Figure 15 (p. 42)-The original instrument line offered by the Victor Talking Machine Company.
Figure 16 (p. 44)-Victor's first factory office located at 114 N. Front Street in Camden, New Jersey.
Figure 17 (p. 48)-Advertisement in "The Review of Reviews"-1904.
Figure 18 (p. 50)-Advertisement in "The Cosmopolitan"-1903.
Figure 19 (p. 52)-Recording for the Acoustic process.
Figure 20 (p. 54)-Advertisement in the "Literary Digest"-1915.
Figure 21 (p. 60)-On April 24, 1904, a large fire destroyed the first factory building used by Victor.
The Victor Talking Machine Company
The Victor Talking Machine Company, as we have seen, was incorporated on October 3, 1901, and organized two days later. It was not a new enterprise, but a merger of the interests of Eldridge R. Johnson with those of the Consolidated Talking Machine Company of America. The Consolidated Company, it will be recalled, was a holding company set up over The United States Gramophone Company, which controlled the Berliner patents, and The Berliner Gramophone Company of Philadelphia, which was the manufacturing company.
The first commercial activity of consequence by Berliner dated from October 5, 1895, when the Berliner Gramophone Company of Philadelphia was set up. Mr. Johnson made a pilot run of Gramophones for this company sometime during the late Summer or early Fall of 1896. His activities were, in fact, those of a brand-line manufacturer until September of 1900 when he set up to make and distribute his own product. From these facts, it would seem that the Victor Talking Machine Company could show direct lineage back to October 5, 1895. Mr. Johnson thought that it might reasonably claim 1894, the year in which he took over the Scull Machine Shop.
Whatever the preliminaries may have been, the company's real growth started with the formation of the Victor Talking Machine Company which got off to a fast start as a result of the business which Mr. Johnson had built up during the previous year. There is evidence that the first products (Fig. 15), which were offered by the new company, as well as its early advertising and other commercial activities, were a carry-over from Johnson's activity of the previous year. The work which Mr. Johnson and his organization had done from September 1900 to October 1901 in developing the product, building a factory organization, and establishing national distribution would, incidentally, appear to have had an important bearing on the distribution of Victor stock between the Berliner and Johnson interests, and hence on the company's history.
Looking back, it is natural to think of Mr. Johnson as having been the dominant figure in the entire development of the disc-type talking machine. This, however, was not always so. While Mr. Johnson was struggling along in 1896 trying to keep the small machine shop from folding up, Mr. Berliner was a man of considerable wealth with an international reputation and an important patent. Further, the men who owned the Berliner Phonograph Company of Philadelphia were men of parts with important outside interests. (p. 41)
Starting from a subordinate place in the disc field, Mr. Johnson had, by the Summer of 1900, earned a considerably improved position: first, by designing a practical and attractive spring motor; second, by delivering a uniformly well-made product; third, by developing a process which, though ham-strung by patents, produced greatly improved results; fourth, by the exercise of patience, perseverance, and good judgment in dealing with the better established factors in the business; and fifth, by building a factory building and developing a manufacturing organization. However, he was still the junior partner in the activity; he was, at the time, only 34 years old. Mr. Berliner was 17 years his senior.
By September of 1901, this situation had changed radically. Mr. Johnson had had a successful year. In addition to having developed an active, nationally advertised business with broad distribution, he had made $180,000.00. He had a manufacturing and selling organization on a going basis.
The Berliner Gramophone Company, on the other hand, had been out of business for a year as a result of the legal difficulties with its selling agent, Mr. Seaman, and had been greatly weakened both financially and commercially. They apparently were not able (perhaps not willing) to accept Mr. Johnson's proposal that they buy his interests for $350,000 in order to clarify the complicated situation which existed at that time. It is possible, of course, that their decision may have been influenced by a fear that the Seaman injunction might be renewed. As it turned out, it was renewed.
At any rate, while the question was being debated, a decision was reached, somewhat suddenly it seems, to settle the problem by transferring the rights to Berliner's patents, as well as Mr. Johnson's patents and the assets of Mr. Johnson's manufacturing activity, to a new company to be known as the Victor Talking Machine Company with Berliner and Johnson interests participating proportionately. The ratio finally negotiated, yielding control to Mr. Johnson, could not have been easy for the Berliner interests to accept. On the other hand, looking back, the Victor point of view would be one of surprise that Berliner's share had been as large at it was.
