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Technological Extinctions of Industrial Firms: An Inquiry into their ...

Technological Extinctions of Industrial Firms: An Inquiry into their ...

38 After the RCA color

38 After the RCA color broadcast specifications became the industry standard in 1953, RCA tried to promote the color market by selling complete color sets and kits to competitors (Levy [1981, p. 163]). However, factory prices in the 1950s were typically $400-500, equivalent to over $2,000 in 1990 dollars (Willard [1982, pp. 171-172]), and breakdowns in 1957 required visits by repairmen on average every two months (Harris [1957, p. 115]), so that despite efforts by NBC to spur color sales through prime time color broadcasts, color set sales remained tiny. Only in the early 1960s did color set sales begin to take off, and manufacturers responded with a range of color display improvements (Levy [1981, pp. 35-64]; Herold [1974, 1976]). Other innovations in the 1960s and 1970s improved the displays, tuning, and circuitry of black and white as well as color TVs. After the rise of color set sales, probably the most important change to the product was the growing use of solid state circuitry in the 1970s. Transistors and integrated circuits greatly improved set reliability and, more importantly, eventually changed both TV set design and production techniques (LaFrance [1985, pp. 120, 309], Wooster [1986, pp. 68-75]). Japanese producers took the lead in designing integrated circuits for TVs, and U.S. producers lagged one to two generations behind in their level of component integration (Wooster [1986, pp. 73-74, 118-119, 156-157]). Table 11 can be used to assess which firms were most involved in TV product innovation. Innovations that were not attributed to specific firms were ignored because they were developed by many firms around the same time, and as before black and white and color versions of an innovation were each counted one-half. Eight U.S. TV set manufacturers appear in the list. The top four, in order, were Magnavox, RCA, Zenith, and GE, with 5, 4, 4, and 3.5 innovations respectively. These four firms accounted for 62% of the innovations attributed to particular firms. Table 10 indicates that RCA, Zenith, and GE were the top three U.S. producers by 1958, with RCA and Zenith continuing as the industry leaders in the color era and Magnavox displacing GE as the number three color producer. Magnavox’s innovations involved tuning and peripherals, plus its light sensor for brightness adjustment which, according to Levy [1981, p. 53], "involved no new technology, but was eminently demonstrable in the showroom." In contrast, the innovations by RCA, Zenith, and GE were concentrated in display innovations and fundamental improvements in circuitry. The next three firms in

39 order of number of innovations, Motorola, Sylvania, and CBS, were in the second tier of firms in terms of market share at the times of their innovations. Advent was the only U.S. TV set innovator that was not an industry leader, and its innovation addressed a small niche market, projection television. Thus, TV product innovation was dominated by the leading firms, especially the top four producers. 30 The product innovations in Table 11 diffused rapidly within the U.S., according to Levy’s [1981, p. 46] impressions from interviews. A quarter of the innovations in the table were not even attributed to particular firms because of their development by multiple firms simultaneously. Components including picture tubes, cabinets, tuners, and later semiconductors were available from large numbers of independent suppliers, and many major TV set producers integrated backward into production of these components (Levy [1981, pp. 104-108]; LaFrance [1985, p. 105]; Wooster [1986, p. 379]). 31 Key patents were held by RCA and to a lesser extent by Hazeltine, but were licensed to any interested firms. RCA’s royalties during 1952-1956 were estimated to be 2.26% of TV set prices (Levy [1981, pp. 154-162]). 32 And in a 1958 consent decree, all of RCA’s TV patents except a block of color TV patents were made available royalty- free in exchange for other firms allowing RCA to use their patents (even if they had none); Hazeltine’s licensing was also constrained. Thus, simultaneous innovation, suppliers, and licensing provided means for rapid diffusion of television product innovations. 30 Consistent with these conclusions, a report by Charles River Associates [1979, pp. 2-4] noted that of fourteen key color TV innovations developed by U.S. firms in the 1970s and 1980s, RCA developed 5 and Zenith 4, versus at most 1 for other U.S. set manufacturers. A U.S. Office of Technology Assessment and Forecast study, cited in the same report [pp. 2-9], found that among U.S. firms in the period 1969-1978, RCA and Zenith had the most color TV patents granted, 183 and 55 respectively. 31 Picture tube suppliers included Clinton, a specialist in small tube sizes that did not make TVs, RCA and Sylvania, which sold large numbers of tubes, and GE, Sony, and Zenith, which manufactured primarily for their own use. Many picture tube suppliers entered color tube production in the 1960s (LaFrance [1985, p. 105]). 32 RCA netted $96 million in patent royalties during the period 1952-1956 (Levy [1981, pp. 154-162]). RCA licensed liberally in part to promote its broadcasting standard, upon which its patents were based, and to support the growth of its broadcasting subsidiary, the National Broadcasting Corporation. After its 1958 consent decree, RCA continued to license Japanese firms, which from 1964 through 1970 paid over $47 million for black and white and $87 million for color TV set royalties; as of 1981, RCA still received approximately $50 million per year from Japanese firms for color TV licenses (LaFrance [1985, p. 366]).

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