The Philips Story: Part Two

founder Gerard Phillips. We'll begin this episode with a discussion about what happened to Anton's son, Fritz Phillips as much of the world was plunged into the conflict known as World War Two. So if you remember from our last episode, Anton and his son in law Frandson or Franz Aton fled the Netherlands. They went to North America. They had established a North American base of operations to work from

during the course of World War Two. Much of Phillip's management followed suit, but but Fritz Phillips stayed behind in the Netherlands, and Fritz really tried to protect the interests of the company as well as the company's employees during the entire Nazi occupation. Now, from nineteen forty until nineteen forty three, Fritz kept things running at Phillips, even resisting the moves by the Nazis to switch the operations to more warlike efforts to support Germany's UH operations, and Fritz

really was able to resist that fairly effectively. But in April nineteen forty three, things took a very dark turn for Fritz, and obviously was a terrible time for much of Europe because in April nineteen forty three, the Nazis made a declaration that was pretty much the doom for

Fritz Phillips at least for the next two years. So when Germany invaded the Netherlands back in nineteen forty the three hundred thousand members of the Dutch Army had been essentially captured, but then released after the Netherlands officially surrendered

to Germany. So the three thousand members of the Dutch army were under German supervision for a while and then allowed to go back and rejoin Dutch society under the Nazi occupation, But in nineteen forty three Germany declared that those three hundred thousand soldiers would be conscripted and forced into labor on behalf of Germany, so they become, you know, a said slave labor to the Nazis, and the Phillips employees decided to go on strike to protest this move.

It wasn't and move against Fritz Phillips. It was a move against the Nazis. But Germany held Fritz Phillips personally responsible and captured him and put him in a concentration camp and essentially was trying to use him as leverage to force Phillips employees back to work. Meanwhile, while in captivity, Fritz was put in charge of a camp workshop in that concentration camp, and it was staffed by Jewish prisoners.

So again he did his best to protect his workers in the concentration camp, trying to make sure that he he made it clear that each one of them was necessary for him to do the work that the Nazis were demanding. Tragically, uh, he started with four sixty nine Jewish employees. Only two of them survived to the end of the war. Um and I say only three two because it's just a tragedy for any of those lives to be lost. Obviously, however, it's almost I can't even

say it's a silver lining. But he did manage to protect quite a few of those people. In fact, if you compare those numbers with the Dutch Jewish population, overall, almost all the Jews in the Netherlands had been completely eliminated eradicated. So Fritz Phillips actually did succeed in saving lives, and I'm sure that he would have wish that he could have saved all of them for his efforts. Israel actually decorated Fritz Phillips with the yad Vashim metal in

and he was alive to accept that that honor. Fritz survived the war, as I just indicated. After his release, he dedicated the next several years to rebuilding the Phillips presence in the Netherlands because during the course of World War Two, Phillips factories were hit hard. They had been bombed by the Allies twice and then once by the Germans. When the Germans were withdrawing during their retreat, they also bombed the Phillips manufacturing factories. He would eventually become the

president of Phillips in nineteen sixty one. He retired in nineteen seventy one, and he passed away in two thousand five at the age of one hundred years old. But going back to just after World War Two, during that era, uh, you know, it was it was a period of rebuilding, and by six most of the facilities had recovered. Meanwhile, Phillips research focused on things like transistors and integrated circuits over the next couple of decades. Really the nineteen fifties

was the era of the integrated circuit and the transistor. Uh. That work was really being pioneered at places like Bell Labs. But Phillips were, you know, the companies like Phelps were able to jump on that bandwagon, as it were, and add their own expertise in advancing the technology of integrated circuits and building a foundation for future work in electronics. In nineteen forty nine, Phillips introduced the syncro cyclotron, which sounds like a really wicked amusement park ride, but the

syncro cyclotron was actually a particle accelerator. Now that might sound unusual. You're talking about a company that's largely known for its work in electronics and stuff some that's fairly simple, things like radios and lamps, and a little bit in the medical field with X ray technology. But this was another example of how Phillips was really valuing pure scientific research. Not only was Phillips looking to join and create new markets and electronics, but also push our understanding of the