The Company's first staff of officers following the organization meeting on October 5, 1901 was as follows:
John T. Gross and C. Roy Bair were also involved in the organization; presumably in some nominal capacity. (p. 43)
The executive and factory offices were in Camden at 114 N. Front Street (Fig. 16). The sales office was on the 13th floor of the Stephen Girard Building on 12th Street in Philadelphia. Instruments using cabinets purchased from the Sheip Mfg. Co. were made in the new four-story brick factory building at 120 N. Front Street in Camden. Records were being recorded and matrixes processed at 10th & Lombard Streets, Philadelphia. Records were being pressed by the Duranoid Mfg. Co. in Newark, New Jersey. The product was being shipped from 10th and Lombard.
About a year later, the company had some records pressed by the Burt Co. of Milburn, N.Y., and started to press records for itself in a converted building at 23 Market Street in Camden. However, the sales office was not moved to Camden from the Commonwealth Trust Building (to which it had moved in 1903 or 1904) until 1905, and the transfer of activities from 10th & Lombard to Camden was not completed until 1907, which, incidentally, was the year Victor started to make its own cabinets.
Because the Gramophone Company of London had been such an important customer of Mr. Johnson's, and in view of its activities just before Victor was set up, it is understandable that their position with regard to the new company should have been clearly defined. It was mutually understood that:
1) Victor would provide sufficient capacity to give the Gramophone Company at least three times the volume they had received during the year ending July 1, 1900.
2) They could count on getting at least 50% of the new company's present or future capacity.
3) The new company would maintain an extensive experimental laboratory (50% of the cost up to $10,000 to be borne by the Gramophone Company). The product would be sold to the Gramophone Company on the following basis:
4) Each company would confine its sales efforts to that part of the world where each had individual patent and copyright protection. In general, this meant that the Gramophone Company would serve the British Empire (except Canada, which was covered separately by the Berliner Gramophone Co. of Montreal) and most of Continental Europe. Victor, on the other hand, would serve the rest of the world-The United States, Cuba, Mexico, South America, Africa, the Near East, the Far East, the Pacific Islands, etc. (p.45)
In 1901, the Gramophone Company was still being managed by Mr. William Barry Owen, but he returned to America the following year and Mr. Alfred Clark took over. Mr. Clark had been with Edison at one time, and, at another, had charge of Berliner's retail store at 13th & Chestnut in Philadelphia. He was a very able man and continued as Managing Director of the Gramophone Company for 40 odd years. Victor's total life-time billings to the Gramophone Company were approximately $5,600,000.
In the Fall of 1900, the wax cylinder was recognized by the trade and the public as the standard of quality. The disc was on the defensive and, in the main, was sold through bicycle and other small shops, whereas the cylinder type machines would be found, to a greater extent, in music stores.
From the Fall of 1900 to the Fall of 1901, Mr. Johnson's organization had, through the better performance of the new disc record, succeeded in improving this situation and it is interesting to note that by September of 1901, two important "old line" music chains, Wurlitzer and Grinnell, were handling the product. It is also interesting to note that, within the next sixty days, two other important names, Lyon & Healy and Sherman Clay, had been added to the lists. The acquisition of Lyon & Healy was a particularly notable event. At the time, it was the largest and most influential music house in the country. The story goes that Mr. Johnson had a long session with the store's management and tried from every angle to get their interest only to leave feeling that he had failed. However, acceptance was unexpectedly received the following day. This added greatly to Victor's prestige, and was to create assistance in getting other desirable distribution. It also started a close and mutually profitable manufacturer-wholesaler-retailer alliance, which lasted for about twenty years. The wholesale-retail set-up applied, of course, to numerous other distributors. As a matter of fact, a time came when Victor sold a few stores like Wanamakers, Lit Brothers, etc., whose wholesale activities were confined largely to their own retail stores. This policy was discontinued around 1920 when "dual" distribution was discontinued and a single wholesaler was set up to serve a "suggested" territory.
