Thomas Edison and the Entertainment Phonograph

Confronting the Mass Market: Thomas Edison and the Entertainment Phonograph

Leonard DeGraaf National Park Service Edison National Historic Site

Between1880 and 1910the phonograph became a mass-marketedconsumer product.During the late 1870sThomas Edison's tinfoil phonographwas a curiosity of little practicalvalue. By thefirst decadeof the 20th centurythe phonograph,as well as musicalrecords on bothcylinder and discformats were widely availableto consumers.Americans purchased over half a milliontalking machines and over 27 million records in 1914, and this number continued to rise until 1929. Although Thomas Edison played an importantrole in the technical developmentof thephonograph and his firm wasa leadingproducer between 1896 and1908, he experienceda number of problemsin marketinghis talking machines and recordsbetween 1909 and 1929 -- problemsthat led to the failure of his business. During this period Edison was a market follower in the industry, surpassedby the Victor TalkingMachine Company and challenged by suchother competitorsas the Columbia PhonographCompany and Brunswick-Balke- Callender.In 1919Edison produced only 7.2% of the phonographsand ! 1.3% of the recordsmanufactured in the United States [4]. By the end of the 1920s his companycontrolled only 2% of the recordmarket [5]. As one Edisondealer lamentedin 1926,"instead of theEdison being the mostpopular machine it is one of theleast popular. The Edison,the original, the Daddy of themall shouldnot take secondplace for any of them"[7]. This paperexamines the reasons for the failureof the Edisonentertainment phonographbusiness. The traditionalexplanation for Edison'scommercial failures maintainsthat he wasa poorbusiness manager. This view wasinitially expressed by Henry Ford, who called Edison "the world's greatestinventor and worst businessman,"and has subsequently influenced a numberof assessmentsof Edison's businessabilities [ 18]. This interpretationwas often asserted, however, without the benefitof detailedresearch on Edison'scommercial enterprises. This is particularly truefor the phonographindustry, which has received little attentionfrom business historians. While the developmentof the phonographbusiness is a complexstory involvinga varietyof broadeconomic, technical, marketing and culturalforces, specificdecisions made by Edisonand his competitorswere alsocritical factors. At issue here is not whetherEdison was a good or bad manager,but how he

BUSINESS AND ECONOMIC HISTORY, Volumetwenty-four, no. 1, Fall 1995. Copyright¸1995 by the BusinessHistory Conference. ISSN 0849-6825.

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respondedto theproblems of designingand marketing sound-recording technology withina rapidlychanging competitive environment. In orderto explainEdison's problemsin the phonographbusiness, this paperexamines the technicaland marketingstrategies he employedand compares those strategies with theapproach of hismore successful competitor, the Victor Talking Machine Company. As this paperargues, Edison's strategies were ill-suited for an emergingmass consumer market.

Mass Marketing the Phonograph, 1888-1907

Edison'sfirst attemptto marketthe cylinderphonograph during the late 1880sand early 1890s was unsuccessful. In 1888the North American Phonograph Companywas created in orderto leasethe Edison phonograph and a rival cylinder machinecalled the graphophonefor useas commercialdictating machines. The North Americancompany, however, failed to developa marketfor dictating machinesbecause of a varietyof technicaland marketing problems. The failureof the dictating machinealong with the popularityof coin-operatedamusement phonographsin publicplaces convinced Edison and his associatesto developa homeentertainment talking machine [1, pp.78-87]. By the late 1890sEdison had designeda simpler, spring-drivenphonograph; developed procedures for manufacturingpre-recorded musical cylinders on a largescale; and organized a new firm, the NationalPhonograph Company, to marketthese machines and records. The lowercost of thesemachines, combined with an improvingeconomy enabled the National companyand its principlecylinder competitor, the Columbia PhonographCompany to dramaticallyincrease sales. By 1904 the National companyhad sold over 113,000 machines and seven million records [Table 1].

