[HM89ACH], Agreement, Thomson-Houston Electric Co, Thomas Alva Edison, February 1889


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[HM89ACH], Agreement, Thomson-Houston Electric Co, Thomas Alva Edison, February 1889

Editor's Notes

Summary: This is a license proposition to the Thomson-Houston Company and the Edison Co for dividing the market relating to electric lighting. Proposal: Thomson-Houston withdraw from the lamp business and the isolated business, as well as withdrawing their Central Station business from all cities with over 25,000 inhabitants, leaving this all to Edison. The Thomson-Houston Company is to take all incandescent bulbs from the Edison Company, and will additionally order dynamos and fixtures from the Edison Company at a 20% manufacturing profit for the Edison Company; ## To Thomson-Houston, the document proposes to reserve the arc lighting business, and leaving them business in cities of under 20,000. They are also to take a license from the Edison Co for the three wire lighting system. ## Edison then comments on these propositions: 1) He would not consider that Thomson-Houston stay in the isolated business at all, even if they only sold Edison's goods, since that would demoralize Edison's own agents in this field. ## 2) Edison rejects the idea of making an agreement with Thomson-Houston that provides for that company to withdraw from the lamp manufacturing business, while still buying and reselling Edison's own lamps. This, he believes, would only undercut Edison's own business, while his company could force the Thomson-Houston company out of this field entirely by reducing the price of their lamps. ## 3) Edison argues that granting the Thomson-Houston co the three wire license would kill the Edison co's Central and isolated businesses, whereas if the Edison Co uses the license themselves they can drive the Thomson-houston Co from the market. Besides, the Thomson-Houston Co would not agree to buy a fixed amount of systems from the Edison Co anyway. ## Edison dismisses the idea that the Thomson-houston Co is a capable competitor to the Edison Co, and chalks up their success to: The fact that they take payment in stock and bonds of their own company, and these are not "unadorned" profits, since it should not be assumed that they will all pay dividends. The Edison Company turns a profit in incandescent lighting without such bookkeeping machinations, and without tapping into the small-town market, which Edison encourages it to do. ## Edison argues that there is no reason to give the Thomson-Houston Co. arc lighting business, even though this is not a business that the Edison Co has engaged in, since it might be a very profitable field to enter in the future. ## Edison does not see the Thomson-Houston Co.'s agreement to stay out of large cities with the three-wire system as a concession at all, since they use the three-wire system and all of Edison's devices illegally, and have not entered big cities anyway. ## Edison further argues that it is not necessary to buy an alternating system form anyone, since no patents are held by any one controlling any essential features of such a system. ## Edison argues against selling the Thomson-Houston Co machinery and receive royalties for setting up direct systems in small towns. Rather than obtain royalties, he argues, it would be much, much more profitable for the Edison Company to run their own systems in fewer towns, and Edison uses calculations from several small Pennsylvania towns to prove his point. ## Edison argues that conceding towns of under 25,000 inhabitants to the Thomson-Houston Co would give them a majority of the business. ## Besides, Edison says, in all probablility the lamp patent will be sustained, in which case the Thomson-Houston Co will have to fork over about $400,000 dollars besides royalties for all of the lamps they have sold. ## In conclusion, Edison argues that no entangling alliances be made with competitors. We have the business capability, says Edison, let us use it and profit by it.
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Thomas A. Edison Papers, School of Arts and Sciences, Rutgers University
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