First-Hand:Apple, RCA and the Visionaries

Submitted by Michael Ettenberg

Before there was an Apple and Steve Jobs there was an RCA and David Sarnoff. Just as Steve Jobs, with great vision, created a company dominant in today’s hot consumer electronics field David Sarnoff did the same in the age of TV and Radio. With Sarnoff’s death in 1971, RCA began a slide to its demise in 1986. Bought by GE, it was sold in pieces to a variety of companies. History teaches us Apple will have the same fate with the loss of its visionary.

Like Jobs, Sarnoff did not have a technical degree; he started as a wireless telegraph operator at the Marconi Wireless Company, the precursor to the Radio Corporation of America (RCA). In the beginning radio was only important to the military and controlled by the government, it was thought by both government and industry that radio was a point-to-point communications medium. Sarnoff disagreed and in 1916 wrote a memo describing a radio music box for the enjoyment of all. It took RCA’s management until after 1920 to accept the idea that radio could be used for entertainment. Just like Jobs, Sarnoff recognized the power of controlling content distribution and created in 1926, the NBC radio network, the first and only network in America at the time. To completely fulfill his dream of a music box, he brought Toscanini from Europe and created the NBC Symphony Orchestra with its own studio concert hall.

Like Jobs, his perseverance was legend. He wanted to create broadcast television and hired Vladimir Zworkin from Westinghouse to lead the effort in 1928. Zworkin told him the project would take two years and cost $100,000, the actual time and cost were many times that figure but Sarnoff continued to support the effort even through the great depression. The first demonstration of commercial television did not occur until 1939, when at the World’s Fair in New York there was a broadcast from the first television station WNBC to 200 TV sets. Then there was color TV, believe or not at the time a substantial business risk, Sarnoff had to bet the company to make it happen. RCA was developing an all-electronic version of color TV, compatible with broadcasts to the then black and white TV sets. CBS beat them to the punch with a non-compatible color TV system incorporating a spinning mechanical color wheel and incredibly the FCC in 1950 approved the CBS system as the US standard. As you might imagine, the color wheel system did not do well in the market place; the FCC reconsidered and a few years later choose the RCA system.

I arrived at RCA Labs as a research scientist in June of 1969 when RCA was at its zenith. RCA was at that time the largest and most profitable consumer electronics company in the world. It had the dominant market share in television sales and the leading very profitable TV network in NBC. It was, as the tag line RCA it used in advertisements, the most trusted name in electronics.

A demonstration of RCA’s power in the market place occurred in the mid 70’s, during the Video Cassette Recorder (VCR) format war between BETA and VHS tape formats. BETA developed by Sony was considered the superior format. RCA went to Sony to ask them if they would make an RCA branded model with some changes to Sony’s current model. Sony would not agree to the changes, so RCA went across the street to JVC, who produced the VHS VCR for RCA. VHS, the inferior format, was subsequently the winner, due in large part to RCA’s power in the marketplace.

A year after I arrived at the Labs Sarnoff retired and soon died and his son Robert took over. Sarnoff left his son a treasure trove of very valuable advanced technologies and new products and Robert Sarnoff and the subsequent CEOs of RCA managed to fritter them away in the space of 15 years.

The first was computers; RCA was a major manufacturer in competition with IBM, Honeywell, NCR and others. In fact RCA had a technical lead in time-sharing and virtual memory technology, both of which turned out to be important. Robert early in his tenure sold the business because it needed significant investment to stay at the leading edge and instead invested in buying Banquet foods, Coronet carpet, Hertz rental cars and Gibson greeting cards to try to make RCA a conglomerate.

Another opportunity for investment was RCA solid-state division. RCA was an early leader in microprocessors, which became the heart of personal computers, and had invented Complimentary Metal-Oxide-Semiconductor(CMOS) technology. CMOS is the production architecture still used today for all Silicon integrated circuits, but RCA’s solid-state integrated circuit business also required large investments to stay current. Without significant investment RCA became a second tier player, concentrating on niche businesses such as TV and Automobile electronics instead of the faster growing and more lucrative computer related businesses.

Liquid Crystal Displays (LCDs) were invented at RCA Labs and abandoned, in addition RCA had a technological leads in visible LEDs and detectors for fiber optic communications but neither technology was pursued.

