sell not another minute of 1938 time and hit another new high.

Thus, although 1938 advertising appropriations may be shrinking, sales of radio time are obviously not feeling the pinch. These are taking as large a slice as they did in 1937, possibly larger. Last year, radio as a whole helped itself to about 17-c- of the U. S. advertising dollar,* running even with magazines, second to newspapers, which got 59-c-. Of radio's 17-c-, network-time sales took about 7-c-. The remainder went for air time sold by individual stations.

Theories grow fast in any sort of advertising business, and radiomen have a theory to account for the behavior of their industry in hard times. Sponsored radio entertainment, they argue, creates a demand not only for the product advertised but also for the entertainment itself. When hard times bring cuts in advertising budgets, sponsors must think twice before they risk the popular vexation which might arise from taking from the public a favorite free show or a popular entertainer. Therefore, sponsors are slow to pull out of radio, quick to return.

It is also true that network contracts are signed on the basis of 13-week periods and continuing contracts hang over from prosperous times into depression months. Radio's big first quarter this year was swelled with much of this continuing business, and it contributed mightily to the handsome gross totals. But the rush to return to the air during the fourth quarter involves another factor. All parts of network-radio's day do not provide the same audience pulling power. To reach the largest and most varied audience, advertisers consider evening time the best, favor most strongly the hour between 8 p.m. and 9 p.m. in one of the four U. S. time belts. Nobody wants any commercial time after 11 p.m. Therefore, big shows are likely to be in the market mainly for network between 8 p.m. and 11 (E. S. T.). Three hours a night, seven nights a week adds up to only 21 hours a week of premium time, 84 hours on four (two for NBC) networks. But sponsors are also reluctant to buy time in opposition to a show which is a great national favorite. That again reduces the amount of premium time, keeps a keen edge on the competition for the prize hours even in depression years. It also tends to make advertisers strain to keep their hold on time that has served them well, and is one more stabilizing and recuperative factor in the radio business.

Still another reason for radio's steadily advancing prosperity is the increase in sales of daylight time (up 500% in five years for CBS). Cereal makers have learned to go after the kiddies around the wash-for-suppertime, soap makers like to catch housewives at the morning laundry or noon dishes. But the fact remains that of the average 65% of their time the networks boast of giving away, by far the greater part is in the daytime. Commercial radio, like many a maiden, looks best after dark.

Nevertheless, only a few U. S. publishers, network radio's chief competitors for advertising contracts, could be supposed last week to be sitting on an eight-month gross so large and comfortable as that enjoyed by the big three broadcasters:

MBS. . . . . $ 1,673,913

NBC. . . . . $26,923,483

CBS. . . . . $18,373,777

Some aspects of the busiest season of their best year:

MBS. Youngest member of the young industry is the Mutual Broadcasting System. Network radio had had several unsuccessful efforts to build a fourth national chain to compete with NBC's Red and Blue, CBS, when in 1934 an advertiser who wanted to reach New York and Chicago listeners, but did not want to pay the cost of network broadcasting, approached stations WOR (Newark) and WGN (Chicago) to make a deal. The sponsor wanted to put on a show to be aired over the two stations. The show originated in Newark and he proposed to pay each station its standard time rate, but asked the stations to pay the wire charges for carrying the programs between the two cities. The deal was made and on the basis of these two-station broadcasts MBS was formed in September of that year. WOR and WGN organized on a 50-50 basis, agreed to seek advertisers who wanted to use both stations, not to interfere with each other's local programs. As a network, MBS was to have no corporate profit. Officers were to be paid only by the station for which they worked.

Established as a cooperative string of broadcasting outlets, it soon added WLW (Cincinnati) to its list. Less than a year later the new network began picking up many stations in New England, the Midwest. When California's Don Lee Broadcasting System joined, it completed the MBS coast-to-coast stretch. Other stations joined singly and in groups to give MBS a 1938 collection of 107 outlets, all linked together on the cooperative profit-sharing basis. Since several of these are also affiliated with NBC or CBS, who have prior claims on their time for sponsored programs, it is often impossible to sell a sponsor all the MBS stations he might want at one time.

