The History of Philco
Chapter 4: Diversification and War
© 2005-2013 Ron Ramirez
The 1939 Philco home radio line was different; radically different. The more expensive Philcos had slide rule tuning and pushbuttons for preset broadcast stations. High fidelity advances were cast aside in favor of a new toy – wireless remote control. Philco initially called it "Mystery Control," refusing even to admit in its dealer catalog that it was wireless remote control, instead calling it only "a mysterious force!" The same catalog falsely claimed that Mystery Control was "not a radio beam," when in fact it was just that – a low-frequency, battery-operated transmitter with a dial very similar to a telephone dial, which sent pulsed signals to the radio receiver.
Inside the radio, which was really two receivers in one, the portion of the set which received the remote signal processed the pulses and would proceed to change between eight preset stations, raise or lower the volume, or turn the set off – all depending on how the set owner dialed the remote. The Mystery Control could not turn the set on, however – the user had to do that manually.
Philco's radios were now wired with rubber-insulated, push-back wire. No one at the time considered the need to completely rewire an old Philco nearly seventy years later, due to the rubber insulation having deteriorated.
Baby Grand sets were gone, except for a few farm sets. Now, if one wanted a small Philco, he or she had several smaller table model sets from which to choose.
Philco's automobile radios no longer carried the Transitone name. That was transferred to a new, price leader line of small table model radios. The first Transitone for home use, the TH-1, is a curious set. Its circuit design does not resemble anything Philco had ever designed. It was a four tube TRF radio, with a ballast tube. No Philco home set had ever used a Type 6D6 tube as original equipment; they always used the equivalent Type 78 tubes instead. The service information for the TH-1 lists five-digit part numbers that do not correspond to any Philco part numbers. On a label on the back of the TH-1, no mention of Philco is made at all – only a tiny, cryptic reference to an "S.R.C." at the bottom of the patent notice tag. Could this be Simplex Radio Company, and was the TH-1 a Simplex-designed set? This possibility remains under investigation.
The second Transitone, the TH-3, was a slightly modified 38-12CB with a different dial scale. The dial only read "Transitone," but was otherwise identical to the dial of the 39-6. No doubt this was a Philco set!
A strange set with no dial or controls on the radio itself, only a wired remote with eight pushbuttons and concentric volume/tone controls, was announced for the 1939 lineup. Model 39-50RX appears in the firm's 1939 dealer catalog. However, it was apparently withdrawn from production just before the model year began, as it is not chronicled in Philco Furniture History, and none are known to exist.
For the first time, Philco had a product in its line that was not a home or auto radio, battery or battery eliminator. They had contracted with the York Ice Machinery Company to produce an air conditioner for them, which was named "Cool-Wave."
In the Fall of 1938, Larry E. Gubb, then President of the company's Philco Radio & Television subsidiary, received a phone call from W. Paul Jones of Fairbanks-Morse in Indianapolis, Indiana. Fairbanks-Morse was interested in selling its entire refrigerator division, including existing inventory of its refrigerators. By November 1938, Philco had agreed to the purchase, bringing Jones along and making him Vice-President in charge of refrigeration. Jones' team of engineers also became Philco employees. Philco sold remaining supplies of Fairbanks-Morse Conservadors (35,000 of them) through the spring of 1939.
According to Philco official James T. Buckley, Philco's reasoning for getting into white goods was that radio sales began in the summer (indeed, each season's new radio line was introduced to the public every June), peaked at Christmastime, then went into a slump until the following summer. Buckley claimed that it was difficult to make money in radios until late in the year. On the other hand, refrigerators began selling in the spring, when radio sales were at their lowest, and would peak in the summer.
In other words, profit all year 'round.
Philco's Canadian subsidiary began producing models that were increasingly different from their USA counterparts in summer 1938 for their new 1939 line. In addition, the Toronto, Ontario company began to use a very different model numbering scheme for their sets from that used in the USA.
Meanwhile, the parent firm produced some models for the Latin American market before the war with blonde mahogany cabinets. Larry F. Hardy, Vice-President of home radios, said that "we can't sell them here. The Latin Americans are five years ahead of us in style." It would be the late 1940s before blonde cabinets became popular in the USA.
It was in 1939 that Philco won its lawsuit with RCA over patent royalties. RCA was forced to return $750,000 in excess royalties, and to draw up a new licensing agreement with Philco.
