Zenith's Decline

[dishdude]

The bad CRTs the company produced '93-'96 had nothing to do with the decline of the company, it started back in the late 70's when the US did nothing to protect American companies and manufacturing from dumping and outsourcing. Zenith started losing hundreds of millions each year starting in '84, and tried many things unsuccessfully to stay alive. Personally I think they should have dumped the TV business and focused on PCs, but hindsight is 20/20.

The only year after '84 that they posted a profit was the year they sold the PC business.

[holmesuser01]

And I do agree... the System 3 sets were awful. Profitable for the repairman, but awful. I used to stock multiple modules for these sets.

[zeno]

Dishdude got it right. The CRT problem didnt cause the
loss of many customers. Loss of dealers yes. But that
really didnt either. The old way of selling TV's was at an
end for everyone. TV's were becoming a commodity almost
blister wrapped & hanging on a peg board. Most were not
made to be fixed easily & any support was going away.
Zenith was also loosing there biggest base, old people.
The best customers were dieing off fast
No matter what nobody could build sets here anymore. It
all went to China for the smallest bowl of rice. China is
doing it for 3 reasons. Cash flow, jobs to keep the reds in power,
and modern tech with military applications.

73 Zeno

[andy]

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[Carmine]

Originally Posted by andy

I would argue that Zenith's decline started in the 60's when they refused to move to circuit boards. I know they advertized it as a feature, but they must (should) have known that designs would soon be too complex for point-to-point assembly. I assume the real reason they stayed with hand wired is that they didn't want to invest in new production lines. From what I've seen in 70's-90's sets, Zenith never did quite get the hang of soldering circuit boards.

I know their point to point sets hold up better than circuit board based sets of the same period, but I can't imagine there was much difference over the normal lifespan of a TV. Even decades later, I rarely run into serious problems caused by these old circuit boards.

You're nuts.

Zeno and Dishdude are spot-on.

Here is a small sampling of the 18-page (and counting) book chapter I've written on the subject. If anyone here hasn't read “The Fall of the U.S. Consumer Electronics Industry, an American Trade Tragedy”, a little-known book written by Phillip J. Curtis in 1994; you should.

The consumer electronics industry is still going strong nearly 100-years after transitioning from a handful of tinkering inventors to a multi-billion dollar annual industry. While small North American companies continue to innovate on the research and development side of electronics, there hasn’t been a meaningful American player on the consumer side of this industry for more than a generation. Quite simply the average person knows nothing of how and why thousands of U.S. jobs in the consumer electronics industry vanished. Despite all of the American innovation in broadcasting, color television, transistors, memory chips, etc.; it is as if we all woke up one morning and the biggest, most highly regarded names in electronics were all from Asian nations. Yet it wasn’t always this way.

How does this relate to the auto industry? There are a great number of parallels and lessons to be learned, and they can be applied to most any manufacturing industry that wishes to export its products into other markets, or any which suffer from subsidized imports. Perhaps “wishes” isn’t the correct word… Selling all over the world is more of a requirement in this day and age to achieve the necessary economies of scale.

Thus the story of American electronics manufacturing has a conclusion: It doesn’t exist. While the domestic automobile industry is still breathing like a wounded grizzly-bear, the “small game” of the electronics industry is extinct. The auto industry is a much larger and far more complex beast that will require proportionately more time to bring down, and accordingly may die a slower death.

I’ve also devoted some time to the subject because many rightfully wonder why American manufacturers don’t speak up more stridently… If in fact they are being so disadvantaged by imports and exclusion from foreign markets. It’s possible that they may have looked at the outcome for Zenith Electronics Corporation, which did choose legal remedies, pleading (and suing) for the enforcement of internationally recognized anti-dumping laws, anti-monopoly laws and prosecution for U.S. Customs fraud; only to be repeatedly undermined by involvement from the State Department, Justice Department and the Executive branch. As you’ll see, the waters of international law enforcement get very murky when politics are involved. Zenith demonstrably resisted off-shoring manufacturing, research and development for decades after its competitors had moved their manufacturing to Asia, or closed their doors entirely. By the early 1990s, this industry-leader was reduced to a shell of its former self. Zenith’s ace-in-the-hole, a compatible system of HDTV was their only proprietary asset of any value. When the FCC dropped its requirement for a new HDTV system that would work with existing sets, The devalued stock was ultimately acquired by the Korean company LG (Lucky Goldstar) which by then was simply shopping for a well-regarded brand name to apply over their own lower-end products.

