Silent Movie & Radio Capital
Excerpted from The Zenith Story, A History From 1919, Zenith Radio Corporation, 1954
THE ZENITH STORY
On December 14, 1901, Guglielmo Marconi flashed the letter “S” across the Atlantic Ocean by wireless telegraph, and thereby launched a revolution in communications that was destined to bring profound changes in the pattern of civilization.
Marconi’s tremendous achievement brought only passing attention from the adult public, but it kindled the imagination of eager youngsters everywhere. In the decade that followed many of these youngsters dismayed their parents by devoting more time and effort to “Marconi’s toy” than to preparing themselves for a future in “something practical”.
Two of these “wireless doodlers” lived hundreds of miles apart, and were to meet only by sheer chance. R. H. G. Mathews of Chicago pursued the hobby and qualified as an amateur radio operator in 1912. In 1915 he began building and selling wireless equipment to other amateurs. Karl Hassel of Sharpsville, Pa., won his amateur license in 1915, and then matriculated at the University of Pittsburgh. Here he discovered that he was the only person on the campus, student or faculty, who knew how to operate the University’s newly constructed wireless station.
Came World War I, and both boys enlisted in the Navy. They met at Great Lakes Naval Training Station, and worked together on radio until 1919. They then set up a continuation of Mathews’ business as Chicago Radio Laboratory, building and selling radio sets.
Their first factory was a table in Mathews’ kitchen (1316 W. Carmen Ave). Their tools were pliers, screwdrivers, a hand drill , and a soldering iron that had to be heated over the burner of a gas stove. From this kitchen table workshop grew the business that was to become Zenith Radio Corporation.
Early in their business life Mathews and Hassel began the long series of radio “firsts” that has become a Zenith tradition. One of their first ventures was construction of a long wave radio receiver for the Chicago Tribune, which was used to pick up news dispatches about the Versailles Peace Conference from a long wave station in France. This short circuiting of the congested trans-Atlantic cable enabled the Tribune to beat competitors by 12 to 24 hours on conference stories.
The varnish had scarcely dried on the kitchen table workbench before the fledgling business needed larger quarters. The boys built a new factory near the Edgewater Beach Hotel. It was a shanty-like structure that gave them a working space of fourteen by eighteen feet, with a cubby hole for their amateur radio station, 9ZN. At about the same time they published their first catalogue. A few months later they coined the trade name, Z-Nith, from the call letters of their radio station. This was the origin of the trade mark, Zenith .
The first Zenith testing station
5525 N. Sheridan Rd.
The next Z-Nith first was construction and installation of a wireless system that made the N. C. & St. L. the first railroad in the world to successfully dispatch trains by wireless telegraph. Transmillers and receivers were set up in Tullahoma, Tennessee and Guntersville, Alabama to handle traffic over the rough country between.
Initial difficulties included such things as scuing off a bank’s burglar alarm during a directors’ meeting; adding a high voltage shock to the pain of a dentist’s drill while he was working on a touchy patient; and putting nearby telephones out of service. These problems were ironed out. The system went into service, and operated successfully for several years.
By the end of 1919, the Z-Nith partnership was thriving, with production exceeding one complete set a week. In May, 1920, the boys acquired their most important asset, a license to use the basic regenerative circuit patent of radio’s greatest inventive genius, the late Major Edwin H. Armstrong1.
Until the latter part of 1920, Chicago Radio Laboratory concentrated on building equipment for the growing army of radio amateurs, or “hams” as they soon came to be known. A change came in November of that year.
Radio broadcasting as we know it today was non-existent. The University of Wisconsin had begun in 1919 a regular broadcast schedule of news, market reports, weather in formation, and general programs from its station 9XN (now WHA).
As a public service for radio amateurs WHA developed a unique program. Each noon it radio-telegraphed the weather report in fast code for expert “hams”. The report was then repeated in slow code so that beginners could take it. After that, an announcer read the weather report for the general public, and so that beginner “hams” could check their accuracy.
Here and there around the country other stations produced similar schedules, but only a narrow segment of the public showed interest.
Then came the presidential election of 1920. News of the Harding landslide was disseminated with startling speed throughout the country by station KOKA in Pittsburgh and other stations. The public suddenly realized that Marconi’s toy was a very useful and practical communications tool. Broadcasting began in earnest.