Up to the Fall of 1901, both Edison and Columbia stood firmly back of the cylinder principal as against the disc. As a matter of fact, Edison continued to exploit the cylinder exclusively until 1913. However, Columbia was so impressed with the improved disc record that, as we have seen, they introduced one of their own during the last quarter of 1901 under the name, "Columbia Disc Graphophone." It was not only a disc, but was also recorded by the Lateral Cut method (as against Hill and Dale), and in styling was so close to the Victor product as to cause confusion. Further, it infringed the Berliner patent and Victor got an injunction. (p. 46) This led directly to the cross-licensing agreement of December 8, 1903, between the American Graphophone Company (Columbia) and Victor. Under this agreement, Columbia got what they needed from the Berliner patent, and Victor got what they needed from the Jones patent. Now that Victor had the Berliner patent, and what it needed of the Jones patent. It seemed, for the first time, to be out in the clear as far as "basic" patents were concerned. Incidentally, the cross licensing put Columbia on an even footing with Victor and it became a question of who could make the best use of what they had.
In 1901, Victor won first prize at the Buffalo Exposition. Columbia, in an apparent effort to get something out of this for themselves, stirred up a great deal of friction with Victor by advertising their product as, "The one you saw at the Exposition. The one you like best."
In 1904, having been awarded first prize at the St. Louis Exposition by the Awards Committee. Victor advertised, 'Victor wins Grand Prize" (Fig. 17) This set loose a barrage from Columbia. It seems that, having been by-passed by the committee, they had wrangled recognition of some sort from the Exposition Committee. They protested and so did Victor. There were cross-suits, charges of corruption in connection with the awarding of prizes, etc., and more fuel was added to the early friction between Victor and Columbia.
When it started, or how it may have developed, is not known, but the business had not been going very long before a pattern, or program, of operations developed which lasted with comparatively little change over the years.
The first element in the program was that the product must be made of the best obtainable materials and workmanship. The principal objective was, of course, to get top performance. However, eye-value was an important secondary consideration. The product must have a flair-it must look quality. Great stress was placed on research and product development. A costly experimental laboratory (mostly "cut-and-try") was set up and every effort was made, in terms of the limited facilities of the time, to get increasingly better results. As time went on, no expense was spared to get special tools and other equipment, which would provide a better product and reduce the cost of manufacture.
As against the "card" or "price" type of advertising which most competition was using at the time, Victor assumed a constructive position almost from the start, and ran copy which was calculated to create desire for the product. Mr. Johnson gave this activity close personal attention, but, no doubt, got valuable assistance from Mr. Douglass and from the Powers and Armstrong advertising agency. While the advertising, which the company ran in the early days, was forceful and progressive, and no doubt represented a considerable financial strain, the results, which have been found do not support the general impression which has been built up that the volume was spectacular from the start. (p.47)
During the last three months of 1901, the advertising expenditure was 4.33% of domestic billings. During 1902 it was 3.25%, and during 1903 it was 5.92%. As against these figures, the lifetime average was 8.24%
The company's advertising policy-at least after 1903-was a heavy-handed one. The mediums used, in the main, were magazines and newspapers. There was no effort to get maximum results at minimum cost, but rather to use every publication for which there was any justification. There were times when the money came hard, but it came. The advertisements were everywhere you looked!
Newspapers were used primarily to announce new products-particularly the monthly release of new records. Magazines were used to create product demand. Here again, a definite pattern developed. Whether this was pre-planned or something which evolved is not known, but the facts are that the general problem was continuously attacked from four separate, carefully ratioed angles:
1. The excellence and superior performance of the product.
2. The pleasure and advantages (entertainment and education) of ownership.
3. Availability of the world's best artists.
4. The gift idea ("The Gift That Keeps on Giving").
It was generally thought that, of the four leads, the third was, perhaps, the most effective. The vast expenditure for full and double page ads (Fig. 18) featuring individual artists and groups added greatly to the value of the Victor contract. It helped Victor sign up, at one time, nearly all of the world's best artists. It sold the product and, by association, implied a product of top-flight quality.