At the end of this chapter you should also feel outraged at the American officials, elected and appointed, who failed to enforce internationally-accepted rules of law in the face of foreign lobbying efforts. Finally it’s an important lesson because it shows how foreign industrial cartels are organized and work in partnership with their respective governments.

Later:

On Sunday evening, September 7, 1957 attorneys representing RCA presented Zenith counsel with a hastily prepared settlement, designed to prevent the opening of a civil litigation trial the following morning. The initial draft gave Zenith a royalty-free license for radio-television manufacture. Other manufacturers had refused to join Zenith’s suit, and RCA was not about to give up its patent-pool revenue from other builders without even being challenged. More relevant to our discussion of trade was a $10-million payment made as compensation for the estimated loss in revenue as a result of Zenith’s exclusion from the Canadian market.

The victory would be short-lived, because the groundwork was being laid for a far more devastating attack on American electronics manufacturers. But first Zenith would see further success, overtaking RCA to become the number one seller of black & white television receivers in 1956. Meanwhile, Time magazine described RCA’s early color televisions as “the most resounding industrial flop” of 1956. When the first color receivers designed to be compatible with existing B&W broadcasts were demonstrated to the FCC in October 1953, Zenith was one of only three manufacturers capable of building their own color Cathode Ray Tube (CRT). By far, this was the most complex and expensive color TV component. However, Zenith’s Commander McDonald cautioned that color television was still in a prototype stage and not yet suitable for the consumer. Many other manufacturers started; then stopped color set production in the mid-to-late 1950s because of their poor reliability and a high dissatisfaction rate among consumers. Thus, Zenith did not market a color receiver until 1961, when they felt their product was reliable and simplified in its operation. Zenith’s color sales were an instant success, in part because so many loyal customers had been waiting for Zenith’s “seal of approval” on what was then viewed as an expensive and trouble-prone gadget.

During the course of taking depositions and examining documents from RCA for the European-civil court attempts to open closed markets, it became apparent that David Sarnoff was focusing an inordinate amount of attention on Japan beginning in the mid-1950s. Teams of Japanese researchers and engineers were making regular trips to RCA headquarters, laboratories and factories. At the same time, RCA’s patent experts and technical staff were making frequent trips to Japan. As far back as 1921, in a memo dated December of that year, Sarnoff had recommended a “consolidation” of competitors in Japan, modeled on the way RCA had been doing business in the United States. Sarnoff’s interest was in the lucrative foreign patent licenses and is plainly revealed in this quote from his memoranda:

“RCA would be glad if such a group in Japan would be its representative in that country and would be pleased to represent the Japanese group in the United States.”

Owen D. Young, another Sarnoff mentor at GE during the creation of RCA, followed up with a letter to “Doctor Dan” a Japanese contact, urging them to “stabilize” the electronics industry in Japan and stated:

“I explained to you that we had mobilized in RCA the patents and technical resources of AT&T, Western Electric, United Fruit, Westinghouse and GE and that to make such a mobilization effective all of these concerns have taken a substantial financial interest in RCA.”