In May, James M. Skinner, who had been President of Philco since late 1930, was made Chairman of the Board, replacing Edward Davis. Larry E. Gubb, previously head of the Philco Radio & Television Corporation subsidiary, became President. Skinner had exercised quite a bit of influence over Philco for many years, but apparently his influence was not what it used to be after he became Board Chairman. At this time, Philco remained a privately held corporation; the executives still owned the stock. John Ballantyne, James T. Buckley, and Gubb were apparently in favor of Philco offering stock to the public, as they were the men who brought this about in 1940, after Skinner's departure. Skinner's feelings about offering stock had been made public some years before in a Fortune magazine article (he was against the idea then, and presumably still was in 1939). Skinner was also Philco's largest stockholder. Before 1939 was over, however, Skinner resigned from Philco. In 1958, five years after his death, Business Week would report that Skinner's departure from Philco was due to a "policy tiff." The possibility of making Philco a publicly held corporation may well have been the cause.
Philco's TV station, W3XE, began broadcasting a regular schedule in 1939. At the time, there were around 200 televisions in use in the Philadelphia area, thus W3XE's schedule was not carried in the newspapers. The station mailed postcards containing each week's schedule to TV set owners until the papers began to publish the station's program schedules.
In June 1939, Philco's new 1940 lineup was introduced to the public. The radio line was, for the most part, quite similar to Philco's 1939 line. Philco finally admitted to what its "Mystery Control" really was, by using a more correct term – wireless remote control. A notable advance was a built-in loop antenna on all but the cheapest models. This eliminated the need for an outdoor longwire antenna, something Philco sets had needed since they began to produce radios in 1928.
The loop antenna could be rotated (within limits) for best reception of the tuned-in station.
Philco introduced its first television receivers in June 1939. However, the early Philco sets were overshadowed by RCA's initial offering of consumer television products, introduced at the New York World's Fair by RCA head David Sarnoff.
The big news in Philco's 1940 line was a refrigerator carrying the Philco brand. Philco pushed its new refrigerator line quite heavily; to the point of informing its distributors that they should carry Philco refrigerators or drop the Philco radio line. Vice-President of merchandising, James H. Carmine, prepared a large advertising campaign for the new refrigerators, including giveaways of radios and electric clocks. The campaign was successful, as Philco sold 89,000 refrigerators in 1940.
Philco dropped its original Cool-Wave air conditioner in 1940, as it proved to be troublesome. On very hot days, it couldn't keep up with rising temperatures. In addition, it had no provision to pull in fresh air from outside. The company began selling larger units instead.
For calendar year 1939, Philco made $1,899,323 on sales of $45,421,078.
After Philco won its patent royalty suit with RCA in 1939 and received a new license, there was no longer a need for two companies under the same roof. Returning to Philadelphia by train from a trip to the South in the early part of 1940, Philco President Larry E. Gubb, along with John Ballantyne and James T. Buckley, spent the trip discussing the possibility of selling Philco stock to the public. Buckley recalled having dealt with a broker named Ed Sayers at Smith, Barney & Co. Upon their return to Philadelphia, Ballantyne, along with Philco Treasurer, William Wilson, decided to pay a visit to Sayers. Upon consulting a telephone directory in a cigar store to find Sayers, they visited him at his Smith, Barney office. When they mentioned taking Philco public, Ballantyne said that Sayers "was so surprised he nearly fell in the wastebasket."
The company was formally reorganized in July, 1940. Philadelphia Storage Battery Company and Philco Radio & Television Corporation merged back together, its old common stock was split 33-1/3 to 1 and issued at $15, with a par of $3. The firm was now called Philco Corporation.
One month prior to this, Philco bought controlling interest in the National Union Radio Corporation, a manufacturer of vacuum tubes.
At the same time Philco was buying into National Union, its new 1941 radio line had been introduced. "Music on a Beam of Light" was the year's catch phrase. It was a phonograph with a very unusual pickup. The large pickup head contained a lamp, a permanent jewel stylus, a small mirror, and a photocell. A special circuit in the radio produced a radio-frequency voltage which lit the lamp, preventing any 60 cycle hum from being introduced into the sound of the reproducer. The mirror was mounted on top of the stylus. As a record was played, the jewel stylus in the record groove made the mirror vibrate. The lamp shone on the mirror, and as the mirror vibrated, the photocell picked up the variations of light reflected from the mirror. The photocell, transferring light energy into audio-frequency voltage, sent the resulting audio into the receiver where it was amplified and heard through the set's speaker. The result was improved tone with less surface noise. Although, the reduced surface noise was due chiefly to the selenium photocell's inability to pick up the higher-frequency vibrations of light, thus, reducing overall frequency response, and high-frequency surface noise as a result.
The new Beam of Light phonographs were housed in console cabinets, mounted just above the set's speaker. The speaker grille was designed to tilt forward to reveal the phonograph. Hence the "Tilt-Front Cabinet."
Philco had sold radio-phonograph combinations since 1930 (model 296 was their first), but sales had been consistently poor; so much so that Philco's 1938 line of radio-phonographs were actually produced by the Radiobar Company, using Philco radio chassis and Capehart record changers! However, the Beam of Light innovation helped Philco to (finally) grab the top spot in radio-phonograph sales in 1941.