Hassel and Mathews quickly put on the market a receiver with which the general public could hear the growing number of broadcasts. Business boomed, and within a few months the walls of Chicago Radio Laboratory’s new factory were bulging. So the company moved to a mammoth 3,000 square foot plant on Ravenswood Avenue, with a staggering rental of $300 per month, and a payroll of six employees. At this time the boys bought their first power tool, a motor-driven drill press, and boomed production to more than one set a day.
McDONALD JOINS THE PARTNERSHIP
In the meantime, E. F. McDonald, Jr., of Syracuse, N. Y., had established himself in the automobile business in Chicago, where he introduced the first successful plan for selling automobiles on time payments; had served through the war in Naval Intelligence and been discharged with the rank of Lieutenant-Commander; and was looking around for a new business.
On New Year’s Eve, 1920, McDonald went to a garage to pick up his automobile, and noticed several men listening to music coming from a box. He asked the proprietor what there was abou t this phonograph to make people listen to it on New Year’s Eve.
“That is no phonograph,” he was told. “That is aradio. They are listening to music through the air from Pittsburgh.”
McDonald learned that it would take several months to get delivery on a radio set for himse lf. and decided he had found his new business for which he had been searching since the cnd of the war. However, it was not that simple. He found out that he would need a license to use the inventions of Major E. H. Armstrong, and Armstrong licenses were no longer available.
Temporarily balked, McDonald soon heard about two young men—Hassel and Mathews—who were building radio receivers on Chicago’s north side.
Thinking about that radio set, he paid a visit to the Ravenswood factory and took particular fancy to a set that sold for $75.00, less tubes, batteries, and headphones. Hassel, in person, came to McDonald’s residence at the Illinois Athletic Club to install it—and didn’t leave until he had collected his money, Reca lling the occasion, Hassel said, “It wasn’t a question of whether I trusted him or not—we needed the money to keep going.”
Hassel and Mathews had the all-important Armstrong license, and more business than they cou ld handle with the equipment they owned. But they were short on capital. McDonald joined forces with them, provided funds for expansion, and became general manager of Chicago Radio Laboratory. One of his first moves was to change the trade mark from Z-Nith to Zenith.
When negotiations began, Hassel and Mathews were represented by a young Chicago attorney named Irving Herriott. Hassel told McDonald that he, too, should have an attorney.
“I like the cut of Herriott’s ‘jib,'” McDonald replied. “Let him represent us both.” So began Mr. Herriott’s long period of distinguished service as Zenith’s general counsel, which continued until his death on November 17. 1953.
Normally. capital investment in an existing business results in an equity for the investor. In this case, however. the largest investor. McDonald, owned no interest whatsoever in Chicago Radio Laboratory, and for a very good reason. The Armstrong license was held by Chicago Radio Laboratory, a co-partnership, and was not transferable. This also had its bearing on the organization of Zenith Radio Corporation. When the company was formed in 1923 it was not a manufacturer. Instead, it was the exclusive sales and marketing organization for handling the radio equipment built by Chicago Radio Laboratory. This arrangement continued until other developments made a consolidation possible. at which time the entire assets and business of Chicago Radio Laboratory were acquired and Zenith became a manufacturer in its own name.
McDonald’s financial backing and business know-how added impetus to the rapidly growing volume of business. In 1922 the factory was moved to larger quarters at 48th and Kedzie.
In 1919, this shack on Chicago’s North Side housed station 9ZN and factory for Z·Nith Radio products.
RADIO LEARNS TO SELL
Meantime, part of the company activities had gone back to the old radio shack near the Edgewater Beach Hotel. Mathews, Hassel and the engineers built a broadcast transmitter and installed it there under the call letters WJAZ. Studios were in the hotel itself, and “QSL” cards began to come in from listeners all over the nation.
Nineteen-twenty-three was an exciting year. Commander McDonald organized and became the first president of the National Association of Broadcasters. At this time nobody had a very clear idea of how radio broadcasting could be financed, but thoughtful America ns did not relish the idea of a government monopoly such as grew up in most foreign countries. McDonald provided and demonstrated the answer.
The publisher of a radio magazine for amateurs had greatly increased his print order one month in anticipation of absorbing another magazine. The merger fell through, and he was left with a staggering surplus of unsaleable magazines, McDonald asked him if he would donate $1,000 to the National Association of Broadcasters if they could sell these magazines over the air. He agreed.
Magazines were spotted in the few cities which at that time had broadcasting stations, and whose owners dared try this unorthodox scheme. Some broadcasters refused to participate. For three nights announcers on participating stations including Zenith’s Station WJAZ read selected articles from the magazine, and told listeners that copies could be obtained from newsstands. The issue sold out, 100%. The publisher was delighted and continued the arrangement.
