ABC Network - Seattle 1929-Funding the ABC Network

American Broadcasting Company
Seattle - 1929

Funding the ABC Network

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.