It was in 1940 that Philco engineers increased the resolution of its television pictures to 525 lines, the standard which was adopted by the Federal Communications Commission in 1941 and which remained in use (with modifications to add color in the 1950s and, decades later, stereo sound) until June 12, 2009 when the USA's television stations, with the exception of low-power translator stations, switched to digital transmission.
A Philco-published history of its television station, WPTZ, claims that Philco used frequency modulation (FM) for television sound in 1940. While the FCC mandated FM sound for TV when it adopted standards in 1941, it is interesting that Philco made this claim, since Philco did not introduce radio receivers which could receive FM until June 1941 – and then, these used circuitry which not only circumvented the patents of Major Edwin H. Armstrong, the inventor of FM, but did not reproduce FM at its full potential.
1940 was a year of firsts for Philco's television station, W3XE. In January, the station televised Philadelphia's annual Mummers Parade for the first time. The 1940 Republican National Convention, held in Philadelphia that year, was the first political convention to be televised; again, over W3XE. The station began telecasting University of Pennsylvania football games in September 1940.
In November 1940, Philco produced its fifteen millionth radio receiver, prompting a "Fifteen Millionth Philco Jubilee" at Philco dealers throughout the United States and Canada. And in December, Philco made history again by becoming the industry's first manufacturer to produce two million radios in a calendar year.
Philco's 1940 gross sales were up to $52,311,131, with a net profit of $2,248,568.
Between 1935 and 1940, Philco had spent $11 million on advertising, with its distributors and dealers spending an additional $11 million. In 1941, Philco spent an additional $5 million keeping its name before the public. In 1944, John Gilligan, Philco's advertising manager, stated that Philco spent such huge sums "because we think advertising is a commodity, like heat or light or rent."
The heavy advertising helped keep Philco the number one radio manufacturer in the country. More expensive models were featured in their national magazine ads. James H. Carmine, Philco's merchandising Vice-President, made this comment in 1944 regarding local advertising: "We get down to earth in the newspapers, to drag the customers into the stores." In other words, a low-priced model was featured locally to get people to come into the local Philco dealer, where it was the salesman's job to "sell" the customer "up" to a higher-priced set.
Heavy emphasis on sales had long been a Philco hallmark. The company had divided the USA market into ten regions, each headed by a division manager who had to meet his sales quota or be fired; as of 1944, no division manager had yet lost their jobs.
By the time America had entered World War II, Philco had around 135 distributors, which sold Philco products to somewhere between 20,000 to 25,000 dealers.
Philco paid its salesmen on a commission basis, and did not pay for their expenses. However, the commission was good enough that the salesmen could afford to cover their own expenses.
1942 radio models, which came out in June 1941, were for the most part only slightly changed from their 1941 counterparts. The higher-end models no longer had rotary band switches, pushbuttons being used instead to select a particular band as well as for preset broadcast stations. The more expensive radio-phonographs now had a two-speed mechanism – 78 rpm and 39(!) rpm. The two-speed mechanism would prove to be very troublesome, and eventually after the war, Philco would offer a conversion kit to convert the 1942 changers to single-speed 78 rpm operation.
During 1941, Philco constructed a relay link between Philadelphia and New York, making it possible to rebroadcast events such as boxing at Madison Square Garden to television audiences in Philadelphia. W3XE first broadcast baseball games in 1941 – twilight league games held across the street from Philco Headquarters at Tioga and C Streets, on a field where Philco's television factory, built in 1952, still stands. On September 8, 1941, Philco's experimental television station W3XE received a commercial license from the Federal Communications Commission. WPTZ was the second commercial TV station to be licensed by the FCC.
As war clouds gathered in 1941, Philco began to look for government contracts, opening an office in Washington, D.C. in the fall of that year. Vice-President in charge of operations, William Balderston, was put in charge of the new office. Most military brass shrugged off Philco's initial efforts at acquiring government contracts, since the company was best known for assembling radios from parts that came largely from outside sources.
What the military didn't realize, however, was that Philco had its own engineering department, with a group of engineers which had been doing television research since 1928.
The Philco contingent was told by a Navy official that it would take them two years to get Navy work in wartime – four years in peacetime. Rejecting offers to operate a steel mill, a munitions factory and a shell-loading plant, the company took on some small contracts to build such things as frequency meters and radios for tanks, in order to gain experience.
The main item Philco was interested in building for the government was radar. Shortly after opening its Washington office, Philco received the chance to produce radar equipment.
A competing electronics firm had told an Army Air Corps colonel that it would take eight months to get the radar into production. When Philco found out about this, they inquired about producing the device. A sample was brought to Philadelphia, where it was carefully examined. Upon completing their examination, they promised to have two samples ready by January 1, 1942, and that they could commence production in eight weeks.
