About 8 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 $16.5 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 2009.18 Although industry revenue has dropped from a peak of $21.7 billion in 2006, the number of stations keeps growing, now totaling about 15,300 stations (about 4,700 AM stations, about 6,600 FM commercial stations, and about 4,000 FM educational stations).19 Unlike television, where nearly 40 percent of a station’s expenses goes to buy 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 to cover 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 broadcast performance royalty fees 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, syndicates more than 200 programs, including regular news features (e.g., CBS Radio News, NBC Radio News), entertainment programs (e.g., Country Countdown USA, the Billy Bush Show), talk shows (e.g., the Dennis Miller Show, Ed Schultz), and complete twenty-four-hour formats (e.g., hot AC, hot country, mainstream country, and classic rock). More than sixty 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.