By May 1932 the BBC were ready to start their own research into television production. To aid them they set up their first TV studio in the recently purchased Broadcasting House and employed their first television engineer, Douglas Birkinshaw. D. R. Campbell and Thornton Bridgewater from the Baird Company joined him and Baird's equipment was installed in the new premises. But by now, John Baird himself was merely an employee of the company that bore his name.

In 1930 Baird's shares had fallen dramatically and by June of that year it was necessary to amalgamate the Baird Television Development Company and Baird International Television Ltd into Baird Television Ltd. Soon after this, the parent company, Television Ltd went into voluntary liquidation. This company held one million deferred shares (a controlling interest) in the public company. Baird's financial adviser, Sydney Moseley, secured these shares from the liquidator and the controlling interest was purchased by Isidore Ostrer, the managing director of Gaumont-British film company in January 1932.

Baird's reaction to this was to withdraw to his laboratory and continue research on several new projects. One of these was the development of ultra shortwave transmissions. Medium waves, as used by the BBC, permitted no more than a certain amount of detail, which limited Baird to transmissions of 30 lines. Their main advantage was their ability to carry signals for hundreds of miles. Ultra shortwave allowed much more detail but limited the range to about forty miles, although a series of relay transmitters would allow the pictures to go much further. On 29th April 1932 Baird gave a demonstration from his ultra shortwave transmitter at Long Acre, the pictures being transmitted to a 30-line receiver at Selfridge's.

The following year Baird, now married and a father to his first child, moved to 3 Crescent Road, Sydenham. The house was chosen for its close proximity to the Crystal Palace, a vast glass and metal building that had originally been designed by Paxton in 1851 for the Great Exhibition. In 1933 the Baird Company rented part of the Palace. Baird used the south tower for his ultra shortwave experiments, and by 1934 he was televising 180 line images to a cathode ray tube screen, giving images 10 by 8 inches.

With the possibility of high definition television, in May 1934, the Postmaster General decided to set up a committee to advise him on the development of the medium and the merits of the systems available. Rivals were now emerging to Baird and one of them was Marconi-EMI. (Later changed to EMI-Marconi). Marconi-EMI was developing a system that operated on all-electronic lines and by 1935 they were offering an interlaced system of 405 lines, as opposed to Baird's 240 lines. Marconi-EMI's Emitron camera was based on the RCA Iconoscope developed by Vladimir Zworykin, although the company vigorously denied this. However, Zworykin had handed over several patents on the Iconoscope camera to Marconi Wireless and Telegraph Company in Britain as early as 1932. Further more, when RCA President David Sarnoff returned to New York in 1937 following a trip to Europe he commented: "Under an exchange of patent licences this British company may use RCA patents in England and, in turn, its American licencees may use British patents in the United States." It should also be noted that when RCA was created after the First World War, one of the companies it absorbed was the Marconi Wireless and Telegraph Co. of America.

Apart from Baird, who had a vested interest in opposing the Marconi-EMI system, there were many others who were deeply suspicious of an American company (by way of RCA's involvement) establishing a foothold in British television, especially as they considered that it was Britain who gave television to the world. Even as early as 1932 there were rumours that US companies were poised to broadcast American programmes through the BBC.

Baird even went as far as venting his objections in a personal letter to the Prince of Wales, who was a great supporter of the inventor. But according to Asa Briggs The History of Broadcasting in the United Kingdom (published by Oxford University Press in 1965) the letter was intercepted by the Prince's secretary and passed to R. Eckersley at the BBC (who was director of programmes and brother of the former Chief Engineer), whereupon it subsequently vanished into BBC files.

One can understand Baird's frustration. He firmly believed that the Baird Company should join forces with one of the larger companies. "The Marconi Company got in touch with us in 1932 and were anxious to join forces" he later wrote. "We had numerous meetings, I went up to Chelmsford and was shown around their television research department. Many meetings and luncheons followed and the whole stage was set for a merger." But according to Margaret Baird, John was reckoning without the board. "He had never felt at ease with Ostrer who, with other members of the board, seemed to regard the company as an organisation for selling sets rather than as one for research." Even though John had his supporters within the company, when it came to a vote on the merger Ostrer was dead against it and won the rest of the board over.