So far as can be determined, that was the first regular merchandising program conducted over a group of stations. It launched the system of sponsored broadcasting which has given Amcricans the finest broadcast service in the world.
NORTH WITH MacMILLAN
It was also in 1923 that McDonald persuaded Commander Donald B. MacMillan, the Arctic explorer, to take radio with him to the Arctic. When MacMillan sailed that summer his ship, the Bowdoin. was equipped with Zenith short wave transmining and receiving equipment. For the benefit of the expedition WJAZ set up special news progmms, and transmitting messages from friends and families of men in the expedition.
Broadcasts from WJAZ were picked up directly by the Bowdoin. Return messages came by short wave, frequently relayed by cooperative you ngsters from all parts of the country, who covered phenomenal distances with their low-powered short wave equipment. This demonstration of short wave efliciency did not go unnoticed at Zenith, although at that time most radio interests believed that short wave had no commercial value.
Zenith sold this WJAZ transmitter to the Edgewater Beach Hotel in 1924, but this did not mean the end of Zenith’s broadcasting activities.
The company retained the call letters WJAZ, and constructed what was probably the first mobile radio broadcasting station. It was first used to locate a new station site in Mt. Prospect, Illinois. 20 miles northwest of downtown Chicago. In 1925 this truck went all over the nation for the purpose of publicizing both Zenith and the new, highly efficient art of broadcasting. One broadcast was made from the summit of Pikes Peak.
In 1924, Zenith Radio Corp. moved to this factory at 3620 Iron Street.
In 1924, for the fourth time in five years, the company was compelled to find larger quarters. This time it moved to a four-story building at 3620 South Iron Street in Chicago. Hassel invented a new receiver with greatly simplified tuning which did not infringe on Armstrong patents,
Zenith Radio Corporation then became a manufacturer in its own right, and marketed the receiver under the name Super-Zenith. It was an outstanding commercial success.
The same year saw introduction of the first portable radio, a suitcase-like affair with buill-in loop antenna and horn type loudspeaker that sold for $200. (It is a measure of radio’s progress that in little more than ten years Zenith built and sold a better portable for $19.95.)
CREATION OF FEDERAL RADIO COMMISSION
In 1925 there existed a one-man control of radio with the Secretary of Commerce as supreme czar. McDonald said to then Secretary Herbert Hoover that he did not believe the law was sound. On the invitation of Mr. Hoover, who said he would welcome a test case, McDonald violated a Department of Commerce order and broadcast on a Canadian wavelength.
The Department brought an action against Zenith, and against McDonald personally. Zenith went into court with the contention that the radio law of 1912 was out of dale in 1926. Zenith won.
Congress then passed a law establishing Ihe Federal Radio Commission (what is now FCC) which made it possible to minimize Ihe growing interference between stations on the same wave length. Zenith officials took a leading part in helping to frame and pass the new law. So ended one-man control of radio.
FIRST AC SETS
In 1926 came one of the most important milestones in radio set history, another Zenilh First. Up to that time home radios operated on heavy storage batteries, dry batteries, or a combination of both. Zenith developed and put on the market the fi rst home receiver that operated directly from regular AC electric current. For most homes this meant the end of cumbersome and messy batteries, and made radio safe for the living room rug. That marked the transition of radio from tinkerer’s toy to a standard household necessity.
A NEW LOOK
Preoccupation with the development of Wincharger2 did not prevent Zenith from making major progress in other lines. One 1935 innovation was as simple and obvious as the eraser on a pencil, but it had been completely overlooked by the entire industry.
Prior to 1935, the dials on all makes of radio receivers were small and difficult to read. Zenith changed all this by adding to its 1935 line a large, black dial, with figures so distinct that they were easily read even without glasses by most people. This dial became a tremendous sales feature, and was widely copied by other manufacturers.
Even during the emphasis on low priced receivers in the depression years, Zenith had not fo rgotten its devotion to quality. Consequently, it found a ready market for its 1935 line of feature-laden receivers. One model (1000Z, below), selling at $750, incorporated Zenith’s largest chassis in a massive cabinet, with 50 watt audio output, variable selectivity, 3 speakers, and other exceptional features.
Early in 1951, Phonevision was given its first real test. As previously noted, the company had undertaken its subscription TV research in 1931, and announced one perfected system in 1947. Then, with FCC authorization, Zenith conducted a limited commercial test to determine whether or not the public wanted the opportunity to pay directly for such premium programs as top motion pictures not available on sponsored television.
