SIC 4832

This industry consists of establishments engaged in broadcasting radio programs to the public. This includes commercial, religious, and educational stations and establishments primarily engaged in broadcasting and broadcasters that produce radio program materials used by other stations.

NAICS Code(s)

513111 (Radio Networks)

513112 (Radio Stations)

Industry Snapshot

In late 2002, this industry consisted of approximately 13,300 radio stations in the United States, including more than 4,800 commercial AM stations, more than 6,100 commercial FM stations, and more than 2,300 noncommercial FM stations. The industry enjoyed increasing advertising revenues during the 1990s, culminating in a record year in 2000. In 2001, weak economic conditions caused revenues to fall for the first time in many years. However, the industry began to recover in 2002, when revenues totaled $19.6 billion. Although the success of radio might seem paradoxical in the age of computers, 99 of every 100 households had a radio, with the average number of radios per household at 5.6. The typical listener tuned in for 3 hours and 20 minutes on average each day.

Regulatory changes following the passage of the Telecommunications Act of 1996 increased the limit on the number of radio stations one company could own. As a result, there was a sharp increase in the level of merger and acquisition activity resulting in industry consolidation. The largest merger in the history of radio was announced in November 1999 when Clear Channel Communications, which owned the largest number of radio stations in the United States, acquired AMFM Inc. (formerly Chancellor Media Corporation) for $23.5 billion.

Organization and Structure

The radio station industry is divided into two basic groups, commercial and noncommercial stations. Commercial stations earn their revenues from advertisers who pay for radio advertising time based on listener ratings. Noncommercial stations (also called "educational" or "public" stations) earn revenues from public subscriptions or, in the cases of colleges and religious stations, from the institutions they represent.

Network programs, mainly news, are transmitted to many more radio stations than are owned by the network. Similarly, outside programming, such as pop music's Top 40 countdowns, are produced within the entertainment industry and sold to stations throughout the country.

Many of the large radio stations hire media research firms. The differences between large and small stations are also revealed by their internal organization. Large stations have additional station management and employ promotion and public affairs directors to better understand listener tastes. Small radio stations conduct these services exclusively in-house.

Background and Development

The first radio station in the United States was KDKA in Pittsburgh, which began operating in 1919. The concept of using radio waves to broadcast information and entertainment spread quickly, and by 1922, 570 licensed stations operated in America. With this emerged the idea of networking, by which stations form chains to broadcast programs simultaneously. In 1926 the National Broadcasting Company (NBC) was established with two networks of 24 radio stations under its parent company RCA. By 1928 Columbia Broadcasting Systems (CBS) had established a network of 16 stations.

During the 1920s this industry saw many innovations as stations experimented with power, looking for ways to increase frequency distance and strength, and with acoustics, learning which environments blocked out unwanted background sounds. The 1930s witnessed a large increase in radio listeners. This was due in large part to the fact that it was a source of free entertainment during the Great Depression. As the depression came to a close, World War II would continue to keep the public tuned in, and by 1939, 1,465 stations were licensed in America, with network stations having 90 percent of the audiences.

The early 1940s continued with a slow and steady increase in the number of radio stations operating, and by 1945, 95 percent of all homes in America had a radio. The end of the 1940s saw an emerging interest in television, which took away from radio's audiences.

Television's presence had a negative impact on the radio industry's expectations for growth and the formats of radio programs. Across America many radio-station owners sold their stations; others kept their stations, but sold their large studios intended for staged performances. Radio stations changed their format during the 1950s from presenting story and news programs, which were more graphically presented on television, to mostly music. The 1950s also saw a development that helped radio retain some level of popularity: the transistor radio—created at Bell Laboratories—allowed radio manufacturers to produce small portable radios, bringing this medium outdoors and into cars.

During the 1950s and into the 1960s, FM radio stations, which were created in the 1940s, appeared with a better, static-free sound quality than existing AM bands. By 1961 FM offered stereo sound as well. These features appealed to audiences of special interest groups, such as classical music fans. By the end of the 1970s there were 2,000 FM radio stations in the United States, but with many of them operating for limited hours and regarded as providing only background music.

During the 1960s the growth in rock and roll recordings and the widespread acceptance of portable radios helped AM stations to continue to flourish. By the end of the 1960s, there were 4,300 AM stations in the United States; of those, roughly half transmitted only during the daytime.

The 1970s and 1980s saw a change from AM to FM stations, as FM stations started to offer programming similar to AM, mainly popular and rock and roll music, and had better sound quality. By the mid-1980s, FM radio had taken over much of AM's audiences and held 70 percent of the nation's radio listeners. AM radio stations reacted to their loss of popularity by offering more news and talk radio, and some converted their equipment for stereo broadcasting. Further losses for AM radio, however, were predicted, as well as eventual closure of the band.

