Muzak, Inc.

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Muzak, Inc.

2901 Third Avenue, Suite 400
Seattle, Washington 98121
U.S.A.
(206) 633-6210
Fax: (206) 633-6210
Web site: http://www.muzak.com/muzak.html

Private Company
Incorporated: 1934 as Muzak Corporation
Employees: 715
Sales: $86.9 million (1995)
SICs: 4832 Radio Broadcasting Stations; 3651 Household Audio & Video Equipment; 3652 Prerecorded Records & Tapes; 7389 Business Services, Not Elsewhere Classified; 4841 Cable & Other Pay Television Services

A fixture of the American soundscape, Muzak, Inc. offers a full range of service to businesses across the globe, including 60 channels of music, in-store audio and visual advertising, music videos, and one-way satellite communications systems that enable customers to transmit voice, data, and video to multiple receivers. For half a century, Muzak was the purveyor of what was commonly referred to as “elevator music,” the watered-down instrumental renditions of easy-listening compositions that were piped into scores of retail locations and workplaces for their purported influence on worker productivity and consumer spending. A 1987 merger with Seattle-based Yesco Audio Environments, however, moved the company away from background music into the market for foreground music, or music selections consisting of compositions performed by the original artists. Over the course of the ensuing decade, Muzak evolved into a sophisticated and diverse marketer of a host of data, voice, and video services for more than 175,000 businesses in the United States and abroad.

Muzak’s Technological Birth

Few people associate his name with the birth and ubiquitous presence of “elevator music,” but despite his anonymity George Owen Squier left an indelible imprint on American society. A graduate of West Point in 1887, Squier rose to the rank of a two-star general in the U.S. Army during his 36-year military career, but scored his greatest success as an inventor, establishing himself as a pioneer in the history of science in the United States. As a young artilleryman, Squier made a significant contribution to the development of high-speed telegraphy when he invented the polarizing photochronograph, an instrument capable of measuring the speed of a projectile. Charged with determining the military potential in the experiments of the Wright brothers, Squier became the first airplane passenger in the world when he hopped aboard a Wright-constructed aircraft for a nine-minute flight in 1908. Squier’s legacy to the world, however, was something capable of sparking far more tumult than a historic airplane flight or a groundbreaking high-speed measuring device could arouse. His lasting contribution was once characterized as “metastisizing,” described by novelist Vladimir Nabokov as “abominably offensive,” and referred to in Smithsonian magazine as “a stupefyingly bland, toxically pervasive form of unregulated air pollution, about as calming as the drone of a garbage compactor.” Squier’s gift to the world was Muzak, a commercial product that irritated some, soothed others, and reigned for generations as a household name.

Roughly a decade after his pioneering flight, Squier was tapped as the head of the U.S. Signal Corps, a promotion concurrent with the United States’ entry into World War I. While superintending the Signal Corps, Squier developed a way to play a phonograph over electric power lines that served as the technological foundation for Muzak. Squier patented the invention in 1922 and later in the year sold the patent to a massive utilities combine called North American Company, which backed Major General Squier in launching Wired Radio, Inc. It took another 12 years, however, before North American first essayed Squier’s technology on the market. The year the technology was first tested—in 1934—also marked the year Squier came up with a new name for the company that would employ his patented technology. Squier combined the name of the widely popular Kodak camera and the sound of music, ending up with Muzak. The year the Squier technology first was used and the year the Muzak name was born also marked the year of Major General Squier’s death, but the name and the concept he created would flourish for the remainder of the century, becoming a pervasive presence both in the United States and abroad for generations to come.

Muzak’s first customers were residents in the Lakeland section of Cleveland, Ohio, who paid $1.50 a month for three channels of audio entertainment ranging from dance music to news. The first Muzak recording, also completed in 1934, was performed by Sam Lanin’s orchestra, which recorded a medley of “Whispering,” Do You Ever Think of Me?,” and “Here in My Arms.” Shortly after the service debuted in Cleveland, Muzak’s leaders realized the company could not compete against commercial radio, so they altered their focus and began marketing the audio service to hotels and restaurants in New York City before 1934 was through. Two years later, Muzak’s management made a signal move that would steer the company toward greater heights when they began marketing Muzak service to factories and other work areas. Shortly after the introduction of Muzak into work areas, the company benefitted enormously from a windfall study. The reaction to the study would fuel Muzak’s growth for decades to come.