fundamental nature of the universe. Uh. There was a physicist, a famous physicist named Kasimir who worked on this project, and Kasimir was a notable scientist. His name was actually used to describe a certain physical force that results from a quantized field. It's called the Kasimir effect. That research would later become important for micro electro mechanical systems known

as mems. So there's another good example of how some fundamental understanding of science can end up being a huge benefit further down the line, something that you could not possibly have anticipated when you first set out to study it. I know I'm beating a dead horse here, but I really do believe deeply in this philosophy that pure science has value, and often it has value that we cannot

anticipate when we set out to answer questions. And so if you happen to ever be in a position where you can help fund pure science, I urge you to do it, even if you don't have an immediate return on what that investment will mean, because you never know what's going to turn into in the future. All right, lecture over, let's get back to it. In nineteen three, skipping ahead quite a bit, Phillips introduced the compact audio cassette. This is what we in the eighties called a cassette tape.

Cassette tape is essentially a little plastic cartridge, inside of which is a real that has a ribbon of magnetic tape upon which you can record audio. So magnetic tape was not a brand new medium. It's not like Phillips invented magnetic tape. Previous versions were already in existence and had been used for both commercial and home uses. But the home use was pretty limited because really, the predecessor

to the cassette tape was real to real audio. Some people had real to real audio sets, but they were pretty expensive, so it was one of those things that only people with a lot of money and a lot of interest in technology actually owned. The average person didn't have a real to real tape player, and the cassette tape was kind of uh an effort to bring this sort of technology into the realm of the consumer market,

creating a brand new space. UH. The Phillips innovation meant that you had a compact, portable and eventually an expensive alternative to real to real tape, and that was great. They debuted the cassette tape at the nineteen sixty three Berlin Radio Show. It would be introduced to the United States the following year, in ninet sixty four. Other companies were also attempting to establish a standard for personal audio

at the same time. So that raises a question, how did Phillips end up making its design the cassette tape the standard. Why Why is that the standard and not something else that was being developed at the same time by another company, And the answer is mostly due to a strategy that was forced on Phillips. Phillips ended up licensing the design for free to Sony the design of the cassette tape to Sony. Sony had really been pressuring Phillips to do this. At that time. Japanese companies were

really on the rise. They were rapidly overtaking other companies in other parts of the world, and so Phillips the writing was on the wall. If Phillips did not do this, then some other company stood to gain the most by becoming the standard in home audio formats. So they agreed, and as Sony adopted that Phillips form factor for cassette tapes, the standard was set, and and that is how we

have cassette tapes and not some other format format. But it wouldn't be until the late nineteen seventies that the cassette form factor really became popular among consumers. So it was more than a decade later that people actually started to buy cassette tapes in large amounts. And the big reason for that was because the quality just wasn't there early on, but for both playback and for recording, and vinyl records had much higher fidelity. The sound was better

from a vinyl record. If you bought a cassette tape and tried to listen to the same music that you could get on vinyl, you'd be disappointed in the noise that would be present on the recording. So cassette tapes originally could not compete with the fidelity of records, but as soon as that quality reached a good enough standard, cassettes began to overtake vinyl. So this is an example of a format that you could argue is of an

inferior quality. There are people who will argue to their deathbed that vinyl records are the highest fidelity you can possibly achieve, um because it's a very true representation of the sound that was generated at the time of recording. But you could also argue that ultimately that doesn't matter to the consumer. You just have to make the quality good enough and make it super convenient, and if it's more convenient than the alternative and it's not prohibitively expensive,

people will switch to that format. That's what happened with cassette tapes. They weren't superior in quality to vinyl records, but you could carry them around with you much easier than you could with records. You could even in all something like a tape deck in your car and listen to him on the go. Couldn't really do that with vinyl, at least not without taking the smoothest roads possible, because

any bump would totally ruin your record collection. And it didn't matter that the quality wasn't as good because the convenience was there. But quick aside, you might wonder how does magnetic tape work? And I thought it might be cool to just quickly cover the basics to explain what magnetic tape is actually doing. So the tape itself is a plastic base. So the ribbons is plastic, and it has a coating of ferric oxide powder which is ferro magnetic um, and it's usually paired with some sort of

binding agent so it sticks to the plastic film properly. Now, if you expose that feric oxide to a magnetic field, the magnetic field will cause the particles to align in a particular a. So if you move a ribbon coated with ferric oxide powder through a varying magnetic field, so you're changing the magnetic field over time as the ribbon passes through it. The ribbon actually becomes a record of

