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Everyone thought that Sarnoff was foolishly optimistic when he predicted that $75 million in boxes would be sold within three years. Actual sales: $83 million. David Sarnoff, a prophet with honor, was soon radio's wonder boy, teeming with ideas. Why not, he proposed, put radios and phonographs in a single cabinet, save space, cut costs by using the same loudspeakers? Sales of such combinations soared. Why not start a radio network to improve programs, broaden the market for sets? At Sarnoff's urging, RCA founded NBC and the Red network. Two months later, the Blue network was added.
Changing the Tune. The radio field was being invaded by so many newcomers that Sarnoff got worried; he thought RCA should expand into other fields. But RCA's profits were needed to keep pace with the mushrooming radio business; there was little left for the kind of expansion he had in mind. So Sarnoff began his famous series of expansions without cash; he traded RCA products and stock for the companies he wanted. RCA had developed the Photophone, a device for talking movies, and traded rights to it to Radio-Albee-Orpheum and F.P.O. Productions, Inc. for 65% of their stock. The name was changed to the Radio-Keith-Orpheum (RKO). To get into the manufacturing business on its own, instead of remaining only a wholesaler of sets, RCA swung an even bigger deal: RCA took over Victor Talking Machine for $150 million worth of RCA preferred and common stock, a price that Wall Street thought far too high. RCA profits continued to soar. In 1929, the company that had hesitated to spend $2,000 on Sarnoff's music box grossed $176,500,000 as a result of it, netted $15.8 million, and was one of the sensations of the big bull market.
Radio stock went soaring from $2.50 to $549 a share, was split and resplit. Insiders made killings in radio pools, but Sarnoff had a reputation for keeping aloof from such shenanigans. At their height, he sailed to Europe to help Owen Young set up the Young Plan for German reparations.
When Sarnoff came back in 1930, he was elected president of RCA and faced the Depression. It was forcing many a radiomaker to the wall, but Sarnoff kept on driving ahead. In 1932, the Department of Justice forced G.E. and Westinghouse to give up their 51.3% control of RCA (by distributing their RCA holdings to their own stockholders). In this way, RCA achieved independence, but as part of the deal Sarnoff also had to pay off $17.9 million that RCA owed its parents. He did it partly when he turned over to them RCA's new skyscraper headquarters in Manhattan (which G.E. still uses for its executive office), partly when G.E. and Westinghouse wiped out $8,900,000 of the debt. RCA had outgrown the building, anyway. For new quarters, RCA took over the biggest building in Rockefeller Center and handed out 100,000 shares of preferred stock as part of the deal.