Editing RCA (section)

===National Broadcasting Company===
Beginning in 1922, AT&T became heavily involved in radio broadcasting, and soon became the new industry's most important participant. From the beginning, AT&T's policy was to finance stations by commercial sponsorship of the programs. The company also created the first radio network, centered on its New York City station WEAF (now [[WFAN (AM)|WFAN]]), using its long-distance telephone lines to interconnect stations. This allowed them to economize by having multiple stations carry the same program.

RCA and its partners soon faced an economic crisis, as the costs of providing programming threatened to exceed the funds available from equipment profits. The problem was resolved in 1926 when AT&T unexpectedly decided to exit the radio broadcasting field. RCA purchased, for $1,000,000, AT&Ts two radio stations, WEAF and [[WCAP (Washington, D.C.)|WCAP]] in Washington, D.C., as well as its network operations. These assets formed the basis for the creation of the National Broadcasting Company (NBC), with ownership divided between RCA (50%), General Electric (30%), and Westinghouse (20%) until 1930, when RCA assumed 100% ownership. This purchase also included the right to begin commercial operations. NBC formed two radio networks that eventually expanded nationwide: the [[NBC Red Network|NBC-Red Network]], with flagship station WEAF, and [[Blue Network|NBC-Blue]], centered on WJZ. Although NBC was originally promoted as expecting to just break even economically, it soon became extremely profitable, which would be an important factor in helping RCA survive the economic pressures of the [[Great Depression]] that began in late 1929.<ref>[https://babel.hathitrust.org/cgi/pt?id=uc1.$b78643&view=1up&seq=17 "Early History of Network Broadcasting"], ''Report on Chain Broadcasting: May 1941'', Federal Communications Commission, pages 5-8, 17.</ref>

Concerned that NBC's control of two national radio networks gave it too much power over the industry, in 1941 the [[Federal Communications Commission]] (FCC) issued an industry review, [[Report on Chain Broadcasting]], which included a rule designed to force NBC to divest one of them.<ref>[https://babel.hathitrust.org/cgi/pt?id=uc1.$b78643&view=1up&seq=104 Rule 3.107], ''Report on Chain Broadcasting: May 1941'', Federal Communications Commission, page 92.</ref> This order was upheld by the U.S. Supreme Court, and on October 12, 1943, the NBC-Blue network was sold to candy magnate [[Edward J. Noble]] for $8,000,000, and renamed "The Blue Network, Inc." In 1946 the name was changed to the [[American Broadcasting Company]] (ABC). The "Red" network retained the NBC name and remained under RCA ownership until 1986.

For two decades the NBC radio network's roster of stars provided ratings consistently surpassing those of its main competitor, the [[Columbia Broadcasting System]] (CBS). But in 1948, as the transition from radio to television was beginning, NBC's leadership came under attack due to what became known as the "Paley raids", named after the president of CBS, [[William S. Paley]]. After World War II the tax rate for annual incomes above $70,000 was 77%, while capital gains were taxed at 25%. Paley worked out an accounting technique whereby individual performers could set up corporations that allowed their earnings to be taxed at the significantly lower rate. Instead of NBC responding with a similar package, Sarnoff decided that this accounting method was legally and ethically wrong. NBC's performers did not agree, and most of the top stars, including [[Amos and Andy]], [[Jack Benny]], [[Red Skelton]], [[Edgar Bergen]], [[Burns and Allen]], [[Ed Wynn]], [[Fred Waring]], [[Al Jolson]], [[Groucho Marx]] and [[Frank Sinatra]] moved from NBC to CBS. As a result, CBS boasted of having sixteen of the twenty top-rated programs in 1949. The consequences would carry over to television, where CBS maintained its newfound dominance for decades. Paley had personally worked to woo the performers, while Sarnoff professed his indifference to the defections, stating at an annual meeting that "Leadership built over the years on a foundation of solid service cannot be snatched overnight by buying a few high-priced comedians. Leadership is not a laughing matter."<ref>''The General'' by Kenneth Bilby, 1986, pages 246–249.</ref>