the changes in that magnetic field. Like in other words, if you were to visually represent the changes of that magnetic field across the ribbon, it would be like a timeline your reconstruction, reconstructing the time from the beginning to the end of how that magnetic field changed. Now that magnetic field represents music or or sound. You get an electric current, you put it through an electro magnet. The changing current in the electromagnetic creates this variable magnetic field

that gets recorded onto this tape. You play the tape back through a playback device. Moving this ribbon with the magnetic material past an electro magnet that's not turned on will expose the electro magnet to a changing magnetic field that ends up inducing electric current to flow in the electro magnet, which then can be sent to an amplifier, which then can be sent to speakers, and then you get your sound. It's really amazing, like it's it's actually

pretty simple when you think about it. It's it's translating one type of energy into another and then using magnetic field to record it. But there's something in my mind that refuses to dismiss the possibility that all of this is magic. I understand on a physical level what's happening, but it's so phenomenal to me that you might as well have a wand in your hand and be speaking faux Latin. At any rate, that's how magnetic tape works.

So let's get back to Phillips. They had set the standard for home audio with the cassette tape, and as a result they they managed to change the world of home media, but it took more than a decade for that to really take hold. The nineteen seventies were really challenging for Phillips. I mentioned that Fritz Phillips had retired in nineteen seventy one as president after a really prosperous decade.

The sixties were pretty good, but the seventies were getting tough. Uh. The replacement was Hank Faun reems Ditch, that's my best guess at how to pronounce his last name, and he became the new president, but he was facing some pretty hefty challenges. Those Japanese companies were becoming increasingly powerful and competitive, and that really forced another round of reorganization over at Phillips.

So one of the things that reems Ditch did was shut down some of the smaller factories that were owned by Phillips because these smaller companies, these smaller factories weren't as efficient as larger operations, so the smaller ones got shuttered and the larger ones were prioritized. In nineteen seventy two, Phillips introduced the first successful consumer home video cassette recorder system.

The company called it Video Cassette Recording or vc R, but you shouldn't confuse this with the VHS or Beta Max formats. It was a different style of cassette tape. The vc are cassettes were actually kind of these chunky squares rather than rectangles, and they housed two coaxial reels of magnetic tape. They were available in three different varieties. You can get them in thirty minute, forty five minute, or sixty minute versions, although supposedly the sixty minute ones

were particularly tricky. They could snag and and foul pretty easily, so they were not reliable. Uh and unless you're from Europe, you're probably not terribly familiar with the format. Because Phillips

never sold the devices in any other regions. They were looking at getting into North America, and in fact it even started marketing campaigns in North America to try and introduce the VCR, but before they could, the VHS debuted in America and became adopted as the standard UM and that pretty much foiled the plans of Phillips during the late nineteen seventies to to bring the VCR to the US. In nineteen seventy four, Phillips purchased another company called Magnavox.

Magnavox was an American electronics company that started all the way back in nineteen seventeen, and it produced a lot of different types of devices, but My favorite was the Magnavox Odyssey, which was the first home video game console.

Now Phillips purchased it, and in the nineteen eighties they would combine Magnavox with a couple of other acquisitions that the company had made, Philco and Sylvania, so you had Magnavox, Philco, and Sylvania all combined into one division underneath the Phillips brand by the mid nineteen eighties. The president, Reems ditch Uh,

stepped down in nineteen seventy seven. He was replaced with a man named Nico Rawdenburg, and the next few years saw an increase in sales, but revenue didn't really go anywhere. So even though they were selling more products, revenues were remaining kind of static. And in nine Visa Decker became president and chairman of the board of Phillips, and he restructured the company again. So you could almost argue that the history of Phillips is a series of restructuring and

reorganizing to try and uh get more focus. It seemed like the company would pare down, then build up again, and then the next regime, if you will, would come in and pare down all over again in order to try and get some some laser like focus for this company. Well, Decker's plan ended up closing more than a quarter of all the plants located in Europe, and so this leanard company was able to turn things around and increase revenues once again. But Decker also started making some big acquisitions,

