BW - EP139—001: Martin And Lewis With Monroe And Sinatra—Capital Gains

Breaking Walls: The Podcast on the History of American Network Radio Broadcasting

It’s 4PM eastern time on November 25th, 1948. Elgin Watches annual Thanksgiving Day special is on the air from NBC’s KFI in Hollywood. Don Ameche is the emcee. Ken Carpenter is announcing. This November Radio ratings are robust. Eleven shows have ratings higher than twenty points, and Lux Radio Theatre’s 33.2 is the most listened-to show on the air. But a major shift is about to happen just as the TV era launches. In 1948 comedian Jack Benny organized his activities into a corporation. At that time American individuals were taxed seventy-seven percent on all income over seventy thousand dollars. Benny’s hope was to secure a deal with NBC for his company, so that he could be taxed under capital gains laws at 25%. NBC’s parent company was the Radio Corporation of America. Their head, David Saroff, refused. Amos N’ Andy were the first to secure such a deal. They jumped to CBS in October of 1948. Then Lew Wasserman and Taft Shreiber—President and VP of The Music Corporation of America, called head of CBS William Paley to see if he was interested in a similar deal for Jack Benny. In November, David Sarnoff got word and sent NBC president Niles Trammel to California with orders to keep Benny at NBC, but Sarnoff refused to be there. William Paley flew to LA to meet in person, agreeing for CBS to buy Benny’s corporation for $2.26 Million. NBC responded by doubling their offer. However, Lew Wasserman again intervened, obtained the NBC contract, changed every mention of NBC to CBS, and re-offered the deal to Benny, who then signed it. Although Benny was signed, Paley next had to convince Benny’s sponsor American Tobacco to make the move. He did so by guaranteeing that CBS would pay the cigarette giant three thousand dollars per week for every ratings point lost after the migration. Floored that Paley would offer this, all parties agreed immediately. On Thanksgiving in 1948, William Paley had plenty to be thankful for. While Jack Benny was appearing on NBC for this Elgin Special, CBS announced on their evening news that The Jack Benny Program would be jumping to CBS. When asked that evening by the United Press, Benny declined to comment. It touched off a firestorm between the two networks. NBC claimed any such deal was unlawful. David Sarnoff said “leadership built on a foundation of solid service can’t be snatched overnight by a few high-priced comedians. Leadership is no laughing matter.” It was the biggest mistake of Sarnoff’s career. Jack Benny left NBC at the end of the year. Edgar Bergen too. There was suddenly a glaring hole in NBC’s Sunday night lineup. Between Benny and Bergen, NBC would need to replace roughly forty-five million listeners come January. In 1949, Burns and Allen, and Bing Crosby followed to CBS. NBC’s desperation created major opportunities. Among those to benefit were a comedic duo who’d been selling out nightclubs all over the country. Their names were Dean Martin and Jerry Lewis.