The Chicago Tribune's WGN gave the network its president, Wilbert E. Macfarlane. Thirty years a newspaperman, President Macfarlane is a rugged individualist of broadcasting. As advertising manager of the Tribune in 1927, he became WGN's executive head, refused to let networks dominate his station's policies. The other original partner station, WOR, gave MBS its board chairman, Alfred Justin McCosker. Breezy, back-slapping Chairman McCosker is a radio veteran among network heads. He joined WOR in 1923, became the station's director and general manager in 1926, president in 1933. A onetime newspaperman, Chairman McCosker held his first job as office boy to the late Hearstling Arthur Brisbane.

Their network does not draw the big glamor shows aglitter with expensive stars, but it does a solid business with sponsors who spot their advertising in chosen areas by using small clumps of stations, who economize on talent costs by using recorded programs, who add to NBC and CBS advertising intensive MBS regional coverage, has as well a collection of sponsored shows which uses its full network. Their business has grown from a gross of $1,364,876 for 1935 to $2,269,078 for 1937. The first eight months of 1938 brought them $1,673,913 and contracts already signed for the last four months add up to some $909,200 more. With sales for the year still going strong, MBS already has a 1938 gross under contract which betters its 1937 peak by some 13.6%, is 22.7% ahead of last year on its first eight months, ran up August revenues to top the same month last year by a staggering 70.4%. Despite a depression summer, MBS is still growing fast into the niche it has carved for itself in network broadcasting.

NBC is the father of network radio, and it in turn has a father, Radio Corp. of America. NBC was founded to make money for the parent, not for itself. In the pioneering days of 1926 when RCA's General Manager David Sarnoff (now its president) used WEAF (New York) as a nucleus to form the Red network and a year later, when WJZ (New York) was acquired to start the Blue, RCA hoped that network broadcasting would promote the sale of enough RCA radio sets to be worth its cost. But there were other manufacturers in the set business and they profited mightily from the sales promoted by RCA's network venture. So, it was well for its parent corporation that NBC had got into the advertising business in a big way. NBC had gross sales of $3,760,010 in 1927, increased them by 133.5% to $8,780,333 the next year, has risen steadily except for a 19.1% setback in 1933 to a 1937 gross of $38,651,286. Throughout NBC history more of this money has come from the Red network than from the Blue. The Blue, like MBS, shares many stations with the Red and cannot blanket the U. S. during hours when the Red is fully sold.

Not unlike its Radio City headquarters, NBC is both lavish and austere, has always kept a stern and watchful eye on its sponsors, luxuriates in the prestige of its two networks, its twelve-year antiquity. Although month by month through 1938 the Blue network gross revenues have fallen below last year's figures, the Red has topped its 1937 totals consistently, pulled the gross for both networks for the first eight months of this year 5.8% above 1937's first eight months.

NBC does not hold time under contract for a sponsor for more than 90 days before he begins using it. Although theoretically an NBC client can take a 90-day holiday from the air with guaranteed return to his old time by signing a contract for his new season before he closes his old, actually NBC accepts no obligation to allow him to sign such a contract, refuses any holiday if another bidder is ready to take the network spot for earlier use. So holders of desirable NBC air spots either sponsor year-round shows or else air through the summer slump less costly substitute programs. Sole important exception this year was Maxwell House Coffee. It took its Good News program off the air in the spring, but has since returned to the Red network. Such popular favorites as the Chase & Sanborn Hour, the Rudy Vallee Hour, and Kraft Music Hall have taken no summer holidays. Others (Comedians Jack Benny, Fred Allen) are returning to spots held for them by substitute programs.

The last quarter's new business is made up of such shows as Phillips Lord's Seth Parker, revived by the Vick Chemical Co., a program on which Pepsodent will star Comedian Bob Hope, musical varieties in which Grove's Bromo-Quinine brings Fred Waring and His Pennsylvanians who back to were radio. with But NBC last three fall big -- sponsors General Motors, Packard, Pontiac -- have not yet signed back on. NBC's President Lenox Riley Lohr is watching the automobile industry with peculiar interest. Should these motor makers feel like picking up a microphone before year's end, President Lohr could show parent corporation RCA a 1938 gross income which would not only be a new high, but a spectacularly lofty one.

Among the network heads, President Lohr is the newcomer who came in at the top. He got the job in 1936 and it was his first in radio. A onetime military engineer, he was general manager of Chicago's Century of Progress Exposition. At NBC where all words are measured, he speaks as though using a micrometer on his.