The advertising program was supported by a vigorous and effective commercial policy. By offering a quality product at competitive prices, and with sustained advertising, the line had dealer acceptance. This fact enabled the company to develop close bonds with its dealers (who were appointed by the distributor, but individually recognized by Victor). Every effort was made to insure fair and equitable treatment for all, and to get rid of disruptive and non-cooperative elements. The fact that the dealer liked the line and wanted to keep it enabled the company to press for results.
Approved dealers received sales helps, inspirational material, and direct mailing from Camden at a cost, at one time, of $25.00 to $35.00 a year. A dealer had to account for a yearly volume of at least $300.00 to justify the expense, and was automatically removed from the list if he didn't. The company felt that fair trade practices were essential to the merchandising of a patented specialty, and these principles were successfully applied for about fifteen years, as will be detailed in a later section. (p. 49)
For many years, most of the big name artists and organizations made records exclusively for Victor. The Victor record catalog was developed to the point where it was generally accepted as a reference book of the best and most wanted music, and a "who's who" of the world's best artists-both popular and serious. The excellent work done by the Artist and Repertoire Department under Mr. Child, supported by the recording experts and the company's advertising department, soon developed the situation to a point where it became a mark of distinction to be a Victor artist-particularly a Victor Red Seal artist.
There is perhaps no better way to put the spot light on the skill with which the company was financed than to point out that, whereas the company paid cash dividends totaling 510% from 1902 to 1922, only 54% had been paid up to the end of 1910. Profits had been plowed back from 1901 to 1910 so that undivided profits at the end of 1910 stood at $4,250,195.71. It is also significant that the dividends paid from 1912 to 1922, inclusively, were the equivalent of approximately 7% of the volume during this 10-year period. In 1922, Victor stock, having a par of $l00.00 (when available), sold over the counter for about $1,300.00. On October 27, 1922, the brokerage firm of Stone, Prosser & Doty issued a circular in which the company was described as ". . . one of the largest and most brilliantly successful of companies."
In speaking of his policies, Mr. Johnson once said:
Red Seal Records (Caruso)
While musical reproduction had been introduced into England and the continent from the United States, and while some progress had been made in the United States in recording serious music (Fig. 19), a time came when the European countries temporarily took the lead. Most of the early Red Seal recordings were from imported matrixes. This reached a high with the releasing of Caruso records by the Gramophone Company in March of 1902.
Fred Gaisberg had been sent to Milan by the Gramophone Company to hear a singer who was creating a sensation with a possible view to making some records. Gaisberg heard him and was impressed. However, Caruso wanted the unheard of fee (at the time) of £100 for 10 records. The current scale was in the order of $2-$5-$10 a selection. (p. 51)
London turned it down, but Gaisberg went ahead on his own. The ten records recorded were as follows:
This session turned out to have been one of the most important, if not the most important, in the history of recorded music. For instance:
1. The Gramophone Company made a profit of £15,000 on the sale of these ten records.
2. The record "E Lucevan Le Stelle" got Caruso his first contract with the Metropolitan Opera Company in New York. Mr. Conried, Manager of the Met, heard it in the Gramophone Company's Paris office, took it to New York, and cabled Caruso his first contract. Caruso made his debut at the Met in "Rigoletto" on November 23, 1903.
3. The records had important influence in melting the prejudice, which big name artists still had against recording their art.
4. If Victor advertising over the years gave Caruso valuable publicity (Fig. 20), his name as an exclusive artist brought prestige to Victor.
5. His records, backed by exclusive Victor advertising, effectively stimulated the public's interest in serious music.
6. His contract with Victor was very helpful in building up the Red Seal catalog.
7. The fee of £100 for the Milan recording led ultimately to royalties to Caruso in excess of $3,000,000. Caruso got $4,000 for the first 10 records he made in Camden (shortly after his first appearance at the Met), $10,000 for the next 10, and forty cents a record, with an advance on royalties of $10,000, for the next 10. Caruso was 29 years old in 1903.
If there were any records of Red Seal caliber in Victor's Catalog in 1901, there probably were not many. The last page of the bulletin of 10-1-01 announced that a group of records of this kind would "soon" be available by importation. The first published list of the kind which has been located was probably issued in 1903, and most of the listings were from imported matrixes. (p. 53)
The records Caruso made in Camden apparently marked the beginning of the active development of the domestic "Red Seal" recordings. One important artist after another was added to the list until the domestic section of the catalog became much more important than the imports.
