Radio continues to be one of the most used mass media, reaching about 92 percent of American teenagers and adults every week.16 Because of radio’s broad reach, the airwaves are very desirable real estate for advertisers, who want to reach people in and out of their homes; for record labels, who want their songs played; and for radio station owners, who want to create large radio groups to dominate multiple markets.

Local and National Advertising

About 10 percent of all U.S. spending on media advertising goes to radio stations. Like newspapers, radio generates its largest profits by selling local and regional ads. Thirty-second radio spot ads range from $1,500 in large markets to just a few dollars in the smallest markets. Today, gross advertising receipts for radio are more than $17.6 billion (about 80 percent of the revenues from local ad sales, with the remainder in national spot, network, and digital radio sales), up from about $16 billion in 2009.17 Although industry revenue has dropped from a peak of $21.7 billion in 2006, the number of stations keeps growing, now totaling 15,406 stations (4,725 AM stations, 6,624 FM commercial stations, and 4,057 FM educational stations).18 Unlike television, in which nearly 40 percent of a station’s expenses goes toward buying syndicated programs, local radio stations get much of their content free from the recording industry. Therefore, only about 20 percent of a typical radio station’s budget goes toward covering programming costs. But, as noted earlier, that free music content is in doubt as the music industry—which already charges performance royalties for Internet radio stations—moves toward charging radio broadcasters performance royalties for playing music on the air.

When radio stations want to purchase programming, they often turn to national network radio, which generates more than $1 billion in ad sales annually by offering dozens of specialized services. For example, Westwood One, the nation’s largest radio network service, managed by Cumulus Media, reaches more than 225 million consumers a week with a range of programming, including regular network radio news (e.g., ABC, CBS, and NBC), entertainment programs (e.g., The Bob & Tom Show), talk shows (e.g., The Mark Levin Show), and complete twenty-four-hour formats (e.g., Hot Country, Hits Now!, and Jack FM). Dozens of companies offer national program and format services, typically providing local stations with programming in exchange for time slots for national ads. The most successful radio network programs are the shows broadcast by affiliates in the Top 20 markets, which offer advertisers half of the country’s radio audience.

Manipulating Playlists with Payola

Radio’s impact on music industry profits—radio airplay serves to popularize recordings—has required ongoing government oversight to expose illegal playlist manipulation. Payola, the practice by which record promoters pay deejays to play particular records, was rampant during the 1950s as record companies sought to guarantee record sales (see Chapter 4). In response, management took control of programming, arguing that if individual deejays had less impact on which records would be played, the deejays would be less susceptible to bribery.

Despite congressional hearings and new regulations, payola persisted. Record promoters showered their favors on a few influential, high-profile deejays, whose backing could make or break a record nationally, or on key program managers in charge of Top 40 formats in large urban markets. Although a 1984 congressional hearing determined that there was “no credible evidence” of payola, NBC News broke a story in 1986 about independent promoters who had alleged ties to organized crime. A subsequent investigation led major recording companies to break most of their ties with independent promoters. Prominent record labels had been paying such promoters up to $80 million per year to help records become hits.

More recently, in 2007 four of the largest broadcasting companies—CBS Radio, Clear Channel, Citadel, and Entercom—agreed to pay $12.5 million to settle an FCC payola investigation. The companies also agreed to an unprecedented “independent music content commitment,” which required them to provide 8,400 half-hour blocks of airtime to play music from independent record labels over three years. In 2010, Univision Radio paid $1 million to settle allegations of payola and end an FCC investigation.

Radio Ownership: From Diversity to Consolidation

The Telecommunications Act of 1996 substantially changed the rules concerning ownership of the public airwaves because the FCC eliminated most ownership restrictions on radio. As a result, 2,100 stations and $15 billion changed hands that year alone. From 1995 to 2005, the number of radio station owners declined by one-third, from 6,600 to about 4,400.19

Once upon a time, the FCC tried to encourage diversity in broadcast ownership. From the 1950s through the 1980s, a media company could not own more than seven AM, seven FM, and seven TV stations nationally, and could own only one radio station per market. Just prior to the 1996 act, the ownership rules were relaxed to allow any single person or company to own up to twenty AM, twenty FM, and twelve TV stations nationwide, but only two in the same market.

The 1996 act allows individuals and companies to acquire as many radio stations as they want, with relaxed restrictions on the number of stations a single broadcaster may own in the same city: The larger the market or area, the more stations a company may own within that market. For example, in areas where forty-five or more stations are available to listeners, a broadcaster may own up to eight stations, but not more than five of one type (AM or FM). In areas with fourteen or fewer stations, a broadcaster may own up to five stations (three of any one type). In very small markets with a handful of stations, a broadcast company may not own more than half the stations.

