Together these strategies would allow Clear Channel to potentially carry as many or
more advertisements using a smaller number of commercial minutes.
Allan (2005) used laboratory experiments to compare the effectiveness of 30- and 60-s
commercials on listener recall of the brand being described, finding that the shorter com-
mercials are only half as effective, even though the price of these slots was believed to be
60–70% of that for the longer commercial.
83
Potter (2009) also finds that listeners become
more disengaged when there are more commercials within a pod, and that more, but
shorter, ads lead to listeners overestimating the total time spent listening to commercials.
Potter et al. (2008) report the results from experiments that show that distributing the
same number of commercials in a greater number of advertising pods leads listeners to
perceiving that there are more commercials and displaying greater irritation at them,
but that it also leads to superior recall.
8.8. NON-COMMERCIAL RADIO AND THE EFFECTS OF COMPETITION
BETWEEN NON-COMMERCIAL AND COMMERCIAL BROADCASTERS
In most countries, some of the oldest and still most successful radio stations are publicly
owned, with prominent examples including the national and local radio channels of the
British Broadcasting Corporation (BBC) and the Canadian Broadcasting Corporation
(CBC).
84
While these broadcasters also carry entertainment programming that is very
similar to that aired by commercial broadcasters, they also usually have objectives to pro-
vide cultural services that could be viewed as merit goods or public goods, which com-
mercial broadcasters might be expected to underprovide. For example, Section 4 of the
BBC’s current charter lists the purposes of the BBC as being: “(a) sustaining citizenship
and civil society; (b) promoting education and learning; (c) stimulating creativity and cul-
tural excellence; (d) representing the UK, its nations, regions and communities;
(e) bringing the UK to the world and the world to the UK; (f ) in promoting its other
purposes, helping to deliver to the public the benefit of emerging communications tech-
nologies and services and, in addition, taking a leading role in the switchover to digital
television.”
85
Non-commercial radio in the US has had a somewhat different history, but the
importance of non-commercial radio has increased quite dramatically in the last 30 years.
In this section, I briefly describe the development of non-commercial radio in the US and
83
“Clear Channel Changes Its Tune on Radio Strategy”, New York Times, February 14, 2008, http://
online.wsj.com/news/articles/SB120295626450067289 (accessed January 3, 2014).
84
The BBC was, however, initially established as a private corporation created by the Post Office and a
consortium of equipment manufacturers. In 1927, a Royal Charter was issued establishing the BBC as
a public corporation that should act independently of the government.
85
http://downloads.bbc.co.uk/bbctrust/assets/files/pdf/about/how_we_govern/charter.pdf (accessed
February 28, 2014).
381Radio
what is known about how competition with non-commercial radio may have affected
the commercial sector.
While many universities were among the earliest institutions to create radio stations,
in the 1920s and 1930s, most educational broadcasters were squeezed out as the networks
and other commercial interests competed for AM licenses. Therefore, in 1941 the FCC
reserved part of the FM spectrum (88.1–91.9) that was just starting to be used for “non-
commercial educational” use. However, non-commercial radio only really became
strongly established in the US following the 1967 Public Broadcasting Act, which created
the Corporation for Public Broadcasting (CPB), which distributed federal funds, in the
form of grants, to non-commercial stations meeting certain criteria.
Non-commercial stations can be divided into four groups (
Albarran and Pitts, 2001,
p. 134). The first type, which includes the largest and well-known “public” radio sta-
tions, consisting of about 560 stations in 1999, are CPB-qualified and members of
NPR, which produces news programming and operates a satellite distribution network
on behalf of its members. Most public radio stations are in news-related formats, and these
account for the vast majority of public radio listening, but there are also significant num-
bers of Classical, Jazz, and Adult Album Alternative (AAA) stations.
86
As well as CPB
grants, public stations are funded by listener and member donations, and donations from
both non-profit and for-profit companies that can sponsor or underwrite programming.
The remaining types of non-commercial stations, amounting to around 2000 stations but
accounting for a much smaller share of listening, are: non-commercial religious stations,
often affiliated with a network such as the Christian Broadcasting Network; student or
campus stations, many of which operate on low power
87
; and community stations not
affiliated with an educational establishment, many of which are run and operated by
volunteers.