By 1906, the following artists had been signed on an exclusive basis:
At the start, the record business was largely confined to popular tunes of the day, comics, and instrumental selections with a strong leaning toward Sousa's Band. During the first four years of the company's history, the dollar volume of the record end of the business developed as follows:
This was about $600,000 better than the instrument volume for the same period.
From 1901 to 1905, the company offered its domestic trade 12 different instrument models ranging in list from $15.00 to $100.00. Trade discounts are not known, but were probably 55% for the distributors, 40% for small dealers, and 40 & 10% for large dealers.
The most noticeable changes in product development had to do with the method of supporting the horn, and the evolution of the horn itself. However, far and away the most important development during this period, one of the most important developments in the company's history in fact, was the "taper tone arm and goose neck," introduced in 1903. This feature had the following advantages:
1. Because of the ball-bearing mountings, it enabled the sound box to track across the record almost without resistance.
2. The hinging of the "goose neck" made it possible to carefully determine the pressure of the sound box on the record, and made it much easier to change needles.
3. While the scientific reason for it wasn't known at the time, the performance was much improved. (p. 55) This was due to the fact that the additional distance and gradual expansion of the air-chamber from the sound box to the end of the horn provided a modification of the exponential principle used years later in the Orthophonic Victrola.
Domestic instrument volume from 1901 to 1905 increased as follows:
To a talking machine enthusiast, the "sound box" of a talking machine carried something of the importance and glamour of a chronometer. Individuals prized particular units as, for no particular reason, being the best that had ever been made. Even the company's executives took great pride in showing and playing a box which had come out of the company's experimental laboratory. Several of the company's best mechanics spent years of their lives working behind closed doors making up boxes in every conceivable size and weight and with every fulcrum variation that was suggested or could be thought of. While the great bulk of the company's production was equipped with Concert, Exhibition, No. 2, and Orthophonic boxes, there was a total of about 15 variations which were used in one connection or another.
The company ran a back cover in the "Saturday Evening Post" on July 12, 1902. On April 25, 1903, it followed up with the first "double truck" ad ever run in the Post. The company again ran a back cover in the Post on April 9, 1904. Interspersed was a series of smaller advertisements. In an attempt to strengthen and enlarge its distribution, nearly all of these advertisements listed the company's distributors.
The bold use of large, conspicuous, space had the dramatic effect of putting the spotlight on the new enterprise, and of giving it an apparent importance in line with the largest companies in the country at that time. The practice of using special positions became established practice. After 1910, practically all of the company's extensive advertising in the Post was in big, important space-most of it double spreads and back covers.
Victor traded heavily on the power of curiosity and suspense. From the earliest days, records were issued once a month. They were announced or put on sale prior to a specified date. Instruments were put on sale nationally, with a fan-fare, on a specified "Opening Day." There was a build-up. Something important would happen on a particular day. The trade and public apparently loved it and waited expectantly. Every effort was made. of course, to make the wait worth while to avoid a let-down. (p. 56)
Then, remarkable results were obtained by featuring an unexplained "secret process" which may not have been anything more important than the important matter of using materials which were a little better than actually required, and workmanship which was painstaking in every minute part of the product.
From 1901 to 1905, exposed horns were available in many sizes and shapes: black horns, black horns with brass flanges of varying proportions, all brass horns, flower ("Morning Glory") horns, and, as a top development, horns in oak and mahogany ply-wood.
In view of the complications which had existed between the Berliner Company and Mr. Seaman-which had indirectly and, to some extent, directly involved Mr. Johnson-it is significant that Mr. Seaman, who was also an advertising agent in New York, should have made a serious play in February or March of 1901 for Victor's advertising account. It is also significant, in another way, that the Armstrong Agency should have held the account against all comers from 1901 to 1925. It was, however, no coincidence. Vendors and others who served the company fairly and to the best of their ability were not easily dislodged.