In 1937, the theory that music increased efficiency and reduced absenteeism in the workplace was substantiated by a team of industrial psychologists in Britain. On the heels of this disclosure, a study conducted at the Stevens Institute of Technology in New Jersey showed that “functional music” in the workplace reduced absenteeism by 88 percent and early departures by 53 percent. Additional studies demonstrated equally impressive results, convincing many that there was a direct correlation between the sound of music and higher productivity. At a dairy in McKeesport, Pennsylvania, a recording of “The Blue Danube” was played, inducing the cows to produce more milk. Elsewhere, recordings reportedly inspired chickens to lay more eggs. As news of these studies spread, a more receptive audience for Muzak’s unique services was created, giving the company a viable customer base to target.

Driven by the strong, positive reaction to the scholarly studies, Muzak expanded geographically to take advantage of the burgeoning demand for “functional music” in the workplace. To execute its expansion plan, Muzak developed a franchise system in 1938, enabling it to establish a presence in major U.S. cities such as Boston, Washington, D.C., Philadelphia, Detroit, and Los Angeles. The company’s coast-to-coast expansion quickly attracted the attention of a corporate suitor, the first of many to come in Muzak’s history. In 1938, Warner Brothers purchased Muzak Corporation and the publishing rights for the volumes of classical and semi-classical compositions North American had acquired by the end of the 1930s. Warner Brothers’ tenure of ownership was brief, however, lasting roughly a year. In 1939, Warner Brothers sold Muzak to a triumvirate comprising Waddill Catchings, Allen Miller, and William Benton, founder of Benton & Bowles Advertising Agency, publisher of the Encyclopedia Britannica, and a U.S. Senator from Connecticut.

World War II and Postwar Growth

Of the three owners, Benton wielded the most influence, and eventually bought out his two partners to gain full control in 1941, when the theory that music in the workplace increased productivity was put to its first great test. The United States’ entry into World War II proved to be a crucible for Muzak’s “environmental music,” as the need for heightened production on nearly all industrial fronts offered the opportunity to use the power of Muzak on a mammoth scale. Thousands of factories, arsenals, and shipyards were wired for music during the war, and production, as a result, increased 11 percent at those facilities that aired hits such as “Victory Polka,” “Deep in the Heart of Texas,” and “Swinging on a Star.” By the war’s conclusion, Muzak’s effectiveness had convinced corporate America that background music was a valuable aid in the workplace, and large corporations signed on for Muzak’s service, including companies such as Prudential Life Insurance Company, Bell Telephone, and McGraw-Hill Publishing Company.

By the beginning of the 1950s, Muzak’s position in the business world was secure. Less than two decades after being introduced as a unique and novel service, Muzak was not only being piped into several of the nation’s largest corporations but also into hundreds of smaller businesses as well. As the roster of Muzak clients expanded, the company funnelled money into research to develop technological improvements and to scientifically refine the music itself. Muzak’s engineers developed something the company called “Stimulus Progression,” a process of programming music at faster tempos to counteract the tendency of the human mind and body to slow down during the late morning and mid-afternoon. According to various studies conducted by Muzak, Stimulus Progression increased concentration, lowered blood pressure, and heightened productivity by gradually raising the intensity level of music in 15-minute cycles, with the relative level of each 15-minute cycle escalating during the late morning and mid-afternoon. On the technological front, no invention ranked higher during the immediate postwar years than the 1953 development of “M8R,” an electronic tape playback system that enabled Muzak to switch its recordings from phonograph to audio tape. The development of M8R brought full automation to the Muzak network, making it economically viable for the first time for franchises to operate in communities with populations under 25,000.

By the end of the 1950s, after Muzak began switching from telephone lines to FM subcarriers, hundreds of thousands of employees and consumers across the U.S. were either consciously or subconsciously listening to the emotion-tamed strains of Muzak. Muzak was being played in a wide spectrum of businesses, aboard trains and airplanes, and, beginning with the Eisenhower Administration, in the White House. New ownership arrived late in the decade when Muzak, with 150 franchisees in the United States, Canada, and abroad, was sold to Wrather Corporation in 1957. Under the auspices of Wrather Corporation, Muzak grew robustly. The company’s franchise network expanded substantially and the number of recordings in Muzak’s library proliferated during a 15-year span that included, among other highlights, the inclusion of Muzak aboard the Apollo XI spaceship that carried Neil Armstrong to the moon.

In 1972, Muzak was passed to the hands of another corporate parent when Teleprompter Corporation purchased the company from Wrather Corporation. The expansion of Muzak’s music library picked up pace during Teleprompter’s period of control, with as many as 600 compositions being added each year to the company’s collection of easy-listening hits, as the new management strove to develop a broader palette of contemporary melodies. Midway through the 1970s, the company’s vast musical selection was entered into a computer, enabling engineers to locate compositions with great speed and precision. Additional progress on the technological front during the 1970s saw the launching of Muzak’s own broadcast satellite late in the decade, signalling the beginning of the conversion from FM transmission to satellite broadcast.

