The Day the U.S. TV Industry Died

Why the last major U.S. television set maker, Zenith, finally gave up

15 min read
Man in white coveralls holding cathode ray tube surrounded by industrial equipment
Michael L. Abramson/Getty Images

Driven finally into unprofitability in its traditional market by ever stiffer competition from abroad, harmed rather than helped by a decade of economizing cutbacks in research and development, Zenith Electronics Corp.—the sole surviving U.S. manufacturer of television receivers—reportedly plans to call it quits in the business it helped to create and nourish through some 40 years of innovation.

Indeed, nothing so neatly reflects the company’s present situation as its latest and arguably its second greatest innovation: a flat shadow mask for a flat-faced cathode ray tube hailed everywhere as a major breakthrough. Announced in 1986, the Flat Tension Mask, as it is called, increases the brightness of the cathode ray tube by up to 80 percent, its contrast ratio by up to 70 percent, and its resolution by up to 15 percent over current tube designs, which use a curved face plate and curved shadow mask. The flat mask is stretched so tight that it can maintain color quality even when heated unevenly by high concentrations of electrons in bright areas of the picture.

This article was first published as “The longest survivor loses its grip.” It appeared in the August 1988 issue of IEEE Spectrum. A PDF version is available on IEEE Xplore. The photographs appeared in the original print version.

Such a product exemplifies Zenith’s pursuit of high quality, even if that has meant sticking to the high end of the market. Its tube plant in Melrose Park, Ill., is one of the most profitable parts of its business, bearing witness to the company’s manufacturing skills. But at about $1000, the flat tube is not a consumer product and instead is benefiting Zenith’s latest focus of interest-its relatively new and highly profitable personal computer business.

The TV era ends

The television market was quite different back in 1960. Then, the Glenview, Ill., company tussled for the No. 1 spot with RCA Corp., of New York City, each holding over 20 percent of the domestic market. Twenty-five other companies, such as Admiral, GTE Sylvania, and Magnavox, shared the rest of the business. But one by one, these companies either folded their television divisions or sold them to non-U.S. competitors until, by the end of 1987, only Zenith remained.

The company’s major concerns last year were summarized in its annual report: “Long-anticipated industry price stability did not materialize in 1987 because of continued dumping by Far Eastern suppliers, ineffective dumping law administration by our government, and the failure of Korea and other newly industrialized Far East countries to revalue their currencies.” Those difficulties in the consumer area led to a corporate pretax loss of $28.9 million, despite an operating income that analysts estimate at $70 million from its successful computer business.

Zenith has not officially confirmed that its television business is on the auction block, confining itself merely to the statement that it is examining “all options to restore corporate profitability to a satisfactory level.” But Lazard Freres & Co., of New York City, is reportedly accepting bids on behalf of the company for the entire consumer electronics division.

The Evolution of Zenith (and the TV Industry)

1918

Chicago Radio Laboratory established; later adopts as its trade name Z-Nth, the identification of an amateur radio station.

1924

Zenith produces the world’s first portable radio, which includes large batteries, vacuum tubes, and a horn speaker; an early model is here being held by Admiral Donald B. McMillan.

1926

Zenith manufactures the first commercial radio set to operate on ac.

1940-41

A prototype of the Trans Oceanic receiver undergoes successful field testing in the Arctic.

1945

The Television Broadcasters Association reports TV sets sold in the United States before World War II totaled 10,000.

1947

Nearly 200 000 TV sets sold, including more than 115,000 table models, 37,000 consoles, 12,000 projection types and 25,000 consoles with radio/phonograph. Nine U.S. manufacturers exhibit new models at the 1947 Chicago Furniture Mart.

1948

Zenith enters the TV receiver business, buying Rauland of Chicago, a picture tube manufacturer. All told, 31 U.S. TV makers sell 103 models.

1953

Zenith and 12 other TV manufacturers demonstrate NTSC-based color TV receivers to the FCC.

1955

Zenith develops prototype color TV with remote control.

1956

Zenith patents first remote control for a TV set, the ultrasonic Space Command.

