On this day in economic and business history…
The first national radio network in the United States was formed on Sept. 9, 1926, when RCA — in conjunction with General Electric Company (NYSE:GE) and Westinghouse Electric — established the National Broadcasting Company. In a press release announcing the new network, RCA noted that there were then 5 million homes equipped with radios and perhaps 21 million homes without one. NBC would help expand the distribution of “programs of the highest quality,” and RCA admitted that it would need the public’s support to have any chance of success in a largely untried format:
We have no hesitation in recommending the National Broadcasting Company to the people of the United States.
It will need the help of all listeners. It will make mistakes. If the public will make known its views to the officials of the company from time to time, we are confident that the new broadcasting company will be an instrument of great public service.
This pioneering radio network was made possible by a deal struck between RCA and AT&T Inc. (NYSE:T), in which the radio manufacturer spent $1 million (worth a comparatively minuscule $13 million today) to buy out the telephone company’s test-bed WEAF broadcast station, located in New York City. This solved two problems: RCA badly wanted to expand its broadcast network, and AT&T Inc. (NYSE:T) felt that focusing on expanding telephone access would be the key to its future. In the process, RCA gained access to AT&T Inc. (NYSE:T)’s high-quality (for the time) telephone lines for long-distance transmissions, solving the problem it had previously had with transmission over weaker telegraph wires. Radio finally had the bandwidth to go national.
NBC launched in November of 1926, and by 1927 it had already been divided into two “networks,” branded as Red and Blue, which provided separation between entertainment programs and news or cultural broadcasts. By the spring of 1927, NBC had gone truly national with the launch of the Orange network on the West Coast. A year later, RCA became the first and only true radio-focused company to join the Dow Jones Industrial Average in an index restructuring that expanded the Dow to 30 stocks. Westinghouse Electric also joined the Dow at this time, making it the only time in Dow history that the three companies most directly responsible for the spread of radio were on the index at the same time.
The network continued to expand despite the onset of the Great Depression, but at the tail end of the 1930s RCA’s dominance of American broadcasting drew the attention of antitrust regulators. RCA lost its final appeal before the Supreme Court in 1943 and was forced to divest one of its two major networks (the Blue network), which became the American Broadcasting Company in 1945.