Table 1. PhonographsManufactured by the National PhonographCo., 1896-1904

Date Spring Motor Electric Motor Total

3/1896-2/1897 774 465 1,239

3/1897-2/1898 4,905 260 5,165

3/1898-2/1899 13,833 422 14,255

3/1899-2/1900 45,827 270 46,097

3/1900-2/1901 41,850 44 41,894

3/1901-2/1902 41,315 66 41,381

3/1902-2/1903 79,980 277 80,257

3/1903-2/1904 112,049 1,102 113,151 Total 340,533 2,906 343.439

Source:Appellant's Brief, New YorkPhonograph Co. v. NationalPhonograph Co., United StatesCircuit Court, Court of Appeals, SecondCircuit, November 14. 1905, p. 218. 90

Edison's National PhonographCompany was able to dominate the phonographbusiness in theearly 1900s,but its positionwas challenged by Eldridge Johnson'sVictor Talking MachineCompany. Johnson,a Camden,New Jersey, machinist,began making spring motors in 1896for the gramophone,a disc talking machineinvented by Emile Berliner in 1887. During the late 1890sJohnson manufacturedgramophones for the Berlinercompany and developed an improved disc recordingprocess. Through a seriesof complexlegal maneuversJohnson obtainedcontrol of the Berlinerpatents and organizedthe Victor companyin October1901 to markethis own line of discmachines and records [2, pp. 17-35]. Salesof Victor gramophonesgrew slowly at first, butJohnson introduced a numberof technicaland designchanges that helpedincrease his shareof the talkingmachine market. In 1903he designeda new tonearm, whichimproved the acousticquality of his machines[20, p. 135]. In 1906 he unveileda new disc machinecalled the Victrola, which featuredan enclosedspeaker horn in a handsomewood cabinet [2, p. 61]. The result,according to anearly phonograph historian,"was to makethe phonograph for thefirst time a pieceof furniture." [ 17, p. 6]. In 1901 Victor soldapproximately 7600 machines.By 1907 the company had sold over 98,000 machines[Table 2].

Table 2. RecordsManufactured by the National Phonograph Co., 1896-1904

3/1896-2/1897 0

3/1897-2/1898 87,690

3/1898-2/1899 428,310

3/1899-2/1900 1,886,137

3/1900-2/1901 2,080,132

3/1901-2/1902 1,976,645

3/1902-2/1903 4,382,802

3/1903-2/1904 7,633,142

Total 18,474, 858

Source:Appellant's Brief, New YorkPhonograph Co. v. NationalPhonograph Co., United States Circuit Court,Court of Appeals,Second Circuit, November 14, 1905,p. 219.

The impressivegrowth enjoyed by the phonographindustry since 1901 endedabruptly in 1907 becauseof the Banker'sPanic. As a resultof the panic, Edisonsuffered a 30% dropin salesin 1908,while Victor's sales declined by almost 40%. Both companiesrecovered from the economicdepression, but Victor grew back at a muchfaster rate, and surpassedEdison's sales in 1909. Edisondid not reachhis pre-1907 level until 1916,when the value of Victor'ssales was over three timesas h•gh as Edison's[Table 3]. 91

Table 3. Salesof Victor RecordingMachines, 1901-1915

Year Horn Type Cabinet Phonograph Victrolas

1901 7,650 --

1902 42,110

1903 40,601 --

1904 47,074 --

1905 65,591 --

1906 76,036 506

1907 98,686 3,559

1908 45,473 4,317

1909 56,147 11,764

1910 73,049 21,508

1911 31,106 41,956

1912 21,009 49,224

1913 18,435 115,342

1914 6,179 121,288

1915 3,949 188,725

Source:B.L. Aidridge,The VictorTalking Machine Cotnpany, (RCA, 1964),Appendix IV•