1957

Zenith patents fringe-lock technology, a cure for loss of picture synchronization.

1959

6,300,500 sets sell this year, down from 1955’s peak of 7,700,000 and from 1950’s 7,300,100.

1960

(27 U.S. TV manufacturers recorded—the countdown begins.)

1964

Zenith patents Chromacolor, or “black matrix” technology, but does not introduce it until 1969.

1968

(18 U.S. TV makers remain after Westinghouse Electric, Capehart, Conrac, Dumont, Hoffman, Mattison, Olympic, Symphonica, and TraVler drop out of TV business.)

1969

(Admiral buys Cortron, leaving 17 U.S. TV makers.)

1970-74

(12 U.S. TV makers left alter departure of Emerson, Arvin, Satchel-Carlson, TMA, and Teledyne Packard Bell.)

1971

Zenith opens its first non-U.S. production facilities, in Matamoros, Mexico, and in Taiwan, and patents surface-wave intermediate-frequency filter.

1973

Zenith introduces Power Sentry, the first consumer use of a saturable-core transformer to regulate voltage.

1974

(Nine U.S. TV makers left after North American Philips buys Magnavox Consumer Electronics, Matsushita Electric Industrial of Japan buys Motorola’s television business plus its Quasar brand name, and GTE Sylvania buys Philco trademark.)

1975

Zenith introduces first one-chip color demodulator and TV sets with Zoom feature.

1976

Zenith increase pretax profits by $27 million over 1975 total of $978 million.

1976

(Sanyo Electric of Japan buys TV business from Warwick Electronics; Andrea Radia, a small New York-area family-owned company, fades from the market.)

1977

Zenith halves R&D staff, laying off about 200 engineers.

1978

Zenith opens manufacturing plant in Reynosa, Mexico.

1978

(Six U.S. TV makers left when Admiral Group, by now a Rockwell subsidiary, leaves TV business.)

1979

Zenith introduces first microprocessor-based tuning system and first cable-ready receiver; buys Heath to get into the personal computer business.

1980

Zenith introduces Spacephone, which lets viewer answer phone through TV set.

1981

(Five U.S. TV makers left after Philips buys GTE Sylvania.)

1982

Zenith moves from ultrasound to infrared technology for its remote controls.

1984

Zenith’s scheme for stereo TV, Multi-channel Television Sound, is accepted as the industry standard.

1984

(Wells-Gardner and Curtis-Mathes brands no longer in TV business)

1986

(GE buys RCA.)

1987

(GE sells GE/RCA consumer electronics business to France’s Thomson CSF; Zenith is only U.S. TV manufacturer left.

1987

Zenith announces Flat Tension Mask, a breakthrough in cathode ray tube technology; loses money in consumer electronics for the first time.

1987

Zenith cuts R&D staff, laying off 60 engineers.

1988

Zenith consumer electronics division is reported to be up for sale.

Editor’s note: Zenith’s last year of profitability was 1988. In 1991, Lucky-Goldstar, now known as LG, purchased 5 percent of the company. In 1995, LG purchased a majority share. In 1999, Zenith filed for Chapter 11 bankruptcy, and LG acquired the remainder of the company.

Stockholder pressure on the company to sell may have increased from an investment partnership that has acquired 7.1 percent of Zenith’s stock and has announced its intent to force Zenith to “enhance shareholder value.” Analysts presume the partnership plans to force the sale of the consumer electronics unit.

Active contenders for the purchase reportedly include the four major Korean companies— Samsung Electronics Co., Daewoo Corp., Lucky-Goldstar Corp., and Hyundai Electronics Corp. Each would profit from stronger U.S. distribution and a U.S. brand name, and each would find the endemically small profit margins of the TV market quite compatible with its long-term outlook. Thomson CSF of France has also reportedly entered a bid; it recently purchased RCA/GE’s consumer electronics division with the observation that “volume is one of the rules of the cost-competitiveness game.” NV Philips of the Netherlands, analysts report, is another likely contender.

