I said on May 24 I’d get back to radio.
For the small but vocal segment of the population that spends much time mulling about the media industry, the changes in the radio business in the past decade may seem to be immense. And it was, though only in the context of how little the industry changed structurally in the previous 70 years. The radio industry had seen only one or two “inflection points’ (to use a term from Intel’s Andrew Grove) in its history. The first and still most significant was television, which hit barely 25 years into the development of the industry. FM stereo, in early 1970s, was a second and less violent change. And that’s about it.
For most of the second half of the 20th century radio was a rather sleepy industry. By the early 1950s it had been eclipsed by television as the medium with the greatest national interest to audiences and to advertisers. It took barely 10 years from its peak in 1945, when 15% of all advertising revenue was devoted to radio, to its trough with just 6% of advertising expenditures. Over the next 50 years radio edged its way up to 8% of all media advertising. But in 1947 there were only 1212 stations spread out over the U.S., compared to more than 13,000 today (about 2700 of these being noncommercial).
The result of the 10-fold multiplication of stations during a time that their total source of income -- advertising -- grew only about three times (in constant dollars) was that the average revenue per radio station plummeted 42% between 1950 and 1970. (The details can be found here, in Table 7, page 19 of my new Media Myths study.) By 1990 there had been some rebound, but the average revenue per station was still below the 1950 level. It was not until later in the 1990s that radio station revenue equaled the mid-century level and finally surpassed it.
In other words, the radio business was rather moribund through much of the second half of the 20th century. Unlike virtually any other industry, it was not able to restructure itself in a way that recognized the growth of competition for advertising revenue and audiences. The newspaper industry, faced with many of the same competitive trends, was able to consolidate. While some critics may lament the disappearance of many daily newspapers, the reality is that with a shrinking circulation and advertising share the mature industry had to restructure to leave those that remained robust enough to carry on. But regulation largely prevented radio operators from achieving the economies of scale available to almost ay other industry. In 1990 no single entity could own more than .23% (that’s .0023) of all radio stations then operating. If there was a reason for many individual local stations to cut back on money-losing news and public affairs operations it was the declining financial fortunes of the industry in general.
If the de facto limit on station ownership that existed in 1947 had been maintained proportionately to the number of stations in operation in 1990, a single entity would have been allowed to own 105 stations nationally, or about 1%, instead of 24. Only with the cap finally loosened by the Telecommunications Act of 1996 was the industry allowed to find an equilibrium. It should surprise no one that initially, like a bottle of seltzer that had been jostled before opened, it spurted to find that equilibrium it could have been moving to more gradually—and less visibly—if the cap had been loosed slowly over time. Consistent with this expectation the pace of radio consolidation has retreated markedly in the past three years.
Over the next few days I will be following up with the real story of radio in Minot, ND, which persists as an Urban Legend on the presumed horrors of group radio ownership, as well as analysis of the oft-repeated but misleading concern about the supposed demise of localism in the media.
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