Tuesday, March 20, 2007

NYT on Edison, missing a talent for strategy???

Further to our discussion of Edison and the electric light, the New York Times had an article adapted from "The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World," by Randall Stross. The article included the text:

In retrospect, fame may appear to be a justly earned reward for the inventor of practical electric light in 1879. — yet Edison’s fame came before light.

The NYT article gets into Edison's invention of the phonograph, which did precede the invention of the improvement in lighting. The article notes: In truth, the Edison phonograph fell short of being irresistible; nor did it lead the industry in technical innovation. It was the Victor Talking Machine Company that made discs a practical medium. The disc’s flat dimensions offered a more convenient means of storing many songs than the three-dimensional Edison cylinder.

The NYT article made an interesting assertion: Edison had never shown a talent for strategy, and he did not give the subject close study. One may severely question this statement as to Edison's work in the light/electricity business. Look

In context, the NYT is talking about Edison and the music industry:

This business was not so easily mastered, however, and the contempt with which Edison regarded popular music did not help him understand his customers. They would purchase the records of particular performers whom they had heard of but shied away from the unknown artists. Decades later, economists who studied the workings of the entertainment industry would identify the winner-take-all phenomenon that benefited a handful of performers. The famous become more famous, and the more famous, the richer. Everyone else faces starvation. This was the case at the turn of the 20th century, too.

The management of the Victor Talking Machine Company understood these basic market principles long before Edison absorbed them. Shortly after the company’s founding in 1901, Victor signed Enrico Caruso to an exclusive contract, paying him a royalty that was rumored to be 25 percent of the $2 retail price of a Caruso record. His estimated annual earnings from royalties in 1912 was $90,000, at a time when the second most popular singer earned only $25,000.

The article also noted: But he permitted competitors to snatch up other performers like Louis Armstrong, Bessie Smith, Fannie Brice and Al Jolson. The first record to sell one million copies was Vernon Dalhart’s hillbilly ditty “The Prisoner’s Song.” Not surprisingly, it was a Victor recording, not an Edison.

The fame of the performers whom Victor Talking Machines astutely signed did more than bolster record sales; it also added great luster to Victor’s brand. A “Victrola” soon replaced “phonograph” as the generic term, a development that caused Edison considerable distress.

There is a quote from Edison in 1913:

“I am sure you will give me the credit of having put a tremendous amount of thought into the phonograph business after the many years that I have been engaged on it. Not alone to the technical side of the business have I given an immense amount of thought but also to the commercial side, and I want to say to you that I have most excellent reasons for not printing the name of the artist on the record. Your business has probably not brought you into intimate contact with musicians, but mine has. There is a great deal of ‘faking’ and press agent work in the musical profession, and I feel that for the present at least I would rather quit the business than be a party to the boasting up of undeserved reputations.”


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