[Carmine]

Please don't interpert my comments as a defense of Zenith quality once in their death spiral. My remarks were intended for an accurate depiction of David Sarnoff and encourage people to learn his real motivations while at RCA. These are excerpts from a chapter in a larger book I'm working on that will deal with trade policy and manufacturing. It's very time consuming to write, because I refuse to use some of these statements unless they can be footnoted.

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"Many will no doubt wonder why American manufacturers don't speak up more stridently; if in fact they are being so disadvantaged by imports and their exclusion from foreign markets. It's possible that they may have looked at the outcome for Zenith Radio Corporation, which did choose legal remedies, pleading (and suing) for the enforcement of internationally recognized anti-dumping laws, anti-monopoly laws and prosecution for U.S. Customs fraud; only to be repeatedly undermined by involvement from our own State Department and Justice Department. The waters of international law enforcement get very murky when politics are involved. Zenith demonstrably resisted the temptation to off-shore its manufacturing, research and development for decades after its competitors had moved their manufacturing to Asia, or closed their doors altogether. By the early 1990s, this industry-leader was reduced to a shell of its former self..."

"At this point, I must mention Zenith's biggest competitor of the era, the Radio Corporation of America. Ironically during the first years of its existence, RCA didn't manufacture a single radio. Some of the first multi-national corporations; General Electric, Westinghouse and AT&T, held almost complete monopolies on patents in the fields of electrical power generation, lighting, telephone and radio manufacturing, and through interlocking foreign patent pools, divided the world into territorial monopolies. The executives of these companies came of age as J.D. Rockefeller's Standard Oil Company was broken up under the Sherman anti-trust act, at the start of the century. Thus they quietly engineered so-called consent decrees (which are not admissions of guilt) in response to charges of price-fixing. The result of one of these consent decrees was the 1919 managed break-up of the GE/Westinghouse patent pool and creation of the Radio Corporation of America..."

"After WWII, Zenith was at the height of success and finally in a position to challenge David Sarnoff's Radio Corporation of America not only in sales, but in court by refusing to renew a byzantine package of patent licenses. Zenith's legendary founder, "Commander" Eugene McDonald was a fighter, and was willing to risk his company to declare war on RCA's patent racket. In reality this package of licenses was "protection-money" that a radio manufacturer either paid for, or faced the wrath of RCA lawyers in court. Licensing fees accounted for an enormous percentage of RCA's annual revenues. The power of RCA's world-wide patent monopoly was not in the strength of any particular innovation, but the threat of expensive, crippling litigation. Zenith had been protected to a certain extent because it had licensed its most important patents from Edwin Armstrong, before he had sold them to Westinghouse..."

"On Sunday evening, September 7, 1957 attorneys representing RCA presented Zenith counsel with a hastily prepared settlement, designed to prevent the opening of a civil litigation trial the following morning. The initial draft gave Zenith a royalty-free license for radio-television manufacture. Other manufacturers had refused to join Zenith's suit, and RCA was not about to give up its patent-pool revenue from other builders without even being challenged. More relevant to our discussion of trade was a $10-million payment made as compensation for the estimated loss in revenue as a result of Zenith's exclusion from the Canadian market..."

"During the course of taking depositions and examining documents from RCA for the European-civil court attempts to open closed markets, it became apparent that David Sarnoff was focusing an inordinate amount of attention on Japan beginning in the mid-1950s. Teams of Japanese researchers and engineers were making regular trips to RCA headquarters, laboratories and factories. At the same time, RCA's patent experts and technical staff were making frequent trips to Japan. As far back as 1921, in a memo dated December of that year, Sarnoff had recommended a "consolidation" of competitors in Japan, modeled on the way RCA had been doing business in the United States. Sarnoff's interest was in the lucrative foreign patent licenses and is plainly revealed in this quote from his memoranda:

"RCA would be glad if such a group in Japan would be its representative in that country and would be pleased to represent the Japanese group in the United States."

Owen D. Young, another Sarnoff mentor at GE during the creation of RCA, followed up with a letter to "Doctor Dan" a Japanese contact, urging them to "stabilize" the electronics industry in Japan and stated:

"I explained to you that we had mobilized in RCA the patents and technical resources of AT&T, Western Electric, United Fruit, Westinghouse and GE and that to make such a mobilization effective all of these concerns have taken a substantial financial interest in RCA."

With RCA's patent licensing scheme finally coming to an end in the U.S. as the result of Zenith's litigation, Sarnoff focused on replacing the lost American licensing revenue with a generous percentage of the revenues of a Japanese cartel which would enjoy a protected consumer market in Japan; while beginning to export successfully to the United States. When GE purchased and reabsorbed RCA in 1985 (largely for the NBC network which it owned), the Japanese licensing agreements were bringing in as much as $200-million in annual income. With amazing speed, Japan was building its electronics industry, and targeting the US market. By 1960, Emperor Hirohito conferred on David Sarnoff the Order of the Rising Sun, the highest decoration that can be awarded to a non-Japanese born person. The Japan Times called him the hero of the Japanese television industry.

"Japan, so often held up as a model of free-market capitalism by many in the U.S., and has never been hampered by concerns over what might be decried as "big-government-central-planning" in America. Japan's notorious Ministry of International Trade and Industry (MITI) took steps to organize its electronics industry along the lines suggested by Sarnoff and the RCA specialists, through the Electronics Industry Development Emergency Law, enacted in 1957. The law outlines the organization, direction and provided financing through the Japanese Development Bank. It's much the same as the turn-of-the-century American trusts, such as Standard Oil, but on an international scale. A first step would be the recognized-as-illegal practice of "dumping" electronic goods. These goods are exported to the United States at a loss, but the loss is countered by high prices in Japan's home market, which is closed to foreign imports."

"Japanese manufacturers had captured the entire U.S. portable radio market with a similar (although less lucrative) dumping scheme. Thus by 1968, facing declining sales and finding no further means of cost reduction, Zenith was forced to end U.S. production of portable transistor radios. They were the last holdout. Zenith executives had seen the handwriting on the wall for the more profitable television market as early as 1960, and reasoned that American competition would lower prices in the Japanese market, thus ending the cartel's ability to endure losses from predatory dumping in the United States. Beginning in 1961, Zenith decided to enter the Japanese market.
Zenith management contacted C. Itoh and Company, a major Japanese trading company for help in distributing Zenith products in Japan, which had proven popular at trade fairs and demonstrations throughout Japan. However, this effort would soon meet with failure as Zenith was met with a virtual firewall of Japanese government protectionism. In a translated letter from C. Itoh, it was explained, "[Ministry of International Trade and Industry] (MITI) would not allocate the currency, because Zenith products are exceedingly popular in the market here."

2/The Fall of the U.S. Consumer Electronics Industry, an American Trade Tragedy, Phillip J. Curtis, pp.110, 111.

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This is Mr. Sarnoff's legacy. Painting Zenith and RCA with the same brush, simply because they were contemporary electronics companies is akin to saying Elvis and Rammstein are both Rock n' Roll acts who've spent time in Germany!