ABC Network - Seattle 1929-Network-Funding

Funding the ABC Network

Click image to see a reproduced version of the Stock Offering announcement

ABC's announced station expansion for Fall, 1929

See Totem Broadcasters

Appleton (WI) Post Crescent, August 26, 1929 (click for complete article)

Other funding for ABC's network's

operating costs was imperative

and Linden turned to the Puget Sound Savings and Loan Association -- but not for a

formal loan. Accounts differ about those transactions. Linden later claimed that

the transfer of funds from the bank to the ABC was entirely proper and consisted

of loans which were recorded on the bank’s books even if those loans were

irregular in not having been vetted in the customary manner by loan offers. Others

claims that the monies were “skimmed” before they ever got onto the bank’s

books. In any event, it was cash from Puget Sound Savings and Loan that was

keeping ABC’s expensive operation afloat in late 1928 and through the first half of

1929 (which was when ABC was dramatically expanding its network with new

affiliation agreements being signed with midwestern and eastern stations).

By the summer of 1929 ABC was clearly in financial trouble. Given Columbia’s

announcement that it was abandoning its release of its programs over ABC

effective January 1, 1930, one of ABC’s secure sources of revenue would also

disappear within months.

The degree to which the October, 1929 stock market crash contributed to ABC's

implosion is open to debate although the ABC clearly faced serious financial

problems as early as June, 1929.

Linden must have seen the handwriting

on the wall with cash needs rapidly

exceeding sources of funds by the early

summer – just at the time the network

was rapidly expanding its affiliated

station base. On June 1 stations in

Lincoln NE, Kansas City MS, Muscatine

IA, St. Louis MS, Minneapolis-St Paul MN

and Chicago IL all joined ABC and July

15 affiliations with another four cities

were announced.

The network was achieving believability in its quest for

national coverage.

But with finances increasingly shaky, the ABC issued a

prospectus for a stock sale in June, 1929. On its face, the

network appeared to be doing well in pursuing Linden’s goal

for a transcontinental network rivaling NBC and CBS and he

seemed to be in some good company. For example, the

stock prospectus indicated that solid Seattle citizens were

serving on the ABC’s board of director. Among them was A.

W. Leonard, the president of Puget Sound Power and Light

Company, who was also the vice-president of Seattle’s

Totem Broadcasters.

While ABC’s expenses were extremely high and had to be floated with funds taken

from the bank, Linden must have thought he could ride out the wave until ABC’s

eastern affiliates were in place and having a truly transcontinental network would

bring new sponsors to the rescue. And he must have hoped that the stock sale

launched in June would bring in new capital. Moreover, he’d been draining funds

from the Bank for several years with seeming impunity so reliance on continuing to

service ABC’s cash needs with bank withdrawals might have seemed a reasonable

gamble.

But it was too late. In August, Puget Sound Savings and

Loan filed for bankruptcy on discovery of the funds

diverted to the ABC. That shut off the only significant

stream of funding which had been sustaining the

network. The discovery also revealed that Linden had

also used bank funds to finance his original loan to

Vincent Kraft that preceded his acquiring control over

KJR and KYA. With ABC’s bills going unpaid, including

staff salaries and $90,000 in charges due to Pacific

Telephone and Telegraph for the telephone lines which

connected the stations, the network’s troubles made

national news. The press reported that ABC’s demise

was imminent. James Stevens, who had been hired to

write "The Histories of Paul Bunyan" for $50 per script,

reportedly had to sue for payments due him.

By September the ABC had crashed. Linden announced

the network’s failure and control of its assets were

handed over to a court-appointed receiver.