There was also an attempt to merge with the General Electric Company Ltd., the chairman, Lord Hirst, was a friend of one of the Baird board members who supported John. "The immense importance of such a tie-up was very obvious to me" wrote John. "Although we got as far as having regular technical meetings and our own research departments were working in unison, at the last minute Isidore Ostrer turned the whole thing down."

The committee set up by the Postmaster General was headed by Lord Selsdon and included the BBC's (then) chief engineer, Noel Ashbridge, and the Controller, Admiral Carpendale. The Selsdon Committee returned its report on January 4th 1935. Among the recommendations made were that competition or commercial operation was undesirable as was a low definition service and that a format of not less than 240 lines should be employed. The decision to accept these recommendations caused a flood of complaints. When news got out that low-definition broadcasts would stop in September 1935, viewers from as far afield as the north of England and Scotland complained that the Government had totally disregarded them by accepting a service that would only cover the London area. The Royal Television Society backed these views and urged the BBC to continue with 30 lines. The Society's president, Sir Ambrose Fleming accused the BBC of being "the perfect autocracy", and "an uncontrolled monopoly." He also declared that the overcautious and unenterprising spirit of the BBC was holding television back.

It is now a popular held belief that Baird's system was far inferior to the one produced by Marconi-EMI and was doomed to failure from the start. However, the low definition device that Baird used was capable of giving a better definition of detail than a high definition one. The mechanically scanned pictures needed fewer lines than the electronic system to give good pictures as a result of the higher contrast in the television image points. The leading German scientific writer, Dr Alfred Gradenwitz, remarked on the unusual clarity of Baird's 30-line pictures and was impressed by the "outstanding wealth of detail." Further praise came from American radio pioneer Lee De Forest who wrote to the National Radio Institution of America in 1934 where he observed that Baird was limited by British regulations to 9,000 kHz side bands. "Imagine getting a good picture out of that!" he wrote. "Yet Baird does it -by the use of a 30-line picture and 12½ pictures per second. Considering the handicaps the results are amazing." It is also worth pointing out that the limitations Baird worked with, that De Forest so clearly pointed out, were as a result of the bandwidth that was allocated to Baird between 1930 and 1935 by the BBC.

But while it was becoming increasingly obvious that behind the scenes the BBC were deliberately imposing restrictions on Baird that would severely limit his system, they promoted an entirely different public image. The Selsdon Committee recommended that both the Baird and Marconi-EMI systems be run side by side for a trial period to decide which one would be adopted by the Corporation. But the trials were in the hands of BBC engineers and before the opening date for television of November 2nd, the Baird system was beset with problems, there were even suggestions of sabotage. It has been said that the Baird system was unreliable and constantly breaking down even after the daily transmissions started, but none of this was evident prior to the run-in for the start of the service.

EMI's equipment was based on their all-electric Emitron camera capable of transmitting 405 lines interlaced at 25 images per second. The Baird Company's system was a mechanical one of 240 lines sequentially scanned at 25 images per second. Baird used two systems. One, the fly spot camera, scanned with a fast moving spot of light necessitated the subject being in a dark room. The second was an intermediate camera, which recorded both image and sound. The film was fed from the camera to a tank containing the chemicals required for developing it. A fly spot Nipkow disc transmitter could then scan the processed film, whether wet or dry, and the images were observed on a cathode ray receiver. The delay between filming and conversion was 45 seconds. This process was called the 'Intermediate Film Technique' – and it threw up its own unique problems: underwater air-bubbles interfered with the sound, and it needed a lethal cyanide developer to get the processing time down to 'almost instantaneous.' The lurid orange developer was notorious for leaking out of the system and on to the studio floor). It soon became apparent that the Baird intermediate film system was still virtually at the experimental stage.

However, Baird also used an electronic camera. In February 1935 the press had witnessed the transmission of simultaneous sound and pictures from one room to another at the Crystal Palace laboratory using an electronic camera giving pictures with a definition of 700 lines, 295 more than EMI. Baird had informed the Selsdon Committee in 1934 that he could easily go to 700 lines, the main drawback being that such definition would drastically limit the transmission range without the use of expensive booster stations. In the end Baird decided to go for the maximum range whilst staying just inside the Selsdon Committees recommendation of transmissions of not less than 240 lines. But an article dated 2nd March 1935 in Practical and Amateur Wireless had claimed that at 180 lines Baird's television images were "bright and clear, with considerable detail, while at no time did they 'hunt' or go out of synchronism."