What causedthis change in therelative positions of the Edisonand Victor companies?Given his first entrantadvantages, why wasEdison surpassed by the Victor company?One possibleexplanation for thischange are pricedifferences betweenEdison and Victor products. Although more detailed information about phonographand record prices and how they changed over time is required,there is evidencesuggesting that Victor andother talking machine producers were able to lower the pricesof their productsat a muchfaster rate thanEdison. As Andre Millard hasargued in hisstudy of Edison'sWest Orangelaboratory, "lowering the costsof productionhad become essential in thephonograph business because [the Edisoncompany] faced competition that invariablyundersold it" [1, p. 200]. Price competitionprovides only part of the explanationfor Edison's problemsin the talkingmachine business. Victor's ability to surpassEdison can alsobe attributedto severaltechnical and design advantages of its productsas well as a marketingstrategy consisting of threeimportant elements. Victor machines 92

weremore appealing to consumersbecause their enclosed horns eliminated the need for awkwardexposed horns and becausethey cameencased in attractivewood cabinets. Victor disc records were more durable and easier to store and maintain thanEdison cylinder records and they couldalso be playedlonger, from four to sevenminutes, allowing Victor to recordmusic that would not fit on the two minute Edisoncylinder. Theseproduct advantages complemented Victor's highly effective marketing strategy. The first elementof this strategywas what companyhistorian B.L. Aldridgecalled a "heavy-handedadvertising policy" [2, p. 49]. Victor spentup to 8.2% of itsannual sales on masscirculation newspaper and magazine promotions. The companyrelied on theseads not onlyto promoteits own products,but to create generalconsumer demand for thephonograph as a form of domesticentertainment. The secondcomponent of the Victor strategywas a closerelationship with its jobbersand dealers. Victor dealerswere expected to generatea minimumannual salesof $300. In return,they were given valuable support services, including sales training,printed promotional material and subsidies for localadvertising [2, p. 49]. The third featureof the Victor strategywas a recordcatalogue featuring famous artists. Victor's Red Seal records included such celebrities as Adelina Patti, Dame Nellie Melba, andEnrico Caruso, who signed an exclusiverecording contract with Victor in January1904 [2, pp. 51-55]. This marketingstrategy enabled Victor to becomethe predominanttalking machine producer between 1909 and 1929.

Edison'sResponse to Victor, 1909-1929

Edison'sresponse to the marketingof the phonographin the early 20th century, as well as his efforts to competewith Victor were shapedby his experiencesas an inventorof producertechnologies during the 1870sand 1880s. Many of thetechnologies Edison either invented or helpedimprove in thisperiod, suchas the stockticker, printing telegraph and multiplex telegraph were producer goods designed to increase the capacity and reliability of the nation's telecommunicationssystems. Edison spent much of this time identifyingand solvingthe technicalproblems of highly specializedcorporate markets, which expectedhim to deliverefficient, practical and reliable machines. Edison's ability to work closelywith his corporateclients, his reputationas a technicalproblem solver and the high qualityof his inventionswere criticalfor his successin this producergoods market. This approachto innovationcontinued to shapeEdison's response to the developmentof consumertechnologies during the early 20th century. It determined hisdecisions about product development as well asthe creation and implementation of hismarketing strategies. Edison's reliance on technicalsuperiority, a key element of his strategyin earlyproducer markets, influenced Edison's approach to record formats.Victor's success in marketingthe disc record suggested that the cylinder wouldbecome outmoded. Consumers seemed to preferthe convenience and longer recordingtime of thedisc. AlthoughEdison had experimented with the disc format in thelate 1870s,he concentratedon developingthe cylinderbecause he believed thatit wastechnically superior. In orderto competewith the longerplaying Victor disc.Edison introduced a newfour minute cylinder record called the Amberol in 1908[1, p. 211]. The new Amberolrecord helped increase Edison's record sales, but it did not threatenthe 93