License to Sell
From 1896 on, Mr. Johnson had met up with many of the rough sides of business-pirating, counterfeiting, misrepresentation, double dealing, patent infringement, loss-leader sales, etc. From a practical point of view, none of these problems concerned him more than loss-leader sales. For, whereas there was some legal recourse against the others, the position of a patented product with regard to the Sherman Act had not been clarified.
Mr. Johnson and his lawyers took the position that it didn't make sense for the government to give an inventor a patent monopoly for 17 years and then leave him without protection against destructive elements in the trade. Victor was among the first to strongly advocate fair trade practices and they vigorously fought the issue for about 15 years. They argued that the public's interest against gouging by the manufacturer was protected by the inventor's self-interest because the price and product had to be acceptable to the public if the inventor was to survive.
One of the company's top legal advisers stated his own and the company's point of view as follows:
Beyond the broad theory that dealers interested only in scalping a short, quick profit could demoralize the market, Victor was confronted with the practical problem that promiscuous price cutting would have, in some way, to be controlled if the constructive support of houses like Lyon & Healy, Sherman Clay, Grinnell, etc., was to be retained.
Accordingly, in an effort to meet this situation and merchandise its products on a basis which, in its opinion, would yield a fair profit and equal opportunity to all, the company inaugurated a license to sell system starting March I, 1902, when the company was barely 5 months old. The "notice" was applied directly to the product and was worded as follows:
The Burt Company
On January 18, 1902, Mr. Johnson and Mr. Douglass personally bought the Globe Record Company of New York from the Burt Company of Milburn, New York, for $10,000. This did not include a claim which Globe had against the Columbia Phonograph Company and the American Graphophone Company which Burt was left free to collect in any way it could. The Victor Company was involved in the transaction only insofar that Mr. Johnson, as an individual, agreed to buy 300,000 records from Burt before July 1, 1902, at 7½¢ for 7" and l5¢ for 10" f.o.b. Milburn. He also agreed to buy from Burt half of all the records Victor might require from January I, 1902, to July 1903. It was stipulated that the records were to be pressed from matrixes owned by Globe or Victor. Incidentally, no account has been found of the business, which Mr. Johnson or Victor may have given Globe, nor is the exact connection between Globe and Burt known. The agreement also stipulated that the arrangements would be continued indefinitely, but could be discontinued July 1, 1902, on 6 months prior notice and the payment of $7,500, or on January 1, 1903,on similar notice with the payment of $5,000. (p. 58)
On February 15, 1902, about a month after the purchase, Mr. Johnson and Mr. Douglass sold Globe to the American Graphophone Company. Available records do not show the money consideration, but American Graphophone agreed to drop a suit then pending against Globe and Mr. Johnson, and, what is much more far-reaching, they granted a release and discharge from any and all liabilities for any alleged past or future infringement of patents No. 341,214 (Bell & Tainter's important basic "wax as a medium of recording" patent), 341,288, and 375,579. They also released Mr. Johnson, The Berliner Gramophone Company of Philadelphia, and Mr. Parvin of all "costs, demands, profits, charges" and to "indemnify them from all parties who may claim to have any right to said patents." Available records do not give further details but the known facts would indicate that there must have been a bad situation in the background.
The incident was closed by Victor's abruptly closing the deal with Burt on October 14, 1902, on the ground that Victor's business was being intentionally injured in favor of Columbia by the delivery of inferior records. Victor's record production in its own new pressing plant at 23 Market Street, Camden, was 2,000 records a day during December of 1902.
On Sunday afternoon, April 24, 1904, a fire (Fig. 21) destroyed a large part of the four story brick building which the company was using to make horn-type talking machines. Although the building was insured, there was a loss of about $45,000-not including the loss of business, which would, of course, have been much more serious had the fire occurred in the Fall instead of the Spring. Activities were quickly moved to the "Match Factory" (now known as Campbell's warehouse #1 at the corner of Penn Street & Delaware Ave.). There was really a minimum dislocation of business. The effect can perhaps be reasonably measured by the following comparison of the company's net profits from 1902 to 1905 inclusive:
The shrinkage for 1904 would have been greater had not increasing record sales, which were not affected, offset part of the instrument loss. (p. 59)
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