including buying a lighting division from Westinghouse. So again an example of paring down but building back up again. Over the next several years, Phillips would have a few different presidents, so I thought I would lump them all together in this section rather than peppering them throughout the rest of the podcast. So I'm gonna just tell you all the people who have led Phillips from Decker to present day, so and keep in mind restructuring was pretty much a

a go to strategy with each person. There was a Cornelis van der Kluet who led the company in nineteen six, Yon Tremor came on board in nine, Core Boonstra in nineteen six, Gerard Cloister Lee in two thousand eleven, and the current CEO is Franz von Houghton. So I decided to just sum them up all now so that we

could get back into the technology. So Phillips. The company partnered with m c A to develop a new product called the Laser Disc that originally was marketed in the United States under the name of the m c A Disco Vision, which I think is a phenomenal product name. I wish Disco Vision had been its name forever. Uh. The first place it went on sale was actually Atlanta, Georgia in ninety eight. It went on sale there before it appeared anywhere else in the United States, So shout

out to my hometown of Atlanta, Georgia. Now, both m c A and Phillips have been working on an optical video technology separately optical meaning that you're using some form of light to record and read the information off a disk in order for you to get the video and audio that has been put on that disc. And both m c A and Phillips have been working on this

at the same time. But they both also noted that there had just been this massive war of formats between VHS and Beta Max, and m c A and Phillips came to the conclusion that it made more sense for them to join together and to combine their knowledge and come out with a united product rather than try and have another format war, which could hurt both companies, so they entered a partnership and created laser disc, which never really met with widespread success here in the United States.

There are other markets, like in Asia where it did quite well. In the US, there was a passionate market, but it was very small. So there were some home theater enthusiasts, again mostly people who had a decent amount of money at their disposal, who adopted laser disc technology, but for the most part it was kind of an afterthought. Part of that was because you couldn't use it to write stuff to the discs. Now you're you're consumer products. They were read only, so you could buy movies and

watch them, but you couldn't record anything. VHS had an advantage there you could record stuff from television onto tape and keep it forever. So even though laser disc quality was better than VHS quality, at least initially, again it didn't matter that the quality was better, it wasn't It wasn't practical and convenient enough for people who wanted to

have that home theater experience. So ultimately it didn't really take off here in the US, and uh it still was a very interesting story, but it did lead to another partnership. This time it was a partnership between Phillips and Sony. They decided to work together to develop a digital audio disc. The two companies poured time, money, and other resources into research and development, and the result was

the Compact Disc, which became a worldwide standard. And there are a lot of interesting stories about the history of the Compact disc, including things like how did they come to decide what were the standards for things like bit rate that you record to on a disk. Maybe one day I will do a full episode just about the compact disc and why compact discs are the way they are because those were decisions that were made. It's not like it it was just the magical properties of the CD.

But in order to make sure that this standard survived the test of time, Sony and Phillips decided to do something similar to what Phillips had done with cassette tapes. They granted manufacturing rights for CD players to other manufacturers. In other words, they gave competition the right to make their own CD players because if they didn't, the fear was that these other manufacturers would try to create standards

of their own and that would fracture the market. So just imagine that you're trying to buy music and there are five different formats out there, hard hard copy formats that are similar to c d s, but they aren't compatible with each other. So, in other words, you have a system at home, it will only play one version of the media. You have to go out there and hope that whatever album you want is available on media. You have advantage, you know, you can take advantage of.

That's what Sony and Phillips wanted to avoid. They did not want that world to happen because consumers wouldn't be very happy. It would end up hurting all the parties involved. So that's why they granted the rights to other manufacturers to make things like CD players. In Phillips would change its name to Phillips Electronics Envy, which finally is pronounceable,

so I thank them for that decision. They also introduced a console in the home video game market called the Phillips c d I c D DASH lowercase I that actually stood for Compact Disc Interactive and it was meant to combine the functionality of a CD player and a video game console while still being less expensive than a

PC that had a CD ROM drive. In the mid nineties, Phillips increased the functionality of the c d I by introducing Internet connectivity and making it one of the first consoles capable of browsing the web or playing games online. In order to do that, you actually had to buy an expansion for the c d I, which caused something like a hundred and fifty bucks, which at the time

was pretty expensive. I mean it's expensive now, but you have to adjust for inflation because that was the mid nineties with a d fifty dollars on top of the price of the c d I by itself. Now, what was really interesting to me is that the c d I was able to do something that most video game consoles have not been able to do, at least non Nintendo video game consoles. They were able to license characters

from Nintendo like Mario and Link and Zelda. They were able to license all of those characters and make games featuring those characters for a non Nintendo video game system.