By December 31, twenty-four samples were complete. As these were shipped to Dayton, Ohio, for a demonstration, Philco engineers made final adjustments. The demonstration was a success; Philco received the contract, and tooled up for production in seven weeks.
As Philco remained in first place among radio manufacturers up to the end of civilian production for the duration, their financial picture continued to improve year by year. Calendar 1941 saw Philco's profits continue to rise, up to $2,513,569 on sales of $77,073,636.
In January 1942, Philco was still producing radios for the civilian market; even adding a few new models to the lineup. This would not continue for long, however, as a complete conversion to war work was imminent, the USA having become involved in the conflict after the Japanese attack on Pearl Harbor, Hawaii on December 7, 1941.
As a way to help get rid of surplus stocks, Philco brought out two unusual radios in March, just before civilian production ended for the duration. Both used car radio chassis that had been converted to operate on 110 volts AC. One was a floor model (A-361), which used a chassis originally intended for a Ford automobile. The other was a chairside (A-801), with what was supposed to be a Chrysler radio.
When Philco made the conversion to 100% war work, it placed steel covers on its conveyors to make worktables out of them. They also gathered up their radio test equipment and placed it in racks near the ceiling. This would make conversion to peacetime work easier for Philco.
After the conversion, Philco built radar and other electronic equipment, as well as proximity fuses. Their old storage battery plant at Ontario and Arbor Streets, Plant 1, was converted to production of quartz crystals, which Philco began to manufacture in 1942 at the request of the Army Signal Corps. (Philco had moved its storage battery production to a plant in Trenton, New Jersey prior to the war.) Watsontown Cabinet Company, which had produced cabinets for Philco radios for many years and by now was a Philco subsidiary, was kept busy making filing cabinets and ordnance. Another Philco subsidiary, National Union, built vacuum tubes and cathode-ray tubes for the government.
As part of the shutdown of the production of civilian goods, manufacturers' stocks of refrigerators and air conditioners were frozen in order that they would be available for possible war needs. Thus, Philco was left with several refrigerators and air conditioning units.
As there was a pressing need for the equipment Philco was manufacturing, it became necessary to speed up the processes whenever possible. As an example, when Philco began to produce wave meters for the Signal Corps, it took two and a half hours to calibrate the instruments by hand – and then they required a 24 hour burn-in period before they were ready for use. Philco developed an automatic calibrator for their wave meters, which reduced the total time to prepare the meters for use to fifteen minutes.
Due to conversion to war work and the stoppage of civilian production, Philco's profits fell slightly in calendar 1942, down to $2,209,992 on sales of $68,505,979 which reflects a five million dollar reduction in prices of military equipment sold to the armed forces during the year. The company absorbed a loss of $1,105,776 on inventories which were rendered valueless due to the conversion to war work for the government.
Also in 1942, Philco moved its television station, WPTZ, out of their corporate headquarters and Tioga and C Streets in Philadelphia to a new location in nearby Wyndmoor, Pennsylvania, in order to allow space formerly occupied by the station to be used for war work. WPTZ studios remained at Tioga and C until 1945, at which time the studios were moved to 17th and Sansom Streets in downtown Philadelphia.
Since 1917, Philco had exported some of its products, mainly to Central and South America, through the American Steel Export Company, a firm which also represented other companies. But in April 1943, Philco set up its own subsidiary, Philco International Corporation, to handle future Philco export business. Dempster McIntosh, Vice-President of American Steel, was brought aboard as President of Philco International.
That same month, two of the three Philco executives who were the key players behind taking Philco public, were promoted. James T. Buckley was made Chairman of the Executive Committee, while John Ballantyne became company President.
Meanwhile, Philco's distributors had no new radios to sell. In order to keep their distribution network going, Philco sent three men to look throughout the country for products to sell. James H. Carmine was quoted in 1944 as saying, "We got them everything from cider to stockings." What the distributors received were such items as Fire-King and Thermo-Seal glassware, Soil-Off and O-Cedar cleaning supplies, Sherwin Williams Kem-Tone paint, flags, globes, maps, games, novelty items, rugs, even furniture.
During the war, Philco's plants earned 21 Army-Navy "E" awards for excellence in production of war equipment. The company earned its first "E" flag on August 14, 1942.
In late 1944, Philco was already making postwar plans. Those plans included an FM circuit that would be better than its less than ideal 1942 FM circuitry, and a new record changer for its radio-phonographs. A new line of freezers was also planned. They expected to be ready to go back to civilian radio production within sixty days of resuming peacetime work, and to bring out its first postwar television receiver within six months to a year. Indeed, Philco was back in radio production by November 1945, and did not bring out its first line of postwar television sets until June 1947. This tardiness in TV allowed RCA to get a giant head start in the new television field – and not look back.