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.