AT&T spent half a billion dollars on Picturephone and sold fewer than 500 units.
On April 8, 1927, Herbert Hoover, then Secretary of Commerce, sat before a camera in Washington while AT&T president Walter Gifford watched his live image on a screen in New York.1 The picture ran at fifty lines of resolution. It was the first public demonstration of a video telephone call, and it arrived just fifty-one years after Alexander Graham Bell's first audio telephone call in 1876.
AT&T spent the next three decades trying to turn the demonstration into a product. Bell Labs resumed video telephone research in 1956 and debuted the Picturephone at the 1964 New York World's Fair, where visitors lined up to make calls between booths at the Fair and at Disneyland in California.2 That summer, AT&T opened commercial Picturephone rooms in New York, Chicago, and Washington. A three-minute call cost between $16 and $27. In the first six months, just 71 calls were made.3
AT&T pushed ahead with the Picturephone Mod II, launching commercial service in Pittsburgh on June 30, 1970. The monthly rental was $160, roughly $1,300 in today's currency, and included only thirty minutes of video calling.4 AT&T predicted a million units in service within a decade. By 1973, the total reached 453. AT&T's corporate historian, Sheldon Hochheiser, later called the Picturephone "the most famous failure in the history of the Bell system."5
Between 1966 and 1973, AT&T spent approximately half a billion dollars on Picturephone research and development.6 Skype launched in 2003. Apple introduced FaceTime in 2010. The technology that failed at $160 a month succeeded when the camera was already in the device and the software was free.