Radio today remains one of the most used mass media, reaching 93 percent of all Americans age twelve or older every week.¹⁰ Because of this continued broad reach, the airwaves are still desirable real estate for advertisers and content programmers, who want to target people in and out of their homes; for record labels, who want their artists’ songs played; and for radio station owners, who want to attract large groups of diverse listeners to dominate multiple markets.

Money In and Money Out

As with any other enterprise, money flows both into and out of radio. Commercial stations take in money from advertisers and spend it on such assets as content programming, often purchasing programming from national network radio. Noncommercial stations are funded by donations, which are then used to cover expenses, including content.

Revenues from 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 ads range from $1,500 in large markets to just a few dollars in the smallest markets. Today, gross advertising receipts for radio are about $17.6 billion (about 80 percent of the revenues are from local ad sales, with the remainder in national spot ads, network, and digital radio sales), up from about $16 billion in 2009 but down from an industry peak of $21.7 billion in 2006.¹¹ Nevertheless, 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).¹²

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Spending for Radio Content

Local radio stations get much of their music content free from the recording industry (although by 2009, the music industry—which has seen a shortfall in its own revenues—was proposing to charge radio for playing music on the air). Therefore, only about 20 percent of a typical radio station’s budget goes to cover music programming costs. When radio stations want to purchase additional programming, they often turn to national network radio, which generates more than $1.1 billion in ad sales annually by offering dozens of specialized services (such as news features, entertainment programs, and music formats). The companies providing these programming services to local stations receive time slots for national ads in return.

Manipulating Playlists with Payola

In the world of radio, record labels play a central role in the relationship between money and content. Just as advertisers want to target specific audiences, record labels want specific people to hear their artists’ songs. Payola, the questionable practice by which record promoters pay deejays to play particular records, was rampant during the 1950s as record companies sought to guarantee record sales. In response, radio management took control of programming. Managers argued that if individual deejays had less impact on which records were played, they 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. Recently, the FCC has stepped up enforcement of payola laws.

Radio Ownership: From Diversity to Consolidation

From the 1950s through the 1980s, the FCC tried to encourage diversity in broadcast ownership—and thus programming—by limiting the number of stations a media company could own. The Telecommunications Act of 1996 introduced a new age of consolidation in the industry, as the FCC eliminated most ownership restrictions on radio. As a result, some twenty-one hundred stations and $15 billion changed hands that year alone. From 1995 to 2005, the number of radio station owners declined by one-third, from sixty-six hundred to about forty-four hundred.¹³

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

This has reshaped the radio industry. Take, for example, the former Clear Channel Communications. It 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. Clear Channel continued its rapid expansion into the nation’s largest radio owner, hitting a peak of 1,205 stations in 2005. As mentioned previously, Clear Channel changed its name to iHeartMedia in 2014, a rebranding the company says better reflects its diverse media businesses, especially those involving the Internet. Today, it owns 840 radio stations (still the largest) and has branched out into other areas, owning 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 its iHeartRadio, which has more than thirty million registered users.

Consider also the situation with the top five commercial radio groups: iHeartMedia (840 stations), Cumulus (525), Townsquare (312), CBS (126), and Entercom (103). Among them they own roughly 1,900 radio stations (more than 12 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 consolidations permitted by deregulation, in most American cities just a few corporations dominate the radio market.

When large corporations regained control of America’s radio airwaves in the 1990s, activists in hundreds of communities across the United States protested 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 major complaint of pirate radio station operators was that the FCC had long since ceased licensing low-power community radio stations. In 2000, the FCC responded to tens of thousands of inquiries about the development of a new local radio broadcasting service: It approved a new noncommercial low-power FM (LPFM) class of 10- and 100-watt stations 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. Then FCC chairman William E. Kennard, who fostered the LPFM initiative, explained: “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.”¹⁴

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