Camera sensitivity proved to be an ongoing problem for EMI especially when it came to outside broadcasts, an area in which Baird had already proved himself. And the Emitron camera proved virtually useless for film as its image storage ability caused an image to be retained from one frame of the film to another, causing blurring. The main advantage it had over the Baird system was its portability. Baird's 240-line camera was cumbersome and had to be bolted to the floor. Baird had already alerted the company to this drawback but found that his advice fell on deaf ears. As he was now 'employed' by his company rather than running it himself he found he was powerless to do anything about it.

On 2nd November, at 3.00pm, the official opening of the BBC television service, using (for the first week) the Baird system, commenced from Alexandra Palace. The first programme was presented by the Postmaster General, Major G.C. Tryon, followed by a programme featuring the Chairman of the BBC, R. C. Norman and Lord Selsdon. Other speeches were made by Sir Henry Greer, Chairman of the Baird Television Company and Alfred Clark, Chairman of EMI. One person was conspicuous by his absence: John Logie Baird. In possibly the ultimate insult the BBC could deliver, the man who had given television to the world was simply not invited. In his biography Sermons, Soap and Television Baird wrote of the BBC: 'What the devil had they done for television? But there they sat sunning themselves in the limelight as the men responsible for this great achievement, for so they wished to appear.'

The trial by television for Baird and EMI continued with each system being used on alternate weeks. But just four weeks after the opening ceremony, on 30th November, Baird was dealt the cruellest of blows. At approximately 7.30pm flames were spotted in the central section of the Crystal Palace. Within minutes the structure was engulfed in a raging inferno. Glass cracked and fell continuously and mounted police had to clear back thousands of onlookers. Amongst them was John Logie Baird whose experimental television equipment was housed in the South Tower. Before the fireman could reach that section the intense heat brought down the southwest wing.

To the outside world it may have seemed that the Crystal Palace laboratory was no more than that; a simple workshop where the inventor could continue his television experiments at the tolerance of his new bosses. But between 1933 and 1936 the most extensive television complex in Europe was located beneath the main concourse at the Crystal Palace, a fact that until years later was unknown to most people. At Crystal Palace the Baird Company had three sizable studios, which were comprehensively equipped and acoustically isolated. The largest of these measured 60 ft. by 40 ft. and could accommodate full-scale productions. Other facilities included telecine equipment, dressing rooms, a generating plant, workshops, offices, and sound and vision radio transmitters. So little was known regarding the existence of these facilities that for years later (and today still in some cases) photographs taken there were attributed to Alexandra Palace.

Baird had always wanted to set himself up as an independent broadcaster and to prove the capability of his equipment at the fifth Annual General Meeting of the Baird Company he surprised the shareholders by having the chairman, Sir Harry Greer, appear on a television screen, transmitted from Crystal Palace to their Wardour Street meeting place, to deliver the company report. While Greer made his way back to the West End of London the shareholders and the press enjoyed a variety show and excerpts from films. From February until June 1935, over 42 programmes were transmitted from the studios to various locations in London and over forty transmitters were made. At the beginning of November the first dual standard set, the T5, made its appearance at the Press Club for a special 240-line transmission. Mechanical scanning was used for the 240-line telecine machines. The possibility of recording television programmes on film aroused considerable interest and Baird was able to achieve this by the end of 1934 by using a high-intensity cathode-ray tube and a 17.5 mm cine camera. By using fast processing techniques the recorded television images could be developed, fixed, washed, dried and then projected on to a large screen within two minutes.

The company seemed to be ready to go into full-scale production by the time the Selsdon Committee had completed its report, but following the conflagration only the South Tower, the School of Arts and the Rontunda in the Palace Grounds survived. Baird lost almost £100,000 worth of equipment that night including research records that were irreplaceable. It seemed as though fate had dealt him a cruel blow. But the truth may have been far more sinister.