Radio Stations and the Government. Throughout the history of this industry, government legislation played a major role. In 1927 the newly formed Federal Radio Commission ordered electronic requirements on equipment, the costs of which caused nearly 150 stations to close, including 100 educational stations. In 1934 the Federal Communications Commission (FCC) was established. This governing body issued licenses for television and radio stations and enforced regulations dealing with ownership practices, radio frequencies, and broadcast programming (the most notable being restrictions on offensive language).

During World War II the FCC placed a wartime freeze on the establishment of new radio stations. At this time, the FCC also ordered this industry to conserve its power use by 10 percent, allowing energy use for other industries contributing to the war effort.

Throughout its history, the FCC influenced programming by legislation related to issues such as rebuttal practices for editorial statements and political remarks and restrictions against offensive language. The Communications Act of 1934 prohibited the FCC from censorship, but it could enforce criminal fines and probations of license for "obscene or indecent language." In 1978 the Supreme Court affirmed that the FCC had the authority to act against radio (and television) stations that broadcast indecency during times that children were likely to be listening. The FCC, however, did not enforce fines until 1987.

In 1940 the FCC set up a duopoly policy limiting station owners to only one AM station and one FM station in a given locality and up to four stations nationally. In the 1970s the laws on this were changed to seven AM and seven FM stations. In the 1980s the FCC eased regulations further to 12 AM stations and 12 FM stations nationally. By 1992 the FCC allowed owners two AM stations and two FM stations in a single locality and 18 AM stations and 18 FM stations nationwide. When the Telecommunications Act of 1996 was passed, these rules were changed yet again; the act lifted all national restrictions and increased single market ownership to eight stations, with a maximum of five FM stations.

Controversy over Arbitron. Arbitron, a national research firm, provided the ratings used by radio stations and their advertisers to determine advertising prices and other marketing terms. Arbitron used a combination of statistics based on government census reports and data collected from diaries filled in by sample groups of listeners. Radio stations paid for this service by purchasing periodic reports and surveys. Over the years there was tension between station owners and Arbitron for the most part about the accuracy of ratings, but also in the 1990s about Arbitron's pricing policies. Listener diaries relied on the accuracy of listeners and on the size of the sample group. Arbitron's pricing policies drew criticism from the Radio Advertising Bureau and the National Association of Broadcasters because Arbitron changed its policy from charging stations based on their revenues to charging them based on the size of their listening audience.

The Telecommunications Act of 1996 had a dramatic impact on the radio industry. The largest radio corporations, which had grown in profit and size during the 1980s by acquiring additional stations, were given the opportunity to expand even further, thanks to the looser ownership guidelines. The resulting consolidation of station ownership among a relative handful of large companies was characterized as "the modern version of the Oklahoma land rush," by the Pittsburgh Post Gazette. Broadcast companies quickly sought to achieve a concentration of stations in single major markets. This boon to large companies meant the prospect of hard times for small owners and for radio station employees. The Minneapolis Star and Tribune reported an estimated 30 percent employment cut in the industry on a national basis.

During the year following deregulation, the size of the growing companies was tested at the urging of advertising executives. As a result, the U.S. Department of Justice ruled that broadcasting companies would be limited to a 40 percent share of any given market. Radio advertising revenues increased by 12 percent in 1998 to $15.2 billion. Ad revenues were conservatively forecast to increase by another 9 or 10 percent in 1999, based on a 9 percent increase for local advertising, 12 percent for national spot advertising, and 11 percent for network advertising. Strong advertising growth was supported by a robust economy, continuing industry consolidation, new advertisers, and cross-media marketing.

Major industry consolidations included the $4.1 billion merger of Chancellor Media and Capstar Broadcasting in 1998, which created the nation's largest radio station owner in terms of 1998 revenue. As of March 1, 1998, Chancellor owned 97 stations (69 FM and 28 AM). Through the Capstar merger and other acquisitions, Chancellor owned 465 stations by the end of 1998 and had estimated 1998 revenues of $1.9 billion. A year later, in November 1999, Chancellor—which had changed its name to AMFM Inc. earlier in the year—was acquired by Clear Channel Communications, which owned 459 stations at the end of 1998. The $23.5 billion acquisition was the largest merger in radio history.

Another major acquisition affecting the radio industry was the 1999 merger of CBS Corp. and Viacom, valued at $36 billion. In 1998 CBS had acquired 98 radio stations from American Radio Systems Corp., vaulting it into the second spot among radio station owners in terms of 1998 revenues, estimated at $1.7 billion. Viacom's acquisition of CBS, though, was expected to force the new company to divest up to 10 radio stations. In the Washington, D.C.-Baltimore, Maryland, market, for example, Viacom and CBS together owned 11 radio stations, exceeding FCC limits.