With few exceptions, for the past two decades the FCC has embraced the consolidation schemes pushed by the powerful National Association of Broadcasters lobbyists in Washington, D.C., under which fewer and fewer owners control more and more of the airwaves.

The consequences of the 1996 Telecommunications Act and other deregulation have been significant. Consider the cases of Clear Channel Communications (now iHeartMedia) and Cumulus, the two largest radio chain owners in terms of number of stations owned (see Table 5.3). Clear Channel Communications was formed in 1972 with one San Antonio station. In 1998, it swallowed up Jacor Communications, the fifth-largest radio chain, and became the nation’s second-largest group, with 454 stations in 101 cities. In 1999, Clear Channel gobbled up another growing conglomerate, AMFM (formerly Chancellor Media Corporation). Due to the recession of 2007–2009, Clear Channel shed some of the 1,205 stations it owned at its peak in 2005. Today, as iHeartMedia, it owns 840 radio stations and about 600,000 billboard and outdoor displays in over thirty countries across five continents, including 914 digital displays across thirty-seven U.S. markets. IHeartMedia also distributes many of the leading syndicated programs, including The Rush Limbaugh Show, The Glenn Beck Program, On Air with Ryan Seacrest, and Delilah. IHeartMedia is also an Internet radio source, with iheartradio, which has more than 30 million registered users. Cumulus became the second-largest radio conglomerate when it merged with Citadel in 2011 in a $2.5 billion deal and bought radio network service Dial Global (now Westwood One) in 2013. Cumulus also owns a stake in Rdio, a subscription music streaming service.

Townsquare Media, launched in 2010 with the buyout of a 62-station group, grew to 312 stations by 2014 by focusing on acquiring stations in midsize markets. Two other major radio groups, the Educational Media Foundation and the American Family Association, are nonprofit religious broadcasters. The Educational Media Foundation also syndicates the K-Love and Air1 contemporary Christian music formats to hundreds of stations. The American Family Association is a conservative Christian activist organization that was originally established by Rev. Donald Wildmon in 1977 as the National Federation for Decency.

Combined, the top three commercial groups—iHeartMedia, Cumulus, and Townsquare Media—own almost 1,700 radio stations (about 11 percent of all U.S. stations), dominate the fifty largest markets in the United States, and control at least one-third of the entire radio industry’s $17.6 billion revenue. As a result of the consolidations permitted by deregulation, in most American cities just a few corporations dominate the radio market.

A smaller radio conglomerate, but one that is perhaps the most dominant in a single format area, is Univision. With a $3 billion takeover of Hispanic Broadcasting in 2003, Univision is the top Spanish-language radio broadcaster in the United States. The company is also the largest Spanish-language television broadcaster in the United States (see Chapter 6), as well as the owner of the top two Spanish-language cable networks (Galavisión and UniMás) and Univision Online, the most popular Spanish-language Web site in the United States.

Alternative Voices

As large corporations gained control of America’s radio airwaves, activists in hundreds of communities across the United States protested in the 1990s by starting up their own noncommercial “pirate” radio stations capable of broadcasting over a few miles with low-power FM signals of 1 to 10 watts. The NAB and other industry groups pressed to have the pirate broadcasters closed down, citing their illegality and their potential to create interference with existing stations. Between 1995 and 2000, more than five hundred illegal micropower radio stations were shut down. Still, an estimated one hundred to one thousand pirate stations are in operation in the United States, in both large urban areas and small rural towns.

The major complaint of pirate radio station operators was that the FCC had long ago ceased licensing low-power community radio stations. In 2000, the FCC, responding to tens of thousands of inquiries about the development of a new local radio broadcasting service, approved a new noncommercial low-power FM (LPFM) class of 100-watt stations (with a broadcast coverage reach of about five miles) in order to give voice to local groups lacking access to the public airwaves. LPFM station licensees included mostly religious groups but also high schools, colleges and universities, Native American tribes, labor groups, and museums.

LPFM stations are located in unused frequencies on the FM dial. Still, the NAB and National Public Radio fought to delay and limit the number of LPFM stations, arguing that such stations would cause interference with existing full-power FM stations. Then FCC chairman William E. Kennard, who fostered the LPFM initiative, responded: “This is about the haves—the broadcast industry—trying to prevent many have-nots—small community and educational organizations—from having just a little piece of the pie. Just a little piece of the airwaves which belong to all of the people.”20 By 2014, about 830 LPFM stations were broadcasting. The passage of the Local Community Radio Act in 2011 created opportunities for more LPFM station applications in 2013. A major advocate of LPFM stations is the Prometheus Radio Project, a nonprofit formed by radio activists in 1998. Prometheus has helped educate community organizations about low-power radio and has sponsored at least a dozen “barn raisings” to build community stations in places like Hudson, New York; Opelousas, Louisiana; and Woodburn, Oregon.