Three hundred families, selected by the National Opinion Research Ccnter at the University of Chicago, were equipped with television sets Ihat could receive all four Chicago commercial TV stations. In addition, by accepting a charge of $1 per picture, any test family could see a feature motion picture being broadcast on a special channel by Phonevision.
Each day for 90 days, Zenith broadcast a Hollywood motion picture, with showings scheduled for afternoon, evening, and late evening. The pictures presented a fair cross-section of Hollywood feature productions, but all were at least two years old and had completed their first, second, and third theater runs.
Over the three month period, Zenith test families “went to the movies at home” an average of 1.73 times a week, nearly four times the average rate of motion picture theater attendance at that time. The average patronage per picture was exactly 25% of the possible audience. The company had no legal club with which to collect bills for service, other than discontinuing service to delinquents, but collections exceeded 99% of billings.
In the Spring of 1954, Phonevision—again by FCC authority—was tested in the East. Purpose of the experimental broadcasts was to make final determination of Phonevision’s operating characteristics from a high-powered transmitter (WOR-TV) in metropolitan New York. No participation by the public was involved.
While the earlier Chicago test used telephone circuits to carry the decoding signal, WOR transmission carried both the TV picture and the codes. Test data showed clearly that the airborne systems worked just as well or better than anticipated from laboratory and low-powered transmitter tests.
The test in New York also proved conclusively that the Phonevision coding and decoding systems functioned perfectly even in highly congested areas filled with apartment buildings, where hundreds of thousands of potential Phonevision subscribers live.
ZENITH STRATOSPHERE MODEL 1000Z
The Stratosphere 1000Z was designed with a large black 9″ airplane dial set in a hand casted Bronze Aztec design dial bezel. The 1000Z’s black dial used a separate shadowgraph tuning meter helped listener with the fine tuning of stations. This multi-band dial is constructed of 5-layers of glass with each radio band etched in its own layer of glass with individually lighted tuning ranges. The radio dial tunes AM broadcast stations, Foreign; police, amateur, aviation and ships at sea. Only 350 sets were produced.
Specifications from the 1937 dealer catalog:
ZENITH STRATOSPHERE MODEL 1000Z
CIRCUIT: Ultra modern 25-tube superheterodyne. Triple Filtering. Q.A.V.C. with magnetic relay. Disappearing delay A.V.C. with amplifier. Duplex high fidelity audio amplifier. Manual controlled variable selectivity.
TUBES: 1-6D6 1st R.F.; 1-6D6 2nd R.F.; 1-6A7 1st detector oscillator; 1-6D6 1st I.F.; 1-6D6 2nd I.F.; 1-76 2nd detector; 1-85 A.V.C.; 1-6D6 tuning meter amplifier; 1-6D6 A.V.C. amplifier; 1-79 electron relay; 2-76 parallel 1st audio; 2-42 push-pull 2nd audio; 8-45 parallel push-pull power output; 3-5Z3 rectifiers.
CABINET: A symphony in rare wood. Rare woods blended into a symphonic harmony of exquisite color emphasize the true character of the Zenith STRATOSPHERE as a genuine musical instrument. Design has been dictated by the basic principles of acoustics, just as is that of the violin. Outstanding charm is the result. Solid walnut pilasters are combined with Australian laurelwood. The superstructure is Carpathian elm burl, inlaid with imported marquetry; a note repeated in the center of the grille. Doors are of matched American butt walnut, overlaid with marquetry. The entire ensemble is enhanced by a natural piano finish of satin sheen. Nothing finer has ever been produced by craftsmen in wood.
DIMENSIONS: 50½ inches high; 20 inches wide; 18 inches deep.
SPEAKERS: 1 Dynamic high frequency speaker; 2 Concert dynamic low frequency speakers.
CONTROLS: Tuning; Tone; Volume and Switch; Band Switch; Q.A.V.C. Switch; Selectivity (high fidelity). (Q.A.V.C. level control on back.)
CONDENSER: Special 4-gang.
WAVE BANDS: All-wave from 63,600 to 535 KC (or from 4½ to 560 meters).
OTHER FEATURES: 50 watts output; Individually lighted tuning ranges; Split-second tuning and dual tuning ratio-18:1 and 99:1; Elaborate shielding; High Fidelity; A.V.C. amplifier; Tuning meter amplifier; Immeasurable sensitivity; Sound diffusion; 9-inch airplane dial.