Most of the Japanese consumer electronics companies already have a strong U.S. presence, and only one of them is said to have made a bid. The International Brotherhood of Electrical Workers, the union representing many Zenith employees, has also expressed interest in bidding, but seems not yet to have done so.

“If you are in a balloon drifting across the ocean, and you know that there will be cannibals waiting when you reach land, if you start sinking you still throw out everything, including the guns and ammunition, because if you don’t get to shore, it won’t matter if you have guns or not.”
—Robert Adler, former Zenith Vice President of Research

The winds of change started blowing in the 1970s, when Zenith led the fight to preserve the U.S. TV industry from Japanese advances. Through court action and proposed Congressional legislation, the then Zenith president John Nevin became a familiar national figure as he pressed the case for protection against alleged dumping.

When such pleas proved futile, the company took drastic actions to maintain profitability—notably a halving of its research staff in 1977. “Many of us could not understand how Zenith could blow away its research department,” recalled Alan Sobel, one of the engineers laid off at that time and currently with Lucitron Inc., of Evanston, Ill. Sobel recalls the then vice president of research, Robert Adler, explaining it “to us this way: ‘If you are in a balloon drifting across the ocean, and you know that there will be cannibals waiting when you reach land, if you start sinking you still throw out everything, including the guns and ammunition, because if you don’t get to shore, it won’t matter if you have guns or not.’ ,”

Zenith bet that videodisk players, rather than videocassette recorders (VCRs), would be the consumers’ choice.

The 200 or so research engineers and technicians who survived the 1977 layoff were then assigned targets that often proved off base. For example, like its U.S. competitors, Zenith bet that videodisk players, rather than videocassette recorders (VCRs), would be the consumers’ choice. The company started and stopped its videodisk research program twice between 1971 and 1974, then ended up buying VCRs to resell under its own name. Zenith at first chose to go with the Betamax VCR format, buying units from Tokyo’s Sony. But after the U.S. market demonstrated its preference for VHS, the company switched to selling VHS VCRs from JVC of Yokohama. Zenith boasts that these Japanese-made VCRs have more input from a U.S. company than any other models on the market, because it manufactures the tuner and remote controls in Mexico and supplies them to Japan.

Another strong but perhaps premature effort focused on digital TV. “We put a lot of engineering into a digital chassis,” one engineer recalled, but in the early 1980s “people just weren’t interested ... because most couldn’t really see the difference in picture quality.” Zenith says its sales have been competitive with those of the rest of the digital TV industry, but admits the industry as a whole is only now beginning to take off.

Large screens—picture tubes with diagonals of 35 inches (90 centimeters) or more—were not pursued because of an unwillingness to invest $0.5 million in retooling its manufacturing facilities.

According to another engineer, large screens—picture tubes with diagonals of 35 inches (90 centimeters) or more—were not pursued because of an unwillingness to invest $0.5 million in retooling its manufacturing facilities, then and now limited to a maximum screen diagonal of 27 in.

Zenith’s substantial claim to fame in the early 1980s was its role in the development of the U.S. industry standard for stereo television broadcasting, endorsed by the Federal Communications Commission (FCC) in 1984. Zenith gave this technology to the industry royalty-free, and received a 1985 Emmy for this work.

The R&D staff, in a burst of cost-cutting during the third quarter of 1987, was reportedly reduced by another 60 percent to some 20 engineers, though this number is hard to verify because they no longer work in a research laboratory but have been scattered throughout the company. Zenith staff members report that the company abandoned most work on advanced color picture tubes (although a Zenith spokesman denies this, indicating that work continues on color tube enhancements as well as on the Flat Tension Mask). The same staffers, however, say Zenith continued work, albeit on a reduced scale, on interactive television technologies, digital television, and high-definition television (HDTV). Some analysts suggest, though, that Zenith may no longer be in the technical position to design HDTV products.

When it was still hoping the U.S. Congress would ease competitive pressures on TV manufacturers, Zenith began to hedge its bets by diversifying. A company spokesman said that in 1978, management began seeking new business areas that would draw on Zenith’s strengths in high-volume and high-quality manufacturing, engineering R&D, and brand-label marketing.