With RCA’s patent licensing scheme finally coming to an end in the U.S. as the result of Zenith’s litigation, Sarnoff focused on replacing the lost American licensing revenue with a generous percentage of the revenues of a Japanese cartel which would enjoy a protected consumer market in Japan; while beginning to export successfully to the United States. When GE purchased and reabsorbed RCA in 1985 (largely for the NBC network which it owned), the Japanese licensing agreements were bringing in as much as $200-million in annual income. With amazing speed, Japan was building its electronics industry, and targeting the US market. By 1960, Emperor Hirohito conferred on David Sarnoff the Order of the Rising Sun, the highest decoration that can be awarded to a non-Japanese born person. The Japan Times called him the hero of the Japanese television industry.

...and then a lot more stuff happened in the 60s, 70s and 80s. But you'll have to buy the book (when finished) to get the rest.

[davet753]

I think there were many things that all added up at the wrong time to spell disaster for Zenith.

I was a Zenith dealer until 1998. At that time, Zenith was the last major manufacturer still tied to a network of wholesale distributors for their small and mid-sized dealers. Prices from the factory had to allow room not only for the dealer to turn a profit, but also the wholesale distributor. RCA, Magnavox, and the other big players cut out the middle-man early on while Zenith stubbornly hung on.

Plus, every other manufacturer got away from building "modular" sets except Zenith. While every other manufacturer paid about $40 labor and the cost of a few parts to repair an in-warranty TV set in the 1990's, Zenith was paying the same $40 and providing an entirely new chassis. While it was nice and easy for those of us doing warranty work, it was an expensive proposition for Zenith. Plus, the distributor was making money on every one of these modules for his part in the warranty process.

In their last 10 years, Zenith had a product line that (when compared to other brands) was bloated with poor selling models. For years, Zenith had many slow-selling console's that were continued year after year. When other manufacturers started shaving off the huge selection of consoles, Zenith insisted on keeping in the game by enlarging their offerings, even offering some models in your choice of faux finish.

Like most brands, Zenith enforced a MAP (Minimum Advertised Price) policy on their dealer network. In other words, every model had a MAP price and if a dealer advertised that set for less than the MAP price, they would be ineligible for advertising co-op dollars. In the early 1990's, they started allowing some of the big-box stores to ignore the MAP price, which further depressed the selling price of Zenith sets. In the eyes of the public, when a Zenith 19" portable was selling for the same $199 price as RCA and GE, the game was over. Zenith had developed a reputation over the years for above average prices and quality, and when their prices came down to match the other brands, the quality image suffered. It also really pissed off their independent dealer network, who saw Zenith TV sets advertised in the Sunday newspaper at Circuit City for less than it cost them wholesale.

The well known CRT issues at Zenith was also quite a problem. I remember those days well, and any Zenith dealer can tell you that in the mid-1990's, Zenith was paying out a fortune for in-warranty CRT replacements. Another side effect was the damage bad CRT's done to Zenith's image and reputation in the market. Anyone who bought a Zenith only to have the picture tube crap out shortly after the warranty expired was sure to replace it with any brand other than Zenith.

Like all American Television manufacturers, Zenith was under attack from the flood of cheap imports. Combine this with all the other little problems, and you have a perfect storm that helped spell the end of a once iconic brand.

[Username1]

I will admit I am not up on much of the dumping stuff as it helped the US tv industry
go bye-bye.... I have seen poor quality control help the auto industry shrink....

I'm sure printed circuit boards did not help or hurt the companies that used, or did not
use them.... Partly because efficiencies in other areas would make up for any shortfalls
because of the time and effort required to hand wire a tv. I'm sure it was not a factor.

Bad picture tubes..... Well QC.

As far as politics..... GM did the most to steer build quality industry wide, and from what
I have read, did the most although not by much to defeat any meaningful advancement
in auto technology, as in gas mileage, safety, and smog control, as a result they and
their buddies suffered the most when the us buying public got a look as something
better....

By time the tv industry changed, the American mindset was changing as well.
Few people seemed to take pride in a job well done in any industry. Individuals
put more value in having something new and shiny even when the old one
still worked well.... We see it even more today as the word "upgrade" is used
to convince almost everyone to regularly replace items that still have a useful
life left in it.