As an aside the inventor of the fiber optic detectors was Greg Olsen, a friend and colleague. Greg left RCA just before it’s demise and started a company to produce the detectors in competition with RCA. Greg successfully built his company called Sensors Unlimited and sold it some years later for 650 million dollars. Luckily, I had a small ownership position in his company.

The final straw in this long line of wrong-headed decisions occurred in the mid 70’s. RCA was losing its dominant position to TV manufacturers in Japan such as SONY. In fact the demise of the TV repairman came with high reliability TV’s from Japanese manufactures and RCA had to make investments in their TV line to bring them up to the quality standards of the Japanese sets; a boon for the US consumer but a loss for RCA. To regain their dominance, RCA management decided to create the next great TV related product, a Videodisc and true to form they picked the wrong technological solution and sunk the company. I was peripherally involved in the management deliberations and watched as they squandered another opportunity.

There were two technologies being developed at RCA Labs that could produce a videodisc consumer product, were optical disc data recorders using large gas lasers and a needle in a grooved disc recorder. RCA Labs was a research leader in the optical disc arena mainly through the help of U.S. Government research contracts, which added to the RCA funding. Semiconductor lasers and Optical disc recording were not of great interest to RCA’s management, but with substantial government funding and some interest from RCA’s Government Systems division they let us continue to play in the field.

My own research was on semiconductor lasers, I was fascinated by these tiny devices no bigger than grains of sand that were capable of producing large amounts of directed light with an efficiency substantially exceeding any other light source. Remarkably, just before Sarnoff retired, RCA set up a small activity to become the first commercial supplier of semiconductor lasers. Of course the new management showed little interest or willingness to invest in this business. As is often the case for new technology, the first substantial use was for the military, in this case as proximity detectors for detonation of sidewinder air to air missiles.

It was obvious to us to replace the massive gas lasers with a tiny semiconductor laser and we did just that and created what I believe was the first working prototype of an optical disc player. Just as in a modern Digital Video Disc (DVD), the player consisted of the semiconductor lasers focused through a small lens tracking a few millimeters above the spinning disc reading out the light and dark regions imprinted on the disc. Compared to the relatively poor TV signal most people received with their indoor and outdoor antennas over the air at the time the videodisk produced a much better picture. The major RCA labs research effort however to create a videodisc player was a needle in a groove, which picked up electrical signals imbedded in a conductive disc. We knew our approach was far superior. We had no physical contact with the disc and thus were immune to small dust particles because we could coat the disc and put the dust particles out of focus, just as you don’t notice a little dirt on your glasses. In addition we could not only read prerecorded discs and but also record on blank discs. In addition we had developed disc materials that could be erased and rewritten. We thought we had the obvious winner and demonstrated our system to management. For us it was like comparing the CBS’s spinning disc to the RCA’s all electronic color TV, but like the FCC, RCA management chose the needle in groove approach. The reason given was that the system would be too expensive because the semiconductor lasers were too complicated to manufacture in volume and would always be prohibitively expensive. At the time RCA was one of the few manufacturers of the lasers and only in small volumes, a few hundred a year. Almost all of the sales were to the defense department with the corresponding large overhead in terms of documentation and testing, so the lasers were sold for over $1000 a piece. A few years later Japanese manufacturers were producing lasers for Compact Disc (CD) players for $1 a piece.

The needle in groove Selectavision videodisc system with a 12 inch disc in a heavy protective sleeve had its demise in 1985 along with several hundred million dollars in write-offs. A year later RCA was bought by GE and ceased to exist. The value of the technology and the technologists at RCA laboratory which RCA management failed to exploit is attested to by the labs transition, with the help of GE and SRI, from a company supported research laboratory to a successful and profitable contract research company named appropriately Sarnoff Corporation. Sarnoff Corporation led in the creation of the first broadcast satellite system, Direct TV, and the creation of the HDTV digital broadcast standard in the United States as well as spinning out over a dozen technology startup companies and a multitude of new products and services for companies throughout the world. Too bad the management of RCA could not see the potential, but there are only a few with the vision to develop new technologies and very very few like Sarnoff and Jobs.

Step one of Apple’s demise, I think, is losing share in the smart phone market to Samsung.