Current Conditions

Powered by significant growth during the late 1990s, the radio industry achieved a record year in 2000. That year, revenues increased more than 12 percent, reaching $19.8 billion. However, a number of negative factors impacted the industry in 2001. Topping the list was a weakening economy, made worse by the terrorist attacks against the United States on September 11. As companies cut spending levels, the advertising market suffered in general. Specifically, the radio segment saw revenues drop 7.4 percent, falling to $18.4 billion.

After surviving a year that Mediaweek called "devastating," the radio industry began to recover in 2002. Revenues rose 6 percent to $19.6 billion as the radio segment outperformed other forms of media. Mediaweek reported that, according to different industry analysts, radio advertising revenues were expected to grow between 5 and 7 percent in 2003, as the recovery continued.

The events of September 11 and America's war with Iraq, which began in early 2003, increased the attention radio stations placed on timely news coverage. For example, industry leader Clear Channel Communications established its own news service with some 174 news bureaus and 450 reporters. As part of this approach, large broadcasting companies mapped out strategies for disseminating more information faster. Many directed listeners on music stations to affiliated news channels, where updates on military developments in the Middle East were provided as often as six times per hour.

Industry Leaders

Companies owning radio stations grew dramatically since the passage of the Telecommunications Act of 1996. By the early 2000s, consolidation had changed the face of the industry considerably. By this time, the leading radio station owners included Clear Channel Communications, Inc. (1,225 stations, $8.4 billion in 2002); Cumulus Media, Inc. (270 stations, $252.6 million in 2002); Citadel Broadcasting Corp. (200 stations, $323.5 million in 2001); Infinity Broadcasting Corp. (185 stations, $3.7 billion in 2001); and Cox Radio, Inc. (80 stations, $420.6 million in 2002).

Following its acquisition of AMFM, Clear Channel was clearly the industry leader. By the early 2000s it owned 1,225 radio stations in the United States and had interests in some 240 international stations. Clear Channel also owned approximately 776,000 outdoor advertising displays in markets throughout the world, along with 39 television stations. In late 2002, Clear Channel operated the leading Web radio network, according to Arbitron ratings. The firm's MeasureCast rating revealed that people spent some 5.8 million hours listening to Clear Channel's Internet radio stations in November alone.

Citadel Broadcasting Corp. operated almost 200 stations in some 41 markets during the early 2000s. Before the end of 1999 it acquired 35 radio stations for $190 million from Broadcast Partners Holdings LP, giving Citadel ownership of 161 radio stations in 34 markets. The acquisitions continued into the early 2000s. For example, the company acquired more than 85 stations in 2000.

Hertel Broadcasting, which changed its name to Hispanic Broadcasting Corporation in 1999, was radio's largest Hispanic broadcaster in the early 2000s, with 2001 revenues of $240.8 million. By 2002, the company operated some 65 stations in key markets such as Miami and Los Angeles. In 1999 it created the HBC Radio Network, took a 4.1 percent interest in Z-Spanish Media, and acquired a second Spanish-language radio station in Las Vegas, Nevada. As of early 2003, Clear Channel had a 26 percent stake in Hispanic Broadcasting, at which time the company was in the process of acquiring even more stations.

America and the World

Because radio frequencies operate at low and medium levels, there has not been an international market for radio stations in the strict sense. High-frequency (shortwave) bands, however, were allocated for broadcast between nations through the U.S. Information Agency. Most of these stations were managed by Voice of America (VOA), Radio Free Europe, and Radio Liberty, which broadcast mostly in foreign languages and were not regulated by the FCC.

For more than 40 years, these services were government owned, but in the early 1990s a presidential task force suggested privatization on the premise that pro-Western ideals were not needed in the newly democratized Eastern Europe. The VOA Europe responded by airing English-language popular music and selling advertising time. Such formats were expected to be successful, especially in Eastern Europe, where there was a strong interest in American culture and in learning English; moreover, at this time many new radio stations in Eastern Europe were run on small budgets, where the use of prerecorded popular programs had a market. In 1996 Voice of America broadcasts expanded to Tuzla, Bosnia-Herzegovina, while U.S. troops participated in peace-keeping efforts in that country. That same year, the Asia Pacific Network was also created, having been mandated by the U.S. International Broadcasting Act of 1994. The act prescribed a "new broadcasting service to the people of the People's Republic of China and other countries of Asia, which lack adequate sources of free information and ideas, which would enhance the promotion of information and ideas, while advancing the goals of U.S. foreign policy."

Research and Technology

Satellite transmission and Internet broadcasting—known as "netcasting"—were impacting the radio industry at the start of the twenty-first century