How did that happen? Well, the the reason is that originally Nintendo was looking into building a CD ROM add on to the Super Nintendo Entertainment System, and so Nintendo and Phillips were going to partner together, Phillips was going to build the hardware, the CD ROM hardware that would connect to the Nintendo console, and that would give Nintendo the ability to increase its its range by adding CD capability to the Nintendo Entertainment System or Super Nintendo Entertainment System.

But other CD based video game consoles were not doing so well in the market, so Nintendo changed its mind. The company said, you know, maybe we were a little hasty. To me. It looks like this is not the right path for us to take right now, so we're gonna

back off. We're gonna cancel this arrangement. But as sort of a consolation prize to Phillips for having to cancel this agreed upon partnership, Nintendo said, when you make your video game console, you can use these properties for certain number of video games, and that's where we got things like Hotel Mario Fat A lot of good it did Phillips, though the video games were widely considered to be pretty awful, so they were not enough to save the system and

push it to popularity. In fact, a lot of publications out there will list the Phillips c d I as one of the worst consoles ever in the history of Ever, it was considered to be that bad, largely not because of the hardware, but because of the lackluster games that were developed for it. It's a very forward thinking kind of console, it just didn't execute well and didn't have

the support as far as software is concerned. Now, in the mid nine nineties, Phillips and Sony would join forces again, but this time they also had Teshiba and Panasonic with them to develop what was called the Digital Versatile Disc or DVD. Now. The reason for that alliance was again to avoid another home media format war like that VHS Beta Max battle. Before the DVD, there were two primary

formats that were racing to become the standard. One of those formats was backed by Sony and Phillips and was called the Multimedia Compact Disc or m m c D. The other was called the Super Density Disc or s D, and it was supported by companies like Pioneer, Toshiba, and JVC.

The alliance actually allowed these various parties to collaborate together and incorporate some of the technology they had developed separately into a single format, which became the new standard DVD, and it also headed off that format war in the process. While that strategy worked. It seems that Toshiba kind of forgot all about the importance of it a few years later when it tried to pit its HD DVD standard

against Blue Ray. So Phillips was part of the Blu Ray Disc Association or b d A, and other companies in the b d A included Sony, Panasonic, Pioneer, whole bunch of others, essentially everyone who wasn't Ta Shiba, And so you had this this fight between Blu Ray and HD DVD, and for a while it looked like h D DVD might even win, but ultimately they had to pull out of the race. Blue Ray obviously one you don't see h D DVD sets out there these days.

I actually got to see the results of this battle in person, because when I went to c e S two thousand and eight, there was a big empty spot on the show floor where h D DVD was supposed to be. And that is unusual. Usually every square foot of c E S has some sort of booth attached to it. If it's not a booth, it's a pathway between booths. So to have a big area that had

nothing in it was pretty conspicuous. It was made even more conspicuous by the fact that Blu Ray that year had designed their booth to look like an enormous pirate ship that was modeled after the Pirates of the Caribbean movies, So it was very obvious that h D DVD was the ship that sunk in that particular battle. In two thousand, Phillips closed a chapter in its history by transforming the NAT Lab that's the research and development facility I talked

about in Part one. They changed it into the High Tech Campus Eindhoven, which is an open research facility that has multiple participating organizations. Phillips is one of them, but it's not the only one anymore. This followed nearly three decades of decline in that lab. It's actually kind of a sad story. So Phillips during these restructuring UH processes where they kept on having to reorganize and and and

kind of leaned down. One of the things that was happening was that they were pulling resources away from research

and development. In the process UH, they started to de emphasize the importance of pure scientific research and really looked at the NAT lab is more of a standard R and D lab rather than pushing the envelope of science exploration, and then finally they just opened it up to other organizations, so now it's no longer a Phillips based organ It's Phillips is still involved, but it's no longer the parent of that particular facility. Recently, Phillips has also introduced interesting

systems and healthcare. They've been involved in healthcare since the twenties when they were working with X rays, but now you can find stuff like the Bent Experience. That's what it's actually called. UH. It's an integrated solution that incorporates dynamic lighting, sound, and architecture to improve patient care and hospital efficiency. So kind of a hospital that responds to the needs of the doctors and patients who are who are there, which is kind of cool, a neat idea.

