Seven years ago the U. S. phonograph and record industry was so sick its own backers almost gave it up for dead. Today, it is not only up and around again; it has fattened into one of the fastest growing businesses in the U. S., with an annual gross of some $36,000,000. Every disc-buying jitterbug knows that records have been booming, but why, and just how much, has been anybody's guess. Last week in a figure-packed survey, FORTUNE put an end to guessing.
During the first quarter of the century records had their first boom. Disc-fans of that period paid the late Enrico Caruso alone some $3,000,000 in record royalties. What they paid for was a croaking shadow of Caruso's ringing voice. But in the days of hand-cranked Victrolas, even shadows were marvels of scientific progress. When the radio arrived in the early 20s, Victor Talking Machine Co., with Caruso as its biggest name, was doing more than half the industry's business to the tune of more than $50,000,000 annually. But by 1925 that figure had dwindled nearly 50%, and the heaps of records in Victor's stockrooms had begun to gather dust. By 1932 Victor had passed from the hands of the bankers to RCA, where it became a horse's thumb among RCA's booming radio projects. Victor's competitors did no better. The 1932 gross for the entire industry reached a scant $2,500,000.
But while the record manufacturers gloomed over their dwindling sales accounts, the engineers of Western Electric and the Bell Telephone Laboratories had been monkeying with electrical transcription and reproduction. By means of their new recording and amplifying gadgets the phonographic disc could, for the first time, catch a close approximation of actual sound, from the topmost squeaks of the piccolo to the profoundest groans of the bass tuba. Morose manufacturers adopted the new gadgets in the middle 20s. Electrical recording failed to set the industry on the road to recovery. But it did lay a firmer foundation for the Industry's future growth. It remade a mechanical stunt into a musical instrument.
The real upswing came in 1934 when two things happened: 1) RCA began to remember and worry about its long dormant record business; 2) a brand new concern, Decca, entered the field with a sheaf of fresh ideas. Dapper, bespectacled Jack Kapp and his codirector, Edward R. Lewis, had long contended that what the country needed was a good 35¢ record (standard prices had previously ranged from 75¢ to $2). Signing up big names in the popular field (biggest: Crooner Bing Crosby—see p. 50), Decca put this contention to the test, and sales began to skyrocket. Today, the five-year-old Decca concern, with Crosby as its Caruso, stands second only to RCA Victor, with an estimated annual gross of $4,000,000.
Ninety-five per cent of its output consists of the 35¢ popular discs advocated by President Kapp, and Crooner Crosby sells about 2,000,000 of these a year, a post-Caruso record record.