Radio Retailing Magazine
Radio Retailing Magazine
SW Corner of Michigan and Huron Streets
Chicago Tribune, December 12, 1928
BY GEORGE HAMMOND.
Radio stocks pushed up to good recovery in Chicago stock trading yesterday under the leadership of Zenith Radio, which climbed 5¾ points to a close of 47½ on sales of more than 4,300 shares.
The movement In Zenith was attributed to buying in expectation of expansion plans soon to be announced. it is understood that the company has three propositions on which it is to make a decision in a few days, either of which will increase the plant facilities by four times the size of the present building at 3620 Iron street. where the ploor space Is 125,000 square feet. The number of employes now is 1,500.
Proposals on Foot.
One of the proposals on foot is to a new plant ready for occupancy while the other two are for new buildings.
Plans for the expansion of plant facilities for Zenith add another chapter to the remarkable story of the development of radio. The opening finds two amateurs, Karl Hassel, now the company’s chief radio engineer, and R. H. G. Mathews, tinkering with what they thought might make a radio set. The time was the year 1915 and the place was Mtr. Hassel’s kitchen on the north side of Chicago.
Hassel and Mathews finally rigged up a transmitting set and in their spare time played as an amateur transmitting station with 9 Z nth as the call letters. Later, when the first program broadcasting stations began to operate. the boys started to make an occasional receiving set for a
Was in Auto Business.
In the meantime, Eugene F. McDonald Jr. was in the business of financing time payment automobile sales. This was a business he started when trucks were the first motor vehicles sold on the deferred Payment plan. One night in 1921 at the home of friends, Mr. McDonald heard what he believed to be a rather fine phonograph and was surprised to learn that it was a radio set. He visulaized the future of this infant Industry and threw his hat into the ring.
Mr. McDonald learned that Hassel and Mathews had made the set he had heard and later found them working in a one room shack under the name of the Chicago Radio laboratory. They were producing and selling one set at a time and had only one piece of machinery In the place. A set was just being completed.
“When can you sell me a set like that?” asked the visitor.
“You can take this along today It you have the money with you,” was the reply. “We need some quick money for more material.”
Pile of Orders.
On inquiry, McDonald discovered that the boys had a pile of orders a foot high and not the machinery or the funds with which to install the machinery to fill the orders. A deal was made and McDonpald put $30,000 into the business and supplied the organizatIon, management, and sales ability of the company.
The company was incorporated in 1923 and taking the original call letters “Z nIth,” Mr. McDonald supplied the letter “e” and called the company Zenith.
Unlike other sciences in which inventions have been developed by trained engineers, the credit for radio as it is today belongs entirely to the amateur, according to Mr. McDonald.
The company’s growth can also be discerned from its financial statements. The book value of the original 100,000 shares of stock. was $11.19 a share In 1924, and in April of this year had risen to $17.94. The stock, which was split four for one recently, was listed on the Chicago exchange last February. Earnings for the fiscal year ending April 30 are estimated by Mr. McDonald at $20 a share on the old stock and $5 a share on the new present 400,000 shares.3
Seeing the potential in personal computers, Zenith Radio Company bought Heath Company from Schlumberger in 1979 for $63 million, renaming the computer division Zenith Data Systems (ZDS). In 1989 Zenith sold off the computer business and by 1999 Zenith was absorbed by LG (Lak-Hui Goldstar) Electronics of Korea. There is nothing left of Zenith anymore except the name which is still owned by LG Electronics.
Chicago Tribune, September 12, 1955
1 Major Edwin H. Armstrong was known as the “Father of FM,” was in litigation with R.C.A. since 1940 over F.M. royalties, committed suicide on January 31, 1954.
2 Wincharger Corporation in Sioux City. which was building wind driven generators for charging 6·volt storage batteries. They had solved the problem of getting their generators to work in light winds by using two airfoil sections for blades on their “wind mill.” The wind pullled these airfoils around, as compared to the way wind pushed the multitude of blades on the low·speed windmills used for farm water pumps.
3 Zenith’s stock split 4:1 on November 19, 1928 after it closed at $200 ($50 after split). On October 23, 1929 Zenith’s stock closed at $35 a share, on the 24th (Black Thursday) at $30, and after Black Tuesday, October 29, $26. If one invested $100 at the initial offering in 1924, would have turned a profit of about $2,000 if sold in November, 1928. That same investment would have shown a slight loss if sold after the Crash of 1929.