Phillips also launched a three D scanner in two thousand six that is used to create high quality CT scans, and the company continue to invest in X ray development, creating new systems that use lower dosages of X ray radiation to really limit that exposure both to patients and to healthcare professionals and UH and reduce the risk of of causing damage with that radiation. But Phillips has also pulled back from a few industries in an effort to

simplify and focus its efforts. I've already mentioned that Phillips is you know, they no longer manufacture their own branded televisions, but they've also pulled out of semiconductor operations. They did that back into the thousand and five two thousand six, and there have been some other troubles as well. In two thousand twelve, the European Union find Phillips, along with several other companies, with a charge of fixing prices for

TV cathode ray tubes. Essentially, they said that these companies all colluded to fix cathode ray tube prices rather than compete against one another. In two thousand thirteen, the company renamed itself again. This time they called themselves Royal Phillips, which is the current name of the company, and in two thousand fourteen, the company announced it would split into

two separate entities. So one company would be a lighting business and the other company would be consumer lifestyle and healthcare. So Royal Phillips would become the Consumer Lifestyle and healthcare business and the new company, which will launch with an I P O sometime in two thousand sixteen, at least, that's the belief as I record this podcast, will become UH Phillips Lighting, So you'll have two different Phillips companies at that time, independent one of the other. UH. So

you have Royal Phillips and Phillips Lighting. So let's let's bring this whole story back full circle. We started the discussion about Phillips by talking about carbon filaments for lightbulbs. I thought it would conclude by talking about one of the products Phillips has introduced over the last few years, Phillips Hugh, which is a special kind of light bulb. It's sort of the fitting end to the series. So we're talking about LED light bulbs that are capable of

displaying light in various light temperatures. In other words, that can change color. UM it's networked, so it actually connects to your wireless network at home, and you can control the lightbulbs using something like a tablet or a smartphone. You can set it so that they're different colors or

even change colors over time. You can even there's certain UM television pro rams that have been designed so that if you have a huge system at home and you haven't connected, so that you're television viewing and your hue lighting are all integrated with each other. The huge lightbulbs will change color in reaction to what you are watching.

In other words, it becomes this coordinated immersive experience. So, as an example, if there were an explosion on the television show you're watching, the lights might quickly flash a certain color to create that explosion effect. So it's even more immersive in your home, which I think is kind of neat. It's also pretty dorky, but I'm also extremely dorky, thus pretty neat. Also, it's really expensive, you know, to

to buy these these bulbs. You first have to have a bridge to connect the bulbs to your WiFi system, and I think your typical kit comes with a bridge and three lightbulbs, and it's still pretty hefty price. And then you have to add more light bulbs if you want to have you know, a greater amount of lighting

in your house. So it gets more and more expensive the more light bulbs you add, and you have a certain number that you can add up to the to a point, and then after that the bridge can't handle anymore. So it's not necessarily a practical solution. It might be considered more of a toy for people who really like electronics and lighting effects. I personally have not purchased Phillips HU lightbulbs. I've thought about it a few times, just

haven't made the plunge yet, but maybe I will. We'll see, because I do think it's a cool idea and I think it's neat to see how a company that was founded on creating lightbulbs is still innovating in that space. Although of course now there are competing products on the market. They're similar to Phillips Hu, so obviously more innovation will be required in order to remain relevant. But that wraps

up the Phillips story. There's obviously a whole lot more I could talk about when I really dive into this company. Entire books have been written about the Phillips company, the founders, the influence they had on electronics, in science and physics in the European market. It's there's a library worth of information out there. But I need to set my sites on a different topic. So next week we'll be covering

something totally different. And remember, if you have suggestions for tech stuff, topics or I guess you think should be on the show, or someone I should have as a as a co host for an episode. Let me know. Send me an email. My address is tech stuff at how stuff works dot com, or drop me a line on Facebook, Twitter or Tumbler at text stuff h s W and I'll talk to you again really soon. For more on this and thousands of other topics. Is that how stock works dot com.