market positionof the Victor disc. As a result, Edison'sbusiness managers convinced him to enter the disc trade. Between 1909 and 1915 the Edison laboratorydeveloped a discrecord and machine to competewith Victor. The result of this campaignwas a disc player featuringa diamond-pointedreproducer and a condensiterecord called the DiamondDisc. Despiteevidence that consumers preferredthe disc format,Edison continued to improvethe cylinder. In 1912 he introducedthe Blue Amberol,a celluloidcylinder record that produceda higher qualitysound than earlier wax records[1, pp. 206-216]. With the introductionof the Diamond Disc and Blue Amberol, Edison becamethe only major talking machineproducer to offerboth cylinder and disc formats. The decisionto market bothformats reflected a compromise-- an attemptto resolvethe tensionbetween Edison'sbusiness managers, who wanteda discto competewith Victor, and Edison, who believedin the superiortechnical quality of the cylinder. Edison'semphasis on technicalperfection also influenced the development of hisrecord catalogue. While EldridgeJohnson recognized the promotionalvalue of famousartists, Edison refused to put celebritieson hisrecords. "We carenothing for the reputationof the artistssingers or instrumentalists,"Edison proclaimed in a 1912 memorandum."All that we desireis that the voiceshall be as perfectas possible"[3]. Edison believed that high recordingstandards would sell more records than well-known artists. "It is not our intention to feature artists or sell the recordsby usingthe artistsname," Edison wrote, "we intendto rely entirelyupon the toneand high quality of the voice"[3]. Edisonbelieved that the famousartists recordedby Victor did not necessarilyhave the bestrecording voices, and that the reputationsof many of theseartists was basedon their acting ability or stage presence.For Edison,promoting records by celebrityartists constituted "fakery in music" becauseconsumers could not always discriminatebetween singersof reputationor talent. As he told onecorrespondent in 1913, "I myselfhave refused to be a party to this fakery pressagency work" [23]. While it is difficultto quantifythe impactof thisstrategy, there is anecdotal evidencesuggesting that it affectedrecord sales. A numberof Edisondealers complainedabout the lack of recognizableEdison artists. As onedealer asked the companyin 1923, "wheredo you expectto be in ten yearswithout an artistof reputation"[8]. Anotherdealer claimed in 1927that he hadbeen unable to sell any Edison recordsthe previoussix monthsand that he had to providehis Edison ownerswith specialattachments so that they couldlisten to the recordsof other manufacturers[9]. Becauseof thedifficulty of findingartists who could meet Edison's technical standards,the companytended to use the sameartists repeatedly. As a result, Edisonrecords not only lacked"star" appeal. they alsolacked different musical stylesand interpretations. Edison dealers understood that consumers wanted more thanjust technicalperfection. According to onedealer, "it wouldseem to me that if your companywould take on a new singeroccasionally, or a new orchestra,it wouldhelp matters. You mustrealize that the ownerof an Edisoninstrument does not wantall of hissongs, or practicallyall of them,sung by the samesinger" [22]. Anotherdealer complained that "no one listeningto a dancerecord gives a darn whethera secondclarinet is heardor not. If the publiccared anything for absolute perfectrecording where every instrument is heard,the Victor wouldhave been out of businesslong ago" [10]. As companyvice presidentArthur Walsh noted in 94

