This leaves open the question of whether station ownership affects the extent to
which minorities are served, as stations owned by non-minorities might still seek to
serve minority audiences.
Siegelman and Waldfogel (2001), using data from the
1990s, and
Waldfogel (2011b), using data from 2005 to 2009, provide some results.
They show that while there may be no general relationship between ownership con-
centration and the provision of minority programming, when minorities actually own
stations the number of stations targeted at minorities tends to increase. This, of course,
suggests the need to better understand how allowing greater consolidation affects the
number of stations that are minority-owned. Here, evidence presented by pressure
groups, such as
Free Press (2007), suggest that minority groups only control a relatively
small proportion of radio stations even in markets where minorities actually constitute a
large majority of the population.
54
The lack of female ownership or control is also more
striking, with only 6% of stations owned by females and less than 5% of stations being
owned by companies with a female CEO.
55
This is surprising in the sense that women
make the vast majority of retail purchases and it is these shoppers that advertisers would
really like to reach.
One consequence of pressure to expand minority ownership in the face of increasing
consolidation of the radio industry has been the licensing of “Low Power FM” stations,
most recently under the Local Community Radio Act of 2010.
56
These stations have
limited range (typically around 5 miles), but around 759 of these stations are currently
on air.
57
With the exception of Brand (2004), who describes an earlier program for
licensing these stations in the early 2000s, there has been no research studying how suc-
cessful these stations have been at expanding diversity of ownership or programming,
and, indeed, there is almost no data available on how many listeners these stations have
been able to capture.
8.5.3 The Effects of National Consolidation on Listeners and Advertisers
In line with the vast majority of the literature, so far I have concentrated on how local
ownership consolidation affects programming content and equilibrium advertising quan-
tities and prices. On the other hand, consolidation at the national level, by firms owning
stations in many local markets, may also have important effects. Unfortunately, these
54
Table 22 of Free Press (2007) indicates that only Laredo, TX, where 95% of the population is minority, has
a majority of stations owned by minorities. Overall, 7.7% of full-power commercial stations are owned by
minorities. Unfortunately, the FCC only started tracking racial and ethnic ownership after 1996, so it is
not possible to do a comparison with the period prior to the Telecommunications Act.
55
On the other hand, Radio One, a market leader in the Urban format, was founded by a black female who
remains President of the company (
http://en.wikipedia.org/wiki/Cathy_Hughes, accessed February 27,
2014).
56
http://en.wikipedia.org/wiki/Low-power_broadcasting (accessed February 25, 2014).
57
This number is taken from the LPFM database at http://www.angelfire.com/nj2/piratejim/lpfm.html
(accessed February 25, 2014).
369Radio
questions have not really been studied even though the phenomenon that chains are
active in many different local markets is a common feature of retail industries, and,
because of a tradition of regulating national ownership, radio appears to be a good setting
for looking at the effects of chain ownership.
There are at least two ways in which national ownership might have quite positive
effects on at least one side of the market. First, national owners may be able to sell adver-
tising more efficiently to large regional or national advertisers by using national sales
teams, possibly by bundling commercials across different stations.
58
This may tend to
increase the equilibrium amount of advertising, as suggested by some of the evidence
in
Section 8.5.1, although it may squeeze the amount of time available to local adver-
tisers. National advertisers may also benefit from firms developing a set of radio
“brands” that appeal to similar listeners across the country so that ads can be tailored
to match programming in a natural way.
59
Second, national owners may be able to increase programming quality for listeners,
especially if their stations are concentrated in similar formats. One way they might do this,
as laid out in a model in
Sweeting (2004), would be by pooling the results of their (imper-
fect) research into what listeners want to hear from across many different markets so that
in the end they are more likely to pick better music selections.
60
However, there are also models where this type of homogenization is much less desir-
able. In a model with two manufacturers and two retail outlets located in different local
markets,
Inderst and Shaffer (2007) show how a multimarket retailer may choose to inef-
ficiently single-source products for markets with different tastes in order to extract more
rents from manufacturers in a bargaining game. They argue that this type of single-
sourcing could lead to more negative welfare consequences than within-market concen-
tration, consistent with the evidence cited above that changes in product characteristics
can have larger welfare effects than changes in pricing. This model could potentially apply
to radio if we replace “retailer” with “station” and “manufacturers” with the “producers
58
The United Kingdom Competition Commission’s (2013) report on the merger of Global Radio and
Guardian Media Group provides a discussion of how Global served large, national advertisers through
a specialized sales force. It also sold advertising time to national advertisers for some small radio firms.
Smaller advertisers would negotiate with stations directly.