I look forward to seeing this book..... You let us know when it's done Carmine....

.

[andy]

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[Carmine]

I think what you're not taking into account is that decisions like not switching to printed circuits, or a failure to build tubes larger than 27" do not occur in a vacuum (no pun intended). The dominos which started eating the profit from Zenith's bottom line started falling in the very late 1950s. For at least a decade the effects were small... First they ceded the market on low-profit items like portable radios. But eventually even their high-margin items were under attack. Smaller companies like Admiral simply faded away. Larger parent companies like Motorola sold off their consumer divisions.

Zenith's strategy was to seek remedy in the court system. Often, they would win damages (which might have paid for new capital investment) but what happens when a foreign company simply fails to pay the US government or a US company? A shooting war? Not so much. US trade legislation is largely an executive branch power and that means no one has a career that lasts longer than 8-years (sometimes 4). How many of the FTC or Commerce Department lawyers who had the responsibility of writing/enforcing/collecting trade legislation/duties ended up with a lucrative career at a law firm representing a Japanese manufacturer... Or sometimes directly employed by same? Do you think the real Elliot Ness-style hardasses got those job offers? In at least one case a guy got busted back to processing FOIA requests for being "too agressive".

Meanwhile its very easy to say "well they never got into xyz market", but when capital is limited, what eventually suffers? R&D. Those new areas where they did choose to invest, FTM, HDTV and even laser projection systems ended up as dead ends.

As further proof, Sony was never named in any of these lawsuits or found guilty of any dumping charges. They'd chosen a premium space in the market, not the $199 19" area that was eating the bottom out of a $329 Zenith set. If they faced only Sony at a similar price point, I imagine the outcome would have been different. Perhaps that's the reason Zenith eventually did much business with Sony in areas where they could no longer afford new captial investment.

Consider that it took the Japanese much longer to penetrate Europe (and American companies never did) why do you suppose that was? Perhaps their heavily protected markets vs. our wide open borders? Ya think?

To say that defective CRTs or multiple cabinets finishes killed Zenith is like saying heart failure is the cause of death for a guy with lung cancer. Yes, when the heart stops beating we declare someone dead, but if the heart is damaged after years being deprived of oxygen, do you still blame the heart? If you never consider cause and effect, you'll never cut the number of deaths.

[Telecolor 3007]

In Europe, the Japanese tv sets reduced the number of sets produced in Italy, France (throu "Thomson" made good tv sets up untill the '80's - or even the early '90's) and U.K. (the U.K. tv manufacturing industry declined faster then other Europeanen ones... not only because the Asia imports, but because it wasn't very inovative). But the West-Germans and the Dutch still made tv's up untill the '80's... in the '90's, those companies still exsited, but I don't think the tvs where any longer Made in Germany or Made in Holland.
In Eastern-Europe things where somehow better, since almost every country had unleass one tv manufacturer. In Romania we made some tube sets using Japanese components! (the C.R.T. wasn't always Japanese) Those tv sets where among the most realible ever to be made around here! Some other sets had japanese C.R.T.'s (my <<Telecolor>> 3007 haves an "Toshiba" one - other made have Europenanen C.R.T.'s - depends on what they could get in theyr hands in a certain moment of time); some portable sets (during communism we made only b & w portable sets) had 3rd qualty "N.E.C." C.R.T.'s.
After Communism... some still made sets after 1989. In Romania the things worked up untill around 1997-1998, when because of the bad management *, cheap Chinese and Turkish sets things went dowmn. For the Romaninas, the tv sest made by Japanes brands where expensive... but "GoldStar" and "Samsung" where more affordable and those early to mid '90's "Samungs"s worked for yeras!

* I'm talking about the main company, "N.E.I." ("Network Electronica International"), 'cause during the '90's there where 4 companyes that assambled tv sets: "N.E.I.", "Thomas" (the old tv manufacturerer, "Electronica" was splited betwen these 2 companies), "Hermes" and "Royal" (I think they asambled the "Freedom" tv sets too...). Around 1991 "Tehnoton" of Iaşi (Jassy) asaambled b & w tv sets.