1927, "artistsnames was probably the bestpiece of salespromotion work for the Victor companythat could have been put over" [5]. The samereliance on technical quality that shaped Edison's product develop- mentdecisions also influenced his marketingstrategies. Edison believed that once a potentialcustomer had an opportunityto hearthe superiortones of his machines and records,he would chooseit over competingproducts. The centralgoal of Edison'smarketing plans, therefore, wasto bringas manycustomers as possible into direct contactwith his products. "Hearingthe tone of the Edison,"the companyargued, "creates the desire to ownone and produces a naturalcomparison in the heartsof everyonehearing the instrumentand any needletalking machine they every hear." The efforts to demonstratethe technicalquality of Edison phonographsto consumersare reminiscentof the closerelationship Edison had establishedwith his corporateclients in the late 19thcentury. A numberof planswere developed to accomplishthis goal. Edison'sdealers wereencouraged to stagedemonstrations or recitalsin their showrooms.One type of stagedevent was the Turn Table Comparison,which enabled customers to comparethe Diamond Disc with competingtalking machines. In orderto demonstratethe qualityof the Edisonrecord, the companysponsored a seriesof events calledTone Tests, which featured comparisons between live Edisonartists and their recordsplayed on Edisonmachines. The objectiveof theseTone Testswas to demonstratethat Edison records were so precise and realistic that they could not be distinguishedfrom the live performance[22]. Edison recordingartist Marie Rappoldheld one of the first Tone Testsin April 1916 at CarnegieHall, and hundredsof similar testswere conductedthroughout the World War I period[ 14, pp. 146-147]. The Tone Tests were replacedin the early 1920s with other marketing schemes. One of these plans utilized door-to-doorcanvassers, who left phonographsand a selectionof recordsin homesfor up to three days. The canvasser would then return to close the sale. Another scheme, the "Sub-Dealer Plan,"involved the placementof phonographsin barbershops, ice creamparlors and otherretail establishments.The proprietorsof thesestores were expected to demonstratethe phonograph and send the namesof prospectivebuyers to the local Edisondealer. Thesemarketing plans seemed to work whenthey were tried on a limitedexperimental basis, usually in the areanear Edison's laboratory, but in order for them to be effective againstVictor they had to be implementedon a national scale. Unfortunately,Edison did not have the resourcesto organizeand manage large-scalecanvassing plans. Edison spentless moneyon masscirculation advertising than Victor and othercompetitors because print ads could not convey the samemessage about the qualityof Edisonphonographs as live demonstrations.According to ArthurWalsh, "Mr. Edisonargues that the superiortonal qualities of the Edisonwhen heard far outweighsthe printedadvertising of any strongestcompetitor." The Edison companydid advertisein newspapersand magazines, but these ads were designed to promoteTone Testsand otherdemonstrations. The lack of advertisingwas a source of contention between the company and its dealers. As one dealer complained,"it hasbeen a longtime sincewe haveseen an Edisonadvertisement ß . . that I haveforgotten what they look like.. , thereis no dangerof anyone forgettingwhat a Victor advertisementlooks like or a Brunswickor a Columbiafor 95

the reasonthat you can scarcelypick up any of our bestmagazines but, the very beautifulcolored artistic advertisements of thesecompanies stare you in the face." The quantityof advertisingwas not the only problem.Many dealerscom- plainedabout the lack of artisticquality of Edisonads and other printed material issuedby thecompany. This pointis illustratedby dealercomparisons between the Victor andEdison record catalogues. According to a Massachusettsdealer writing in 1916, the Victor record list came with a portraitand brief biographyof each Victor artist,and wasattractively arranged and printed. It was,according to the dealer,"more than a workof art, it is a work of science-- psychologicalscience." The Edisoncatalogue, in contrast,was merely an alphabeticallist of Edisonrecords in minutetype. As thedealer noted, "it is businesslikein the discardedmeaning of the term.. it is absolutelywithout art or scienceor imagination"[16]. A similar point was madein 1923 by Harold Brainerd,an Edisoncustomer who wanted Edisonto print picturesof his artists. "They may seemtrivialities or luxuries," Brainerdnoted, "but they are the thingson which greatsuccesses like the Victor's have been built" [17].

