Much like the lawsuits major labels initially reacted to digital file-sharing with, record companies in the 1920s tried to prevent records from being played on the radio, even though stations at the time preferred broadcasting live musicians (as records played on the air resulted in mediocre sound quality.) They certainly could not stop the growth of radio, however, and after accepting this reality, they focused on innovation to improve records and record players. After all, some listeners would always want the option of putting on whatever music they want, rather than listen to the choices of a radio station.
And so, starting in the early 20s, the record companies and phonograph makers introduced several important innovations. First, they made more models which ran on electricity, so people didn’t have to wind up the device for each song. In 1925, Victor introduced what they called “orthophonic” sound, which meant the music was recorded electrically, with the new electric microphones and amplifiers, instead of acoustically as was the case before. The new “electric” sound (quickly adopted by most of the other labels) was much clearer, and was closer to the sound people heard on radios. Also, for the first time ever, the fainter instruments, such as keyboards, guitars, the lower bass notes and higher high notes were audible (partly because soft instruments could now be “microphonally amplified” through the new “loud-speakers.”) Instruments such as drums also appeared on records for the first time, presumably because before that a drummer would drown out the other sounds. In short, the noticeable improvement in sound helped turn sales around. Shortly after this “electric sound” revolution, record sales for the top songs of the day surpassed sales of sheet music for those same songs for the first time ever.
By the end of the roaring 20s, radio-and-phonograph combinations were being sold as one unit. Obviously both mediums found a way to complement each other; although records were still never played on air, it never hurt a major star’s record sales to perform their hits live on the radio. Aside from that, the booming economy, the increased purchasing power of the middle class, the new consumer youth (those “flappers” and their fur-coat wearing boyfriends), and the ever-increasing popularity of jazz all helped fuel huge record sales by the end of the decade.
But as with everything else, the Great Depression changed all of that. The downturn in the record industry was by far the worst in its history (far worse, in fact, than the losses of today’s majors.) Total annual record sales dropped from about a hundred million in 1927 to just six million in 1932. Radio, which from the beginning was driven mostly by advertising (which tends to stay stable in hard times) was less badly hit.
A major shakeup in the record industry followed. Nearly all of the smaller, independent labels disappeared almost overnight. RCA, a major radio manufacturer, bought the venerable Victor Records, in what was probably the first instance of media “convergence.” (Many people pointed out this precedent back when AOL bought Time-Warner, i.e. that the new media was buying up the old. After AOL’s stock collapsed, however, it became more like the old propping up the new, and Time-Warner just recently dropped AOL from its name.)
A couple of years later, another of the majors, Colombia, was bought by the CBS radio network. (The fact that CBS stands for Colombia Broadcasting System is actually a coincidence.) The third of the original majors, Edison, had faded out by 1929.

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