The Japanese had one thing that put them on the front: they improved everything they copyed. Who inveted the audio cassette and the cassette deck and who ended up making the best of them?
Nowdays the Korean company "Samsung" does it...

[NoPegs]

Originally Posted by Carmine

But you'll have to buy the book (when finished) to get the rest.

I'm sold. Get those words onto the pages!

[andy]

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[Electronic M]

Originally Posted by Telecolor 3007

The Japanese had one thing that but them on the front: they improved everything they copyed. Who inveted the audio cassette and the cassette deck and who ended up making the best of them?

Not necessarily wrong, but you chose a bad example......
From wikipedia: "In 1971 the Advent Corporation introduced their Model 201 tape deck that combined Dolby type B noise reduction and chromium dioxide (CrO2) tape, with a commercial-grade tape transport mechanism supplied by the Wollensak camera division of 3M Corporation. This resulted in the format being taken more seriously for musical use, and started the era of high fidelity cassettes and players."
http://en.wikipedia.org/wiki/Compact_Cassette
And things like auto reverse were not new inventions either, they existed in reel to reel machines for years before anybody thought to add that to cassette machines.

[Carmine]

I'm going to start out by saying this whole "decline" argument can only be applied to Zenith because they were the last-man-standing in the US Consumer electronics industry. Every other US player from the glory-days of the 50s/60s/70s had already been absorbed into a foreign-based company long before Zenith's complete acquisition by LG. Like any company on the decline, capital expenditures suffer (quality control), R&D takes a backseat (failure to innovate), credit ratings fall (cost of debit) and so begins a death spiral. The only real point for discussion is whether the decline was organic and within their control, or if outside factors were involved.

If a company's failure is organic, say the failure of Studebaker as an auto manufacturer in 1964, one can usually point to survivors competing on the same playing field; of which there were still many by 1964. In the case of Zenith, you simply look to 1995 and see nothing remains of the entire industry. http://articles.latimes.com/1995-07-...ectronics-corp

BTW, I would dispute this part of the linked story:

Zenith, General Electric, RCA and other industry leaders of that time sold their wares all over the world. But in what turned out to be an enormous miscalculation, they agreed to license their technology to Japanese companies such as Sony and Matsushita because Japanese government policies didn't allow them to sell directly in Japan.

Only RCA went this route and scored millions, then cumulative billions in fees. Zenith tried to distribute products three separate times in Japan, beginning in 1961 and continuing over several years only to be refused market entry by retailers who knew better than to challenge the decree of their government's Ministry of International Trade and Industry. Finally, I'm not going to beat my brains out trying to change anyone's pre-conceived notions...

1) You can approach with an open mind and accept what evidence I present. I've provided some books, papers and articles if you wish to verify my conclusions.

2) You can challenge it with your own research.

3) You can continue to offer opinions, anecdotes and cite factors that occurred long after the death-spiral began.

I'm admittedly no whiz at fixing televisions (I hope to improve) but I know a fair share about trade, business and government.

------------------------------

Originally Posted by andy

I have family in the UK, so I'm somewhat familiar with the state of consumer electronics there. I recall that many Japanese companies had to setup manufacturing in the UK (such as Sony TVs, and I remember seeing a Sharp VCR with a big made in the UK sticker on the front). I assume this was to get around import laws. Even so, not a single British TV manufacturer survived to see the 90's.