Conclusion

In New and ImprovedRichard Tedlow has arguedthat "the long-term successof thelarge firm hasbeen determined by its ability to manageboth internal and externalchange over time" [11, p. 19]. This point appliesto Edison's experiencewith the phonograph.By designingan entertainmentphonograph and loweringthe costof machinesand recordsin the 1890sEdison did muchto create the phonographindustry, but he eventuallyfailed because he basedhis marketing decisionson a setof ideasand assumptions that did notapply to a consumermarket. Edison'sability to designefficient and reliable technologies served him well in his late 19th centuryproducer market, but it was not enoughto succeedin a market whereconsumers expected more than just technicalperfection. The Victor TalkingMachine Company, in contrast,was able to dominatethe phonographindustry because Eldridge Johnson implemented marketing strategies that were suitedfor a massconsumer market. Johnsonappreciated the valueof sustainedmass circulation advertising in orderto reachlarge numbers of consumers, andhe understoodthe importanceof providingsupport for his networkof jobbers anddealers. Johnson also recognized that celebrity recordings would help promote record sales. As Andre Millard has noted, "many people bought Victor phonographsbecause they wantedto hear the famoussingers who recordedon Victor records,and many desertedthe [Edison ] phonographto gain accessto Victor's library" [1, p. 220].

References

I. AndreMillard, Edisonand the Businesst•f lnnovation(Baltimore, 1990). 2. B.L. Aldridge,The VictorTalking Machine Company (RCA SalesCorporation, 1964). 3. EdisonMemorandum, May 1I, 1912,Edison General File, EdisonNational Historic Site Archives, WestOrange, NJ [hereaftercited as EdisonArchives]. 4. Summaryof Statisticsfor the Manufactureof Phonographs,Graphophones and Talking Machines, 1919 and 1914, U.S. Bureauof the CensusBulletin, 1919, copy in William Maxwell Files, PhonographDivision Records,Edison Archives. 96

5. Memorandum,Arthur Walsh to CharlesEdison, April 27, 1927,Arthur Walsh Files, Phonograph Division Records,Edison Archives. 6. Harold C. Brainerdto Arthur Walsh, May 28, 1923, Arthur Walsh Files, PhonographDivision Records, Edison Archives. 7. S.A. Essen to ThomasA. Edison,June 16, 1926, in Arthur Walsh Files, PhonographDivision Records, Edison Archives. 8. GeorgeL. Miller to ThomasA. Edison,Inc., March 30, 1923,Phonograph Division Records, Edison Archives. 9. G.J. Bensbergto SilverstoneMusic Co., August11, 1927,Arthur Walsh Files, Phonograph Division Records,Edison Archives. 10. ArthurWalsh to Walter Miller, July20, 1923,Arthur Walsh Files, Phonograph Division Records, Edison Archives. 11. RichardS. Tedlow,New and Improved: The Storyq[Mass Marketingin America(New York, 1990). 12. SusanStrasser, Sati•t•tction Guaranteed.' The Making t•{the American Mass Market (New York, 1989). 13. "EdisonPhonograph Sales Promotion Plan," undated,C.M. Viley Files, PhonographDivision Records,Edison Archives. 14. Walter L. Welch andLeah Burt,From Tinj'bilto Stereo(Gainesville, FI, 1994). 15. Arthur Walsh to Harold C. Brainerd,June 9, 1923, Arthur Walsh Files, PhonographDivision Records,Edison Archives. 16. LowellC. Frostto ThomasA. Edison,Inc, September 2, 1916,William Maxwell Files,Phonograph Division. 17. Dane Yorke, "The Rise and Fall of the Phonograph,"American Mercury, 27 (September1932). 18. HenryFord quoted in MatthewJosephson, Edison (New York, 1959). 19. Appellant'sbrief, New YorkPhonograph Co. v. NationalPhonograph Co., UnitedStates Circuit Courtof Appeals,Second Circuit, November 14, 1905,p. 218. 20. RolandGelart, The Fabulous Phonograph, 1877-1977(New York, rev.ed., 1976). 21 "TheTone Test and the StageSetting," Edison Dtatnond Points (November 1920), p. 15, copyin Edison Archives. 22. Erie Camera& PhonographCo. to ThomasA. Edison,Inc., May 24, 1926,in ArthurWalsh Files, PhonographDivision Records, Edison Archives. 23. Edisonmarginal comments on FrancesM. Crossleyto ThomasA. Edison,April 12, 1913,Edison General File.