|
Licensing the Westrex Electrical Recording System to Victor and Columbia
Click here to go to the Home Page of www.stokowski.org Click here to go to the Navigation Table for www.stokowski.org Aller à la Page d'accueil - Héritage de Stokowski Aller au menu de navigation principal
Sir Louis Sterling, circa 1950. Formerly Managing Director of Columbia Graphophone in the 1920s.
The Initial Licensing Efforts of Western Electric
As described in the page: Bell Laboratories development of the Western Electric electrical recording system, Bell Labs had developed carbon and condenser microphones, plus their new matched-impedance amplifier, plus their new electromechanical disc cutting mechanism. These components were combined together to became the Western Electric electrical phonograph recording system, called the "Westrex" system. By early 1924, the system was ready to be shown to potential recording partners. Western Electric, the manufacturing and marketing arm of AT&T, decided to seek to lease the Westrex system equipment to the phonograph recording companies. rather than to sell it.
The Westrex system was demonstrated to the Victor Talking Machine Company during 1924. Also, George W. Smith, Victor General Superintendent met with Dr. Frank B. Jewett, head of research at Bell Telephone (and soon to be President of Bell Laboratories beginning January 1, 192515) and with Western Electric engineers during mid year 192412.
Wax masters of recordings made by Bell Laboratories with the Westrex system were sent to Victor Talking Machine Company and to Columbia Phonograph Company. As Harry O. Sooy, the Victor recording engineer wrote in his memoires: "...January 16th, 1925: Mr. E[lmer]. E. Shumaker [of Western Electric] sent H. O. Sooy this date six twelve inch wax records for manufacturing made by the Western Electric Co., recorded from the second concert broadcasted by the Victor Company thru WEAF of New York, on January 15..." 23 WEAF was the New York broadcasting station owned by AT&T, and Bell Laboratories had been using these radio broadcasts for several years to make electrical recording experiments. This is presumably also the source of the excerpt of the Coriolanus Overture recorded electrically from a December 17, 1923 broadcast by van Hoogstraten and the New York Philharmonic included in recent 10 CD set: The New York Philharmonic: The Historic Broadcasts 1923-1987.
Dr. Frank Jewett, President of Bell Labs in 1925 and later Chairman of the Board of AT&T
Westrex systems were then made available in the latter part of 1924 to Victor and also to Columbia to evaluate. Victor at first hesitated to license the new system, it would seem primarily because of its high expense. Victor's business condition in 1924 was seriously compromised by the explosion of commercial radio16, and Victor's 1924 earnings dropped to $25,0008. Victor's reticence as to the cost of the Westrex system is certainly understandable. The Westrex system was to be licensed and leased; not sold, and was expensive. It required Victor and Columbia each to make an up-front payment of $50,000 (equivalent to more than $600,000 in current value1) followed by payment of a variable royalty per record, but which averaged approximately $0.01 per disc (equivalent to about $0.12 today1). The annual minimum royalty was set at $25,000, or about $300,000 in current value1. This minimum royalty was equal to the entire Victor earnings for the previous year of 1924. The often repeated story that Eldridge Johnson was inalterably opposed to an electric system in a Victrola cabinet does not seem to have been a factor, since Johnson had progressively further and further withdrawn from the management of Victor since about 1919. During 1924, Victor delayed their response, but did not reject the Western Electric proposals. However, it was Columbia, and Louis Sterling who would be the first to act.
Louis Sterling (later Sir Louis Sterling): Phonograph Entrepreneur
Louis Saul Sterling (1879-1958), was a US citizen, born in Kovno, Russia (now known as Kaunas, second city of Lithuania), May 16, 1879 and who emigrated with his family to the U.S. at age 3 24. In January, 1903 Louis Sterling decide to relocate to London. In later years he said that he arrived in London with a phonograph and with 5 Pounds in his pocket 30. Sterling started work in 1903 for Gramophone and Typewriter Ltd. After leaving G&T in 1904, Sterling became manager of British Zonophone, which manufactured both phonograph records and machines.
In December 1904, Sterling started his own Sterling Record Company 27. which made cylinder recordings.