I probably should have specified western, industrialized, mainland Europe in the pre-EU time period. Historically the UK had fewer protectionist import laws as compared to mainland Europe. The point was not that companies like Phillips, Thomson or Grundig survived unscathed or still build TVs, but they did continue operate, innovate and manufacture in mainland Europe well after the American consumer electronics industry ceased to exist and did so with much greater labor costs and inefficiency. This is because the European market was (and sometimes still is) largely shielded from offshore competition by virtue of its system of taxation, the Value Added Tax which is applied to a foreign-manufactured item on top of the items cost in the home market nation, in which the local taxes are already factored into the price. This basically bought them some time. The simplest way to illustrate this is with a modern-day illustration from the Auto Industry:



...and an explanation of VAT taxes effect:http://www.cleveland.com/opinion/ind...ax_system.html

It wasn't just that the Japanese sets were cheaper, they were often higher quality (or as least seen that way). One of my Uncles had a late 70's Hitachi TV that was still working when they got rid of it in the 90's. He was very impressed that it was still working without a single repair (this would have been unheard of for a British designed set). I don't think Thomson or Philips makes TVs anymore.

I surely don't wish to debate your uncle's experience, but I do question the relevance. I use two 19" system 3 sets, one of which was garbage-picked in the rain and lives in sub-zero cold and triple-digit temps by virtue of being mounted in my garage rafters. The other sees daily use in my bedroom. My living room set is a 27" unit purchased in 1990 by my parents. In the time I've owned these sets, (20+ years) only the 27" set had power supply caps replaced. If I were to apply your logic to my personal experience; Zenith should still be in business. In other words, anecdotal evidence adds nothing but distraction to a serious discussion of business practices spanning multiple decades.

Let me also remind people of this: The much-beloved Japanese quality revolution occurred concurrently with a revolution in ALL ELECTRONICS, as well as robotics and statistical control. Thus any device which uses electronic components and is manufactured will see a exponential increase in reliability by using IC chips over vacuum tubes or robotics vs. a worker with a soldering iron. Of course there is a learning curve, but on the whole every manufactured good improved in this period regardless of which flag was being flown outside the factory. :headsmack:

As far as the Japanese eroding the low end of the market, that's true, and to be expected. As technology gets old, other companies will imitate it. It may be unfair, but it's hard to stop.

Um, no. When a company sells a product in a foreign market below cost (while it makes up the loss in its home market) the practice is referred to as dumping. It's illegal under US and international law. Unfortunately for the industry, the people charged with upholding trade laws are nothing more than revolving-door lobbyists. The collusion was so bad that even Japanese consumers boycotted their own manufacturers in 1967.

Beaver County Times - Dec 3, 1971
http://news.google.com/newspapers?ni...&pg=605,924967


Japan's Rapid Growth Policy on Trial: The Television Case. By KOZO YAMAMURA. JAN VANDENBEBG.

Look at companies that faded away when they couldn't compete with RCA in color TV (like Philco and Dumont). Even Zenith struggled to bring a color TV to market. RCA and Zenith still had exclusive control of the mid and high end into the late 70's. I can't recall seeing a Japanese TV over 19" that was made before the very late 70's.

I would argue that the demise of Philco and Dumont began long before anyone, including RCA, began to show any profit on Color TV. I do not agree that Zenith "struggled" to bring a color TV to market, being one of three manufacturers to demonstrate color TV with their own CRT in 1953... To me it sounds like they made a sound business decision by waiting for demand rather than trying to create it. Finally, the market growth for color TV was all in the 19" and under segment during the 70s. It would make no sense for a Japanese manufacturer to target the large screen segment until they had established a presence in the US... There was no 19"+ segment in Japan to absorb the cost of dumping.

Having said all that, the Japanese companies have found themselves in the same boat. Korean and Chinese companies have undercut prices, and have been driving innovation for some time (when was the last time you saw a Japanese smart phone). Now that LCD and plasma TVs are old news it's hard to make a profit on those items. Sony, Sharp, and Panasonic are all in major trouble. They're losing tons of money making TVs, and they don't have much else to fill the void. Other companies like Pioneer, Toshiba and Fujitsu exited the TV market years ago.

Yeah, Karma is a bitch huh?

Looks like only Motorola saw the future, but that doesn't change what occurred throughout the 70s and 80s.

[andy]

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