For example, a new division was set up to make components to sell to other manufacturers (it now sells primarily to the computer industry), and in 1981 Zenith began another division to manufacture decoders and other products for the cable television (CATV) industry.

The 1979 acquisition of Heath Co., St. Joseph, Mich., led to the company’s most successful venture beyond its traditional boundaries. Zenith’s interest was piqued, not by the well-known do-it-yourself electronic Heathkits, but by Heath’s desktop computer based on the 6502 microprocessor. Zenith used the computer to catapult itself into becoming a major manufacturer of IBM-compatible personal computers. Last year it boasted some $1 billion in sales in this area.

Thriving through technology

TV was not Zenith’s original product. A manufacturer of radio receivers since 1918, Zenith sold its first black and white TV set in 1948, the same year it acquired the Rauland Corp., a Chicago-based picture-tube manufacturer. That first line incorporated a turret tuner that could be upgraded for higher frequency channels simply by having extra tuning strips added to it. In 1952, when UHF assignments were made to broadcast stations, Zenith customers, unlike those of other manufacturers, could adapt their TVs cheaply. Thus began what was to become one of the company’s most valuable assets-customer loyalty.

Zenith engineers took part in the birth of color TV. They built color-signal-generating equipment in the early 1950s and, along with 12 other manufacturers, demonstrated to the Federal Communications Commission (FCC) color receivers built to the National Television System Committee (NTSC) standard. Then Zenith drew ahead by solving one of the commonest problems of the day—loss of picture synchronization due to interference from, say, an electric razor or a car idling nearby. Its solution was fringe-lock circuitry that prevented the spurious noise from fragmenting the picture or causing it to roll. Zenith filed for a patent for this technology in 1951 and got it in 1957. The company successfully—and profitably—sued Admiral for patent infringement.

Zenith won more customers in the 1950s by being the first to the market with a wireless remote control. Invented by Robert Adler, this ultrasonic device was marketed as Zenith’s Space Command feature. It was so popular that at one point, Zenith credited it with boosting sales some 40%. It was licensed to RCA Corp. and adopted, with Zenith’s permission, by many other U.S. companies. Admiral again infringed the patent, and Zenith profited from a successful suit. The technology endured for about 20 years before yielding to infrared remote controls, whose greater bandwidth allowed more functions.

Man wearing white jacket and hair cover holds a TV panel in a dimly lit factory

Zenith's newest technological breakthrough, the Flat Tension Mask tube, is produced at the company's picture tube plant in Melrose Park, Ill.

Zenith Electronics Corp.

The black matrix

One of Zenith’s biggest claims to color TV technology fame is Chromacolor, a type of tube that the rest of the industry dubbed negative guard band black matrix. The company patented it in 1964 and introduced it in 1969. Before Zenith’s innovation, color TV screens had trios of partly overlapping red, green, and blue phosphor dots, the overlap forming a white background. A shadow mask between the electron beam and the phosphor grid narrowed the beam till it illuminated only the center of each dot, leaving the surrounding phosphor unlit to prevent color bleeding.

In Zenith’s Chromacolor tube, the phosphor dots are reduced in size and a black carbon material—the black surround—is deposited between them. The electron beam is allowed to bleed around the dots: the black surround keeps the colors separate on the screen. This change helps brighten the picture by allowing more of the electron beams to reach the phosphors. It also improves contrast—the black surround prevents the reflection of ambient light and so sharpens picture detail.

In 1976 Zenith patented the tri-potential electron gun, also called the extended focal length gun. The longer focal length of the main lens produced a more sharply focused electron beam, and led to the sharpest TV image tube available from a U.S. manufacturer; only Sony’s Trinitron tube (using a different technology) equaled it. But according to Peter Bingham, formerly of RCA/GE and now executive vice president for Thomson Consumer Electronics in Indianapolis, it did not help Zenith because “it wasn’t cost-effective. It required bigger power supplies, and it was more difficult to manufacture.”

