The other big story emerging from the 1920s was the rise of commercial radio. Unfortunately, the sudden success of radio in the early 1920s also resulted in the record industry’s first prolonged decline in sales. Radio had been invented by Thomas Edison in 1880, but he did not follow through on it due to other projects and the intensive amount of capital it would have required to build out the system. Edison’s radio patents were eventually acquired by Italian inventor Guglielmo Marconi in 1895. Nikola Tesla, an American immigrant from Serbia who had worked in Edison’s lab also pursued the technology early in the 20th century.
In the first two decades of the 20th century, interest in radios as a form of entertainment (as opposed to communication) was primarily limited to teenage amateurs who “broadcast” music to whomever might happen to tune into their home stations using mostly home-made equipment. The hazards of allowing unlicensed amateurs to experiment with radio transmission led to the Radio Act of 1912, which limited amateurs to certain defined frequencies, reserving other frequency bands for communications and commercial broadcasts.
In 1919, General Electric founded the first successful commercial radio broadcasting company, calling it Radio Corporation of America (RCA), after purchasing Marconi’s American radio operations. During World War I, the United States Navy had seized control over all American radio broadcasters for national security reasons, and after the war decided to turn over radio broadcasting to only one American company, General Electric, to prevent any foreign control over the technology.
RCA set up its first commercial radio broadcasting station in 1921 (WDY) in New Jersey. In 1922, American Telephone & Telegraph (AT&T), expanding on its telephone monopoly, established its own radio station, bringing much-needed competition to the fledgling industry. AT&T’s telephone cables enabled it to also create the nation’s first radio network, allowing multiple broadcasting stations to transmit the same programming. RCA leveraged its ties to GE to also begin buying up patents and plants for the manufacture of radio transmitters and receivers, a market it soon dominated.
The rise of commercial radio in the early 1920s coincided with a downturn in the American labor market caused by the return of American servicemen from World War I. These two factors combined to suppress record sales in 1922 just as the expanding record industry was experimenting with new genres and independent labels. Victor’s record sales, for example, declined by a third in 1922, and the industry entered its first sales slump. In contrast, RCA’s sales growth from radio was growing just as fast as the record industry’s was declining.