59
For example, in its report on the Global Radio and Guardian Media Group merger, the United Kingdom
Competition Commission (2013)
noted that “one agency said that Global had shown its commitment to
building and investing in strong national brands that could compete against the BBC for listeners and that
this had helped to make commercial radio more attractive to advertisers. Another large agency said that
Global had contributed significantly to a revitalized radio industry making radio attractive to advertisers
through an increase in audiences, better quality programming and easier access to larger audiences through
branded networks.” (p. 87).
60
This model is consistent with the fact that the CEO of Clear Channel estimated that it spent $70 million
on music research (Rolling Stone.com, August 13, 2004) and that programmers in different markets at
large companies usually hold weekly conference calls to discuss what they are adding to playlists (an article
in Billboard, November 16, 2000, discussed how this worked at Infinity Radio).
370
Handbook of Media Economics
of syndicated programming.” At least in music radio, however, one reason why this
model may not work is that music has traditionally been licensed using blanket licenses
issued by ASCAP, SESAC, or BMI, with terms that do not vary across companies,
thereby removing the bargaining stage that drives Inderst and Shaffer’s results.
61
An alternative story would be that national owners reduce quality because, by doing
so, they can reduce production costs using methods that might not be feasible for inde-
pendent stations. An example here is the use of “voice tracking,” where a DJ located in
one city can produce pre-recorded programming to be aired in a number of other, usually
smaller, cities, but which still “sounds local” in the sense that listeners are not told that the
programming is pre-recorded and produced outside the market, and may contain refer-
ences to local places or events.
62,63
There are two divergent attitudes to voice tracking. The first view is that it allows
high-quality talent to be used in smaller markets, where talent of this type could never
be afforded if the presenter had to be physically present in the market where the broadcast
was aired. The alternative view is that even if the outside presenter is skilled, some impor-
tant element of quality must be lost when the presenter is not familiar with the local mar-
ket or simply that many listeners would dislike the fact that the programming is produced
outside the market if they were actually aware of it. While it may be hard to rationalize
why consumers should dislike the fact that presenters are outside of the market per se, such
preferences are not necessarily invalid and it provides a possible explanation for the fact
that broadcasters try to disguise the fact that out-of-market presenters are being used.
A practical concern is that when all programming is produced outside of the market
and stations are operated remotely, they may not be able to provide vital information
in the case of sudden local emergencies.
64
61
As will be discussed in Section 8.9.2, the use of general blanket licenses has recently begun to change as
some large radio station owners, such as Clear Channel, have struck deals regarding fees for performance
rights with record labels. Therefore one might believe that even if the insights of the Inderst and Shaffer
model have not been relevant in the past, they may be in the future.
62
For an example of how Clear Channel used voice tracking in the early 2000s, see “Clear Channel Uses
High-Tech Gear to Perfect the Art of Sounding Local”, Wall Street Journal, February 25, 2002 (
http://
online.wsj.com/news/articles/SB1014589283422253080, accessed January 2, 2014).
63
The use of pre-recorded programming is not new, as stations have used pre-recorded programming since
the 1970s. However, prior to 1987, the FCC required that a majority of non-network programming
should be produced at a local studio (FCC Report on Broadcast Localism and Notice of Proposed
Rule-Making 07–218, 2007, p. 15,
http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-07-
218A1.pdf, accessed January 2, 2014). Recent technical innovations have also made it much easier to
attain a local sound more efficiently using out-of-market presenters (for example, allowing a 3-h music
show to be produced in less than half an hour).
64
The example that is usually cited is a 2002 train derailment near Minot, North Dakota that led to a poi-
sonous gas cloud spreading toward the town. All six local stations were owned by Clear Channel and
operated remotely, and local emergency services were unable to get information broadcast in a timely
fashion. One person died and 1000 people were injured in the disaster (
Klinenberg, 2007).
371
Radio
The welfare issues associated with voice tracking may differ quite substantially across
programming formats. In music formats, any loss of welfare will likely depend on
whether the pre-recorded programming contains a selection of music that is appropriate
for the market. As long as it does so, and in fact music selection can vary across markets
even if the DJ’s talk segments are being voice-tracked, the fact that the presenter is based
elsewhere is unlikely to affect quality very much, if at all.
Empirical evidence on homogenization and the use of out-of-market programming is
extremely limited.
Hood (2007) provides a detailed case study of news programming
over 1 week in one medium-sized market in the Western US, where the news stations
primarily used newscasts produced from outside the market. Stations missed important
local stories such as local flooding and a forest fire. It would obviously be interesting
to assess the importance of local news coverage from a welfare perspective, but this will
be difficult because the effects of local residents lacking adequate information about local
issues may only show up slowly in measurable outcomes such as participation in local
elections (see
Section 8.9.1 for some related discussion).