In the late 1960s, Zenith had also been awarded a number of patents for surface-wave intermediate-frequency (SWIF) filters, now known as surface-acoustic-wave (SAW) filters. Easier to manufacture and more effective at separating adjacent channels than the transformers they replaced, the solid-state devices consist of a small platelet of piezoelectric material with a carefully engineered pattern of parallel aluminum lines photolithographed onto its surface. Today they are common components in color TVs and VCRs worldwide. To this day, Zenith profits from a number of SAW patents. “We were so early in the game that we got some broad patents,” said Robert Adler. “For example, we were awarded a patent on any transmitting and receiving transducers on piezoelectric materials that have different numbers of lines.”

Zenith did not immediately patent SAW technology outside the United States, a former staff member told IEEE Spectrum, because key executives in the late 1960s did not believe that non-U. S. competition could ever be a threat. “When I was hired,” he said, “I asked about the impact of Asia, and I was told that we would never have to worry about it.” That attitude permeated Zenith’s early strategy, he indicated. Zenith disagrees, and a spokesman said the company’s lack of patent activity overseas was due to cost concerns.

Slender profit margins—historically 5 to 7 percent, narrowing to 2 to 3 percent in recent years—common to the entire consumer electronics industry, leave little room for errors in marketing or manufacturing, to say nothing of design.

Slender profit margins—historically 5 to 7 percent, narrowing to 2 to 3 percent in recent years-—common to the entire consumer electronics industry, leave little room for errors in marketing or manufacturing, to say nothing of design. Competition from Japanese manufacturers in the form of low-priced TV sets in the late 1960s made the business even tougher. What began as a trickle in the 1960s and early 1970s rapidly turned into a rout as the Japanese cut prices and gained market share.

The great shakeout

By 1974, major players were affected. Motorola, for one, sold it, Quasar television division to Matsushita Electric Industrial. “We were in several businesses that required a lot of capital,” said a Motorola spokesman, and “our strategy indicated that our future in semiconductors and two-way radio was better than consumer electronics.”

Zenith’s archrival, RCA, “redirected R&D to blue sky research,” Bingham said, and for a few years lost its edge in color television. But as a large, diversified company, RCA survived this error and returned to more fruitful TV research in the late 1970s, according to Bingham.

Woman holds a panel to examine it above an assembly line

Zenith's manufacturing plant in Reynosa, Mexico, uses computer-controlled equipment to produce parts of Zenith's TV chassis

Zenith Electronics Corp.

In those days Zenith had no businesses outside consumer electronics to fall back on, and so had to stay the course. While pursuing cost-reduction efforts, the company resisted coming out with low-cost, low-quality products, and through most of the 1970s was rated among the highest-quality manufacturers by Consumer Reports. It continued to advance color TV technology, if with fewer dramatic breakthroughs than before because of the field’s growing maturity.

Zenith also began to shift its product mix to higher margin products—large console sets with many features—that would be less affected by price declines. On several occasions, however, the decision to add a feature was made late in the design cycle, one Zenith engineer told Spectrum, with a net increase in both the complexity and price of the final product.

Moreover, the popularity of some features proved short-lived—for example, Zoom in the 1970s and Spacephone in the 1980s. With Zoom, a button on the remote control enabled the viewer to magnify the center section of a picture till it filled the entire screen. With Spacephone viewers could answer telephone calls by talking through their television sets.

The 1970s’ survival strategy included the start of Zenith’s removal of some manufacturing operations out of the United States, in 1971 to Matamoros, Mexico, and Taiwan and expanding later to other towns in Mexico and other countries. Today Zenith builds components, subassemblies, chassis, and other parts in Matamoros, Reynosa, and Ciudad Juárez, Mexico. It produces picture tubes in Melrose Park, Ill., as noted earlier, and does final assembly of TV sets in Springfield, Mo., and Reynosa.

Zenith was one of the last TV manufacturers to move from hand wiring to printed circuit boards.