Muzak Moves to Foreground in the 1980s

As Muzak neared its 50th year of business, yet another ownership change was set to take place. In 1981, Westinghouse Corporation purchased Teleprompter and, reportedly, only learned later that it had acquired Muzak Corporation as part of the deal. It was while under Westinghouse’s control that one of the most significant developments in Muzak’s history occurred, one that pointed the way toward the company’s future and distanced it from its past. In 1984, the company struck a private-label agreement with one of its few competitors, Seattle-based Yesco Audio Environments. Founded in 1968, Yesco pioneered the foreground music concept, carving a niche for itself by playing the popular recordings of hits by the original artists rather than instrumental renditions of those hits. Muzak had achieved much in the background music industry during its five decades of market domination—80 million people listened to Muzak every day during the early 1980s and its programs were syndicated in 19 countries—but the wave of the future was in the foreground music industry. The 1984 deal with Yesco represented Muzak’s first move into this market, adding foreground music selections to Muzak’s library that were then provided to Muzak customers under the TONES name. The following year, Muzak began broadcasting its own original artist program called Foreground Music One.

In 1986, Muzak was acquired by The Field Corporation, a Chicago-based holding company owned by department store heir Marshall Field V, who oversaw Muzak’s 1987 merger with rival Yesco. The merger completely reshaped Muzak for the future, precipitating what Billboard magazine would later describe as Muzak’s transformation from a “passé ‘elevator music’ specialist to a dynamic, multi-faceted communications company.” The merger also brought an end to Muzak’s heavy involvement in the background music industry and greatly strengthened its presence in the foreground music industry. Muzak’s vice president of programming and licensing would later note as much when he remarked, “There are still a couple of companies out there doing that kind of old-style, 1,001-strings, ruin-your-favorite-song kind of thing, but we dropped all that in 1987.”

Muzak, which had been headquartered in New York since 1936, relocated its corporate offices to Seattle after the signal merger with Yesco and began developing into the sophisticated, diverse communications company that earned Billboard’s esteem. One year after the merger, Muzak, then known officially as Muzak Limited Partnership, debuted Music Plus, which consisted of five channels of music, audio marketing messages, data messaging, and business television delivered via satellite. Additional services to businesses were offered in 1991 when the company launched its ZTV video network, which offered six channels and 11 music formats to night clubs, restaurants, and bars. The following year, as the pace of new product introductions intensified, Muzak launched SuperLink, a retail advertising service that connected large grocery wholesalers with large groups of retailers, and added seven more channels to its Music Plus service.

Mid-1990s Diversification

Sales by the end of 1992 had climbed to $54.2 million, a total that would increase strongly in the coming years as Muzak broadened its range of services to businesses. New ownership took control in 1992 when management and Centre Partners, a money pool administered by Lazard Freres & Co., acquired Muzak from The Field Corporation. At the time, Muzak’s operations comprised 176 franchisees and 16 company-owned outlets that sold “environmental music,” satellite-delivered video, data communications, and other products in the United States and in two dozen foreign countries. Building on this base, the company’s new owners spearheaded the development of several new programming services during their first years of control, introducing informational programming services, Muzak Newscast and DTN Wall Street, in 1993 and forming Muzak Special Products Division in 1994 to provide a broader range of services to the company’s business clients.

The creation of Muzak Special Products Division, which positioned the company as an alternative marketing service for record labels, helped push sales in 1994 up to $83.4 million, a substantial increase over 1993’s total of $58.5 million. In 1995, the company bolstered its Music Plus service by adding four channels for a total of 16 channels, and increased its presence in Europe through a joint venture with a Dutch company named Alcas Achtergrondmuziek. The partnership with Alcas gave Muzak the capability to market business music, advertising, business television, visual merchandising, and data communication services throughout much of Europe.

As Muzak prepared for the late 1990s and the beginning of the 21st century, it stood strongly poised to take advantage of emerging technologies in the arena of business communications. A business arrangement with EchoStar Communications Corporation in 1996 enabled Muzak to expand its music selection to 60 channels by the end of the year, further strengthening its resources for the years ahead. Less than a decade after its merger with Yesco, the company had completely revamped and diversified its services to meet the variegated demands of business clients across the globe, evolving into much more than Major General Squier first envisaged in 1922. As the company forged ahead, a conversion to public ownership was in the offing.