65
Sweeting (2004) provides some evidence on whether firms that own stations in the
same format but different geographic markets homogenize their playlists, using his panel
of airplay data over the period 1998–2001. The results indicate that common owners do
tend to increase the amount of playlist overlap, but the effects are quite small in magni-
tude. An interesting case study involves Clear Channel’s “KISS-FM” stations, in the Top
40/Contemporary Hit Radio format.
66
Clear Channel developed the KISS-FM brand
and stations in multiple markets had almost identical logos and websites. However, sta-
tions’ playlists displayed significant differences across stations. For example, in the first
week of November 2001, KZZP-FM in Phoenix, AZ played 159 different songs
(i.e., artist–song title combinations). However, only 49 of these songs were also played
on the similarly branded KIIS-FM in Los Angeles, CA. At the same time, KIIS played 109
songs that were not played at all on KZZP. One can infer that these differences reflect the
fact that tailoring playlists to meet local tastes or local competition remains important.
Sweeting (2004) also shows that stations owned by the largest national radio companies
were able to increase commercial loads without losing listeners. This suggests that
changes in programming tended to increase the quality of stations for listeners, at least
on average.
67
65
Schulhofer-Wohl and Garrido (2013) provide an interesting analysis of the effects of the closure of a local
newspaper in Cincinnati.
66
While KISS-FM is a Top 40/CHR brand primarily developed by Clear Channel, the station KISS-FM,
based in San Antonio, TX (ironically Clear Channel’s home city), is not a Clear Channel station and is in
the Rock format.
67
Of course, it is possible that national firms are more able to tailor programming to attract the average lis-
tener, whereas they may reduce quality for music lovers who desire greater variety in the music that they
hear.
372
Handbook of Media Economics
8.5.4 Economies of Scale and Scope
As well as understanding the effects of increased consolidation on advertisers and listeners,
another strand of the literature has sought to provide estimates of the cost-side benefits to
consolidation, which are relevant for welfare calculations even if consumers on neither
side of the market are affected. Cost-side efficiencies potentially provide an explanation
for why there was such rapid local consolidation after the 1996 Telecommunications Act,
given the fact that the empirical evidence indicates that the effects on both programming
and advertising markets may have been relatively small.
The legislation was also partly motivated by a desire to allow owners, especially in
smaller markets, to exploit economies of scale from operating multiple stations, allowing
more stations to remain open in the face of declining radio listening and the recession of
the early 1990s. Sources of possible economies might include lower costs of selling radio
advertising time in the form of multi-station packages, lower costs of increasing program-
ming quality, and lower fixed costs of operating as a result of being able to share
employees and managers across stations.
68
As in the vast majority of industries, the costs of running radio stations cannot be
observed directly both because accounting data is insufficiently detailed and, even when
it is available, it does not classify costs in the way an economist might want to do so.
69
Therefore it is only possible to learn about efficiencies from using information on other
choices (advertising loads, formatting choices, ownership transactions), a structural
model, and assumptions on equilibrium behavior to infer what costs must have been
to justify these choices. To date there has been no attempt to link the estimates to specific
programming practices, such as voice tracking or remote operation, and doing so would
be an interesting direction for future research to understand the welfare benefits, as well as
costs, of these controversial innovations.
Jeziorski (2014a,b) provides recent examples of the structural approach to estimating
synergies. In both cases, only synergies from local consolidation are considered. As part of
his model of the advertising market,
Jeziorski (2014a) allows firms that own multiple sta-
tions in the same format in the same market to have a lower marginal cost of selling adver-
tising. He estimates that these efficiencies are significant (reducing marginal costs by
20%), an effect that is identified by the fact that commonly owned stations appear to
reduce advertising quantities (recall the discussion in
Sections 8.3 and 8.5.1 about
how these are imputed) less than market power considerations alone would predict.
68
Some direct evidence that some economies of scope result from operating multiple local stations comes
from the fact that an owner often operates multiple stations from the same location. For example, the 2010
Broadcasting & Cable Yearbook (
Bowker 2010) lists all four of Infinity’s FM stations that were licensed to
the city of Boston as having their studio at the same address.
Jeziorski (2014b) provides several interesting
statistics on decreases in employment in the radio industry after 1996.
69
Audley and Boyer (2007) do provide some estimates of the different costs of running radio stations of
different sizes in Canada.
373
Radio
..................Content has been hidden....................
You can't read the all page of ebook, please click here login for view all page.