Some industry observers argue that Zenith erred in not relocating manufacturing operations outside the U.S. in the late 1960s, when some of its U.S. competitors did. They believe Zenith trapped itself with an advertising campaign touting the fact that its products were “Made in America,” and only moved after competitors used lower labor costs to undercut Zenith on price. Similarly, Zenith was also one of the last TV manufacturers to move from hand wiring to printed-circuit boards. Again Zenith capitalized on its practices by advertising with pride that its televisions were “hand-crafted.” In the early days, PC boards faced reliability problems and were very hard to repair, industry executives say, but only for a while. They indicated that Zenith stuck with the old technology far longer than made sense.

In fact, they say, the company’s recipe for success has for decades been to stick as long as possible to proven technology in both product design and manufacturing techniques, in this way reaping the benefit of increased reliability and an enhanced reputation for quality. For example, Zenith was also slow in automating its factories, although today they are among the most highly automated, and resisted replacing tubes with transistors.

On the other hand, Zenith’s conservative approach to model styles and furniture is believed to have limited the appeal of its new models to older TV buyers. And the company’s failure to attract young consumers has in fact contributed to the gradual erosion of Zenith’s U.S. market share.

Zenith’s reluctance to change its marketing system also may have hurt the company, analysts say. Its loyal network of distributors—who buy from Zenith and sell to retailers—is one of their assets in rural areas. But this two-tier distribution system simply adds another layer of cost in areas with large chains of retail stores. A Zenith spokesman disagreed, stating that though on the surface this system seems more expensive, the distributor system makes local marketing efforts more efficient.

The consumer group’s noted development of the Flat Tension Mask (FTM) cathode ray tube has proved a boon for the computer division, but a mixed blessing to the mask’s developer. The consumer division spent some $80 million, analysts estimate, to make FTM a reality, but is hard-pressed to see any return on the investment. “We supported [computers] to get them going,” one engineer said. “Some of the profits ought to be put back into us.”

Abandoning ship

Money is not the whole story. A former Zenith staff member told Spectrum that the company no longer has the R&D capability to develop FTM into a consumer product. Indeed, “the cash cow that let them get into the computer business has become an albatross around their neck,” said Nicholas P. Heymann, an analyst with Drexel Burnham Lambert, of New York City.

And the albatross has been getting heavier in the past few years. With the recent entry of Korean companies into the television business, the steady 2 to 3 percent annual drop in receiver prices has doubled to 5 to 6 percent annually—difficult cost savings to achieve under any circumstances.

Until late in 1987, analysts believe, Zenith still hoped its consumer division would become profitable. The strength of the yen was expected to force the Japanese companies to raise TV prices and the Congress was coming close to passing protective legislation, for which Zenith was lobbying heavily. But neither happened, so at some time either late in 1987 or early in 1988, Zenith apparently gave up.

Most of Zenith’s highly specialized engineers believe their expertise would be necessary to any company that took over their division. There are some 500 or so scattered through the company, former employees reckon (Zenith declined to estimate this number). The minority opinion, as voiced to Spectrum by one engineer, is that such a buyer would be interested only in “market share, and would keep the engineering group a short period of time, then disband it.”

A major question is exactly what Zenith would package with its consumer electronics unit. Manufacturing operations in Mexico and in Taiwan would certainly be part of the deal. Analysts are at odds, however, over the tube-making facility in Melrose Park, Ill. A highly automated plant, it has been geared up to produce FTM tubes for computer monitors, as well as simpler types for receivers, and would cost Zenith about $330 million to replace, according to Martin Hurwitz, an analyst with IDS Services, a division of American Express, in Minneapolis. However, the facility may also be the most attractive part of Zenith’s business for any buyer.

To probe further

Patent 2814671 for The Noise Pulse Interruption of Synchronizing Signal Separator, better known as the Fringe Lock, designed by Robert Adler and Meyer Marks, was assigned to Zenith on Nov. 26, 1957.

Patent 3446975, for the Acoustic Wave Filter designed by Robert Adler and Adrian De Vries, was assigned to Zenith on May 27, 1969; it was the basis of many later refinements in television engineering design.

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