At the local level, prior to 1992 a broadcaster was allowed to own at most one AM
station and one FM station, even in the largest markets where there might be 50 or more
local stations. The 1992 reform relaxed these restrictions so that three stations (with at
most two on one band) could be owned in markets with less than 14 stations, and up
to four stations in larger markets (as long as they had a combined audience share of less
than 25%). The 1996 Act relaxed the rules so that firms could own five stations where
three could be owned before, and up to eight stations in larger markets.
The 1996 Act was followed by a tidal wave of consolidation, with 4000 stations (out
of 11,000) changing hands within 2 years and concentration increasing rapidly at both the
local and national levels (
Hillard and Keith, 2005, p. 72). For example, in the largest
10 radio markets, the average four-firm concentration ratio (based on audience shares)
increased from 0.61 in March 1996 to 0.82 in March 2001, while across all markets
the average ratio reached 0.93 (these and the following figures are taken from
FCC,
2001
). This represented a significant tightening of the oligopoly structure of local radio
markets. At a national level, in March 1996, CBS Radio was the largest station owner (by
revenues) with revenues of $496 million (6% of the industry total) and 39 stations, and it
was focused in the largest markets. In March 2001, Clear Channel Communications had
revenues of $3.4 billion (26.2%) and owned 972 stations spread across the complete range
of market sizes. It would have owned even more stations except for divestitures required
by the Department of Justice in analyzing mergers such as its mammoth 2000 merger with
AM/FM Inc., where the firms were required to sell 99 stations in 27 markets (
United
States Department of Justice, 2000a
). In practice, therefore, one might view the regular
antitrust laws, which, when applied to radio, were focused entirely on the possibility that
broadcasters might exercise market power over advertisers, as being as much of a barrier to
concentration as FCC regulations designed to promote media plurality and to make sure
that stations would serve the public interest of their listeners and the public more broadly.
This represented a dramatic change from the situation 30 years earlier.
While many of these policy changes reflected the general move toward deregulation
that affected industries from airlines to electricity, it also reflected the fact that from the
early 1980s radio was facing pressure as audiences declined. Radio listening peaked in
1982, when people listened for 18.2% of the time, but they listened only 10.3% of
the time in 2012.
14
On the other hand, financially the industry as a whole performed
relatively well both before and immediately after deregulation. In nominal terms, indus-
try revenues rose from $2.7 billion in 1981 (
Duncan (1981), p. 70, taken from numbers
reported by the FCC which were used to collect station financial information), $8.0 bil-
lion in 1991, $11.4 billion in 1996, to $17.1 billion in 2000 (numbers from
Duncan
(2001)
, p. 7).
14
Statistics based on Arbitron estimates for people aged 12 and above on the hours of 6 a.m. to midnight
(
Radio Research Consortium, 2012).
350
Handbook of Media Economics
While most academic research has ended around 2006, it is worth noting a number of
recent developments, many of them associated with media convergence, that may have
changed the economics of the industry.
First, the Great Recession had a large impact on advertising revenues. BIA/Kelsey
estimates that industry revenues fell from $18.1 billion in 2006 to $13.3 billion in
2009, and had only recovered to $14.9 billion in 2013.
15
This decline was associated with
the bankruptcy of several large radio groups, such as Citadel Broadcasting, that had
bought stations at significant multiples of revenues during the boom, and major layoffs
at others, including Clear Channel (renamed as iHeartMedia in 2014).
16
Partly because of
financial pressures, station transactions have continued to happen at a relatively rapid rate
(for example, BIA/Kelsey recorded 869 station ownership changes in 2010).
17
Second, while stations still derive the vast majority of their revenues from broadcast
advertising, online advertising (whether in the form of website banners, email advertising
or audio ads placed in the online audio stream) are becoming progressively more impor-
tant, and bring radio stations into much more immediate competition with other local
media that also compete online. Online distribution may also weaken some of the tra-
ditional barriers dividing geographic markets. For example, BIA/Kelsey estimates that
online advertising accounts for 4% of radio industry revenues in 2014, and forecasts them
to grow at 10% per year over the next 4 years, compared to 2% for traditional revenues.
18
Third, non-broadcast sources of audio programming have become more numerous.
Satellite radio has increasingly penetrated, particularly into vehicles. Since 2005, satellite
has offered channels providing local weather and traffic information in larger urban areas.
However, satellite radio has grown much more slowly than its initial backers hoped, and
in 2013 only 10% of car listeners reported that they used satellite radio all or most of the
time compared with 58% for regular AM/FM radio (
Edison Media Research, 2013).
19
15
http://www.biakelsey.com/Events/Webinars/Tracking-the-Broadcast-Industry-MAPro.pdf and
http://www.biakelsey.com/Company/Press-Releases/140326-WTOP-Leads-Radio-Station-
Revenues-for-Fourth-Consecutive-Year.asp (accessed February 14, 2015).
16
http://www.cbsnews.com/news/radio-giant-citadel-declares-bankruptcy/ (accessed February 15, 2015)
and http://www.nytimes.com/2009/04/30/business/media/30clear.html?_r¼0 (accessed February 15,
2015).
17
http://www.biakelsey.com/Events/Webinars/Tracking-the-Broadcast-Industry-MAPro.pdf (accessed
February 14, 2015).
18
http://www.biakelsey.com/Company/Press-Releases/140326-WTOP-Leads-Radio-Station-
Revenues-for-Fourth-Consecutive-Year.asp (accessed February 15, 2015).
19
In its prospectus for an IPO in 1999, XM radio, one of the two satellite radio companies at that time, cited
estimates that 43 million people would be willing to pay $200 for a satellite radio and XM’s monthly sub-
scription fee (
http://www.nasdaq.com/markets/ipos/filing.ashx?filingid¼1004217, accessed March 20,
2015). By 2008, XM Sirius, formed when the two companies merged, has 19 million subscribers
(http://www.forbes.com/sites/greatspeculations/2013/04/12/can-sirius-xm-tune-in-big-subscriber-
growth-this-year/, accessed March 20, 2015).
351Radio
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