In March, 1905, Sterling Record Company was renamed the Russell Hunting Record Co., Ltd., and was subsequently reorganized and renamed several times. Russell Hunting (1865-1945), an American, was one of the early independent phonograph entrepreneurs in the U.S. and in England. Russell Hunting made the 1907 recording of the Gilbert and Sullivan opera HMS Pinafore, and was previously well known in the U.S. for his comedy recordings. Sterling became the Managing Director of the Russell Hunting Record Co., Ltd., but continued to invest and build his other interests. Russell Hunting and Louis Sterling continued to make cylinder recordings, so perhaps they believed that cylinders would emerge as the winners over the flat gramophone disc. The Russell Hunting Record Co., Ltd. was ended in December, 1908 33.
In 1908, Sterling formed Rena Manufacturing Company, which the U.S. Columbia Phonograph Company purchased in 1909. Sterling was then appointed Columbia's British Sales Manager, and went on to develop a number of other phonograph businesses in England 25. Beginning in 1915, under Louis Sterling's initiative, a number of orchestral recordings were made of Thomas Beecham with the Beecham Symphony Orchestra and Sir Henry Wood conducting the New Queen's Hall Orchestra 34.
Louis Sterling in about 1914, age 35. At that time, Sterling was manager of the Columbia Graphophone Company, Ltd., UK subsidiary of the U.S. Columbia Graphophone Company
The U.S. Columbia Phonograph Company (named Columbia Graphophone before 1921) in 1898 had created a British branch, which was reorganized in 1917 as the (British) Columbia Graphophone Company, Ltd.5. It was this British affiliate of Columbia which was to became the basis for the emergence of Louis Sterling as a power in the phonograph industry.
Sterling's British phonograph interests grew during the 1910s, as did the circle of investors who trusted in him. On Friday, December, 8 1922, Sterling arranged for himself and his British investment partners, using the company entity "Constructive Finance Co., Ltd.", to purchase the (British) Columbia Graphophone Company, Ltd. subsidiary from is financially troubled U.S. Columbia parent4.
Sterling continued to grow (British) Columbia Graphophone Company, Ltd. during the 1920s and reinvest earnings into company growth. During this same period, the U.S. Columbia Phonograph Company went into bankruptcy and was reorganized twice. However, its debt load was excessive, and Columbia also experienced the same drop in demand for phonograph records in the early 1920s as did Victor. This was a result of post-war economic recession and the growth of radio. Victor, better managed and without excessive debt, grew while Columbia declined. By 1925, Louis Sterling was prepared to make his next move, which was triggered by the development of the new technology of electrical recording.
Recall that a license to the Westrex electrical recording system had been offered to the Victor Talking Machine Company and to the Columbia Phonograph Company, both US firms. Western Electric at this time did not want to license to companies outside the U.S. 2, perhaps because they were concerned about legal enforcement of patents or of agreements in courts outside the U.S. During most of 1924, both Victor and Columbia in the U.S. had hesitated to license this expensive technology from Western Electric.
Columbia Licenses the Westrex Process
First mover on the Westrex system was this brilliant entrepreneur Louis Sterling. On Christmas Eve of 1924,
Louis Sterling (in 1937 Sir Louis), General Manager of the (British) Columbia Graphophone Company in London
heard some of the test recordings made with the Westrex system2. These records may have
come from the Bell Laboratories wax masters provided to Victor and Columbia, or may have been made by Columbia
engineers in the U.S. evaluating the Westrex system as early as August,
1924 and certainly by November, 19249.
Joseph Maxfield of Bell Laboratories in a oral history recalled using the Westrex system
to make records in both the Victor and Columbia facilities. He said: "...by 1924, we had an exceedingly good
recording system. We had made records at both Columbia and Victor Talking Machine Laboratories - demonstration records.
They were both interested in licensing, and in 1925, they did..." 28
Another interesting version of the source of the test recordings was that
Sterling's former colleague Russell Hunting sent the tests to Sterling.
According to this account, Bell Labs, lacking their own record pressing facilities
contracted with the New Jersey manufacturing facilities of Pathé-Frères.
By 1925, Russell Hunting was back in the U.S. working for Pathé, and if this
version is true, Hunting send the recordings to Sterling. A version of
this story is included in the Jerrold Northrop Moore biography of Fred
Gaisberg 36.