Since the 1980s, public radio audiences have grown significantly, even though com-
mercial radio audiences have been falling. The
Radio Research Consortium (2012) esti-
mates that the number of people listening to public radio for at least a quarter-hour each
week increased from 5.3 million in 1980 to a peak of 31.6 million in 2011. Public radio
has been particularly successful in attracting older and higher-income listeners. For exam-
ple,
Arbitron Company (2012a) estimates that 86% of the audience of public News sta-
tions is above age 35, with 50% of listeners having annual household incomes greater than
86
Arbitron Company (2012a) estimates that News, Classical, Jazz, and AAA stations accounted for 49.0%,
16.2%, 4.1%, and 6.3% of public radio listening in Fall 2011. The remainder was accounted for by stations
using a mixture of programming in different formats, such as News during the day and music in the
evening.
87
Campus radio stations should be distinguished from large public radio stations that operate in association
with universities such as WUNC-FM in Raleigh/Durham and WAMU-FM in Washington, DC. In the
last few years, there has been a rapid growth of low-power FM stations following the Local Community
Radio Act of 2010. See
FCC (2012) for more details.
382
Handbook of Media Economics
$75,000 and 70% of them having a college degree. In many college towns, including
Madison, WI and Ann Arbor, MI, the public radio station is the largest or second-largest
station in the market across all formats.
88
The ability of public radio to attract high-
income audiences provides a particular challenge for commercial radio, as these listeners
should be particularly valuable to advertisers.
One natural question is whether the existence of non-commercial radio stations
“crowds out” commercial stations. There is excess demand for commercial licenses in
larger urban markets, so the focus is, instead, on whether public stations crowd out com-
mercial stations from particular formats.
89
Berry and Waldfogel (1999c) use a cross-
section of data from 1993 to examine whether local public classical and jazz stations
crowd out commercial stations in the same formats. A prerequisite for crowding out
is that public and commercial stations compete for the same listeners, and they show that
there is evidence that the presence of public classical or jazz stations reduces the audience
size of commercial stations in these formats, and that in the classical format, the music
selections of commercial and non-commercial stations are quite similar, suggesting that
substitution and, therefore, crowd-out are plausible. They also find that crowd-out is
likely to be concentrated in the largest radio markets because it is only in these markets
where commercial jazz and (especially) classical stations are found even when public sta-
tions are absent.
90
How important are these results? On the one hand, if the number of stations is fixed,
crowd-out in a particular format implies that listeners in other formats will be benefitting
from greater commercial station variety. On the other hand, these results do suggest valu-
able public funds are being spent providing programming that the market would likely
provide anyway, and which also may be consumed disproportionately by more affluent
groups in the population who do not lack for access to many kinds of media.
Waldfogel (2011b) revisits these questions using data from 2005 to 2009. The results
are broadly similar, suggesting, for example, that the presence of a public classical station
reduces the expected number of commercial classical stations by between 0.3 and 0.4 in
large markets. However, unlike the earlier research, this paper also finds some evidence of
crowding out of news stations. Given that public news stations and commercial news
88
Author’s calculations based on 2014 data available at http://www.rrconline.org/reports/pdf/Fa14%
20eRanks.pdf (public stations) and http://ratings.radio-online.com/cgi-bin/rol.exe/arb581 (commercial
stations) (both accessed March 18, 2015).
89
For example, the Department of Justice has argued that spectrum constraints prevent new entry of FM
stations in medium-sized markets such as Harrisburg, PA and Colorado Springs, CO (
United States
Department of Justice, 2000b
). Of course, given excess demand for licenses, the reservation of spectrum
for non-commercial stations is almost certainly crowding out commercial programming.
90
For classical programming, they find evidence of crowd-out for markets in the two largest population
quintiles in their sample. These were markets with populations above 561,000 in 1993. In 2013, the Syr-
acuse, NY radio market had a population of 567,000 (Nielsen Fall 2013 Market Survey Schedule and
Population Rankings).
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Radio
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