CBS. The Columbia Broadcasting System was founded on the idea that there is money to be made out of network broadcasting. While it has grown from 16 stations in 1927 to 1938's 114, it has multiplied its gross earnings even more spectacularly. From 1928's $1,447,308 it jumped 230.7% to 1929's $4,785,981, has climbed steadily except for its 20.1% setback in 1933 to the 1937 high of $28,722,118. But this year, after a booming first quarter, CBS earnings began dropping below their parallel months in 1937. August business, though better than July's, dipped just far enough to make the gross sales for the first eight months ($18,373,777) 2% under last year's ($18,746,957). However, business already under contract for the last four months came last week to some $8,978,000 and CBS sold $8,690,000 in new Iast-quarter-and-1939-business in three weeks of August. It cannot fall far below its 1937 high, may still better it. But if it does stand still while its competitors rise to new peaks, the blame falls on CBS permitting many sponsors to leave the air in the spring, return to reserved time in the fall. Many a big CBS show vacationed this year, scuttled the company's July and August earnings. This month they began flocking back.

The Lux Radio Theater has already opened its new season. At week's end the Ford Sunday Evening Hour returned to the air. Other returning sponsors on the September and October opening lists include Chesterfields with a new Burns and Allen show, Palmolive Shave Cream with Gang Busters, General Foods and Lum and Abner and Kate Smith, Campbell Soup with Hollywood Hotel, Lifebuoy with Al Jolson, Camels with Eddie Cantor. Chrysler, having taken no holiday, recently renewed its contract for the Major Bowes Thursday evening amateur hours.

CBS new business includes radio's two big new shows. Texaco has bought time beginning October 5 for a plush-lined variety series. Its permanent cast costs some $18,000 a week, includes Cinemactors Adolphe Menjou, Una Merkel, Charlie Ruggles, Soprano Jane Froman, Tenor Kenny Baker, Impresario Max Reinhardt, Announcer Jimmy Wallington. Director Reinhardt is to preside over a dramatic workshop which is one item of the show, will not direct the program as a whole. Another variety show is now being whipped up for Old Gold. To start November 20, it will be permanently enlivened by Funnyman Robert Benchley, who will be making his first venture out of the radio guest star ranks.

Many CBS sales executives are no longer in favor of any summer holidays for any sponsors. But President William Samuel Paley was once a sponsor himself, became interested in radio when he used it to boost sales of the La Palina cigars his father manufactured. In 1928 he bought himself CBS, built up its station membership until he now controls some 1,600 air hours a day. He sells a goodly slice of these 1,600 hours, but has by no means all for sale. Deductions must be made for: 1) Time differences across the continent. 2) Time given to sustaining programs like the New York Philharmonic-Symphony's Sunday afternoon concerts. 3) Time which member stations have sold locally and withdrawn from network participation.

Ten years ago, when Congress Cigar Co.'s Son & Heir Bill Paley became CBS's 27-year-old president, it was a puny network. Although irreverent young employes stealthily called him Pale Billy (purely a trick of transposition, for he likes hot countries, bright sunlight, is usually healthily bronzed), in three months he tightened CBS's contracts with its affiliates, gathered 22 more stations into his network, refused to sell CBS to Paramount Publix Corp. for $1,500,000. Nine months later he sold Paramount Publix a half interest for $5,000,000, within three years bought the half interest back for $5,200,000.

A publisher puts on a show in which advertisers are invited to participate by inserting announcements promoting their products. In radio, the advertiser not only does his own announcing, he puts on his own show. Time was when the networks had a larger part in finding and developing talent for advertisers to buy. President Paley takes credit for "discovering" Kate Smith, Morton Downey, Bing Crosby. But more recently advertising agencies have found how to do this job for themselves, need less help from the networks. Nevertheless, President Paley is still very much in show business. About five-eighths of Columbia's time is sustaining, must be filled with free shows. CBS prides itself on its dramatic workshop, its spot-news coverage and particularly on the American School of the Air, its new adult education campaign.

Capable of the greatest excitement over either business or fun, tall (6 ft.), heavily handsome President Paley has run through watercolor painting, oil painting, motorboating, airplanes, photography in rapid succession. He rushes at business with the same enthusiasm, somewhat deceptively because the impetuosity breaks down into shrewd caution whenever necessary. When anything important is at stake he chooses his words with astute grace, but he prefers the free extravagance of mixed metaphors. A favorite phrase: "Not a red dime." Youngest and oldest chief executive in the network business, he has come a long way from cigars. He now smokes cigarets.

* Direct-mail advertising, throwaways, radio talent and production costs are not included.

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