The more direct version of this history: that of Bell Laboratories working
directly with the Victor and Columbia recording laboratories, as recalled
by Maxfield seems more plausible. However, the Russell Hunting
"back door" story is still interesting.
Whatever the source of the test recordings, Sterling immediately grasped
the significance of this new technology. Sterling began transatlantic
negotiations with Western Electric between December 26, 1924 and the end of
January, 1925 to license the Westrex system. There is also an
often-repeated story that Louis Sterling heard the test recordings at
Christmas and immediately took the next ocean liner to New York.
However, the U.S. travel and immigration records 3 do not
support this version, but rather show Sterling to have come to
New York City on February 11, 1925. That he would negotiate
the transaction by cable, and then travel to close the transaction
seems plausible.
Faced with Western Electric's decision to license only to US firms,
Sterling acted decisively by arranging for his
Columbia Graphophone Company, Ltd. (U.K.) to purchase, in early 1925,
the outstanding shares of the financially troubled
Columbia Gramophone Company (U.S.). The U.S.
Columbia business, after going bankrupt in 1923 32 had
been in financial reorganization in 1923 and 1924, and Sterling likely
had his sights on U.S. Columbia all during this period.
Negotiation of this purchase of Columbia Gramophone occurred during
January and February, 1925. Sterling again used the
"Constructive Finance Co., Ltd." controlled by Sterling and his
associates to purchase the U.S. parent, just as he had in 1922 to
purchase the British subsidiary Columbia Graphophone Company, Ltd.
This purchase by Sterling $2.55 million was partially financed by the
J.P. Morgan Bank, where Thomas W. Lamont, the famous Morgan partner was
an admirer of Sterling.
Sterling arrived in New York on February 11, 1925 as shown in the
New York passenger
lists, below 3. On Friday, March 6, 1925 the
Constructive Finance Company, Ltd., controlled by Sterling,
purchased the 51,000 of outstanding shares of the Columbia Phonograph
Company for $50.00 per share, therefore paying
$2,550,000 to purchase the U.S. Columbia operation19.
It seems likely that $2,500,000 was the purchase price of the shares,
and the additional $50,000 was to fund the initial license fee payment
from Columbia to Western Electric.
Sterling was still a U.S. national, and maintained a New York City residence (where his mother Julia lived
on West 117th Street). Sterling had excellent New York financial connections,
including with J.P. Morgan. 1925 was a busy time for Sterling, and in fact he crossed the Atlantic to
England again, returning on July 15, 1925.
Thus, by Sterling's ingenuity, US Columbia, the former parent of the British subsidiary, Columbia Graphophone now
became the subsidiary, and the British firm, controlled by Sterling became the parent.
Art Gillham (with glasses) standing to left of Will Rogers in November 4, 1924
during the Eveready Hour, broadcast by WEAF New York. AT&T sold WEAF in 1926
as part of a settlement with GE/RCA to exit broadcasting, and GE and RCA committed
to transmit all their network broadcasts via AT&T long distance lines
35. (note the Western Electric carbon microphone in the
1B housing on a stand. However, for electrical recording, records show
that Western Electric condenser micropones were used, rather than the more
noisy and frequency limited carbon microphones)
The definitive agreement between Columbia and Western Electric
was signed April 22, 1925 (one month before
Victor's definitive license agreement), and the up-front license fee was
$50,000. It may be that Louis Sterling's purchase of Columbia for
$2,550,000 consisted of a purchase price of $2,500,000 with an extra
$50,000 to allow the cash poor Columbia company to pay the $50,000
initial Western Electric license fee.
In addition to the up-front $50,000 initial license fee,
the Western Electric license contract called for royalties at
different rates, but starting at about $0.01 per record or about
$0.12 in current money. Also, the agreement called for a
minimum annual royalty of $25,000 (about $300,000 today) free of
British taxes6.
In identifying its electrical process recordings, Columbia adopted
the name "Viva-tonal" and "Electrical Process"
in lightening-bolt style font, which they added to early labels of
Columbia discs recorded with the Westrex electrical system.
Early Columbia Viva-tonal disc label
Victor Talking Machine Company Licenses the Westrex System
Meanwhile, the Victor Talking Machine management was perhaps influenced
by the Columbia licensing of the Westrex system, and more likely by the
need to reverse the poor business results of Victor. Victor was
also aware that the Gramophone Company, Ltd. was evaluating the
Westrex process in Britain. The Victor Talking Machine Company
on December 5, 1920 had purchased half of the shares of the Gramophone
Company for $1,600,00013. This Victor half-ownership
later gave the Gramophone Company access to license the Westrex system.
In early 1925, Victor Talking Machine Company decided to license the
Westrex process. Preliminary patent license agreements were made
with Western Electric in February, 1925.
Allan Sutton does conclusively document that Victor's earliest
electrical recording session with the Westrex system that resulted
in a commercially released record was on February 26, 1925 in
Camden11. Victor and Western Electric signed the
definitive license agreement for the Westrex system on May 21, 1925
according to the (sometimes unreliable) Fenimore Johnson
memoire7. However, as to the exact date, likely
more reliable is the Harry O. Sooy memoire which states:
"...March 11th, 1925: I celebrated my birthday, and
incidentally, my 27th year with the Victor Company by starting
to make Electrically recorded records for our Catalog, indicating the
demonstration proved satisfactory to the Victor Company, although
the Contract for same has not been signed. This work started on
permission from the Bell Company. Mme. [Olga] Samaroff being the
first artist to make records for Domestic use.
March 18th, 1925: Contract was signed by the Western Electric
and Victor Talking Machine Companies for the process and method
of making records electrically..." 23.
So, about 4 weeks after Columbia had signed their contract,
the definitive license agreement between Victor and Western Electric
for the Westrex system was signed. Victor paid Western electric the
$50,000 up-front license fee upon signing, with subsequent royalties
similar to those paid by Sterling and Columbia (described above).
Installation of the Westrex System in Victor Talking Machine
Camden Building number 15
At the beginning of February, 1925, Westrex equipment was installed in
Camden in Building no 15 as recounted by Harry Sooy:
"...February 3rd, 1925: The Electrical Recording Equipment from
the Bell Laboratories arrived at the Victor Laboratory, Building # l5,
via truck, this date...February 4th, 1925: Mr. Maxfield came over to inspect
wiring, etc., and pronounced same satisfactory..." 23
The Philadelphia Orchestra made its first electrical recordings thereafter
in Camden Building number 15 on April 29, 1925.
However, after the 1925 Camden electrical recording sessions, and following
the installation of Westrex equipment in the Academy of Music in
Philadelphia in early 1926, Camden studios were not used again to record the
Philadelphia Orchestra until 1931.
The Westrex system was also subsequently installed in Victor's
New York Studios and on July 31, 1925, the first Victor
New York electrical sessions were commenced14.
Louis Sterling Expansion of Columbia, Leading to the Creation of EMI
Louis Sterling in the next three years after the 1925 acquisition of
Columbia went on to acquire a series of European, Asian, and U.S.
phonograph companies. In October, 1925, Sterling arranged for a
holding company to combine Columbia Graphophone and the Carl Lindstrom
group of companies 29. Lindstrom (1869-1932) controlled
a number of labels, including Odeon, Parlophone and in the U.S.,
Okeh Records. Later, Sterling acquired the legendary
French Pathé-Frères, Pathé-Orient labels and Nipponophone in
Japan. 26
On March 19, 193118, Columbia Graphophone and the
Gramophone Company, Ltd. merged to create Electric and Musical
Industries Ltd., or "EMI", with Louis Sterling as Managing
Director. By this transaction, RCA ended up owning 30% of EMI,
as a result of RCA's 1929 purchase of the Victor Talking Machine
Company (which had owned 50% of the Gramophone Company).
In this same 1931 EMI transaction, Columbia Graphophone spun off
its US subsidiary, for anti-trust reasons, by giving each of the
Columbia Graphophone shareholders a cash dividend, plus fractional
shares in the (US) Columbia Phonograph Co. Inc17.
Louis Sterling became a British subject at some time between
September, 1930 and January, 1933, and was knighted in 1937.
Sir Louis retired from EMI in 1939 at age 60. He died in London
on June 2, 1958 at age 79.
If you have any comments or questions about this
Leopold Stokowski site, please e-mail me (Larry
Huffman) at e-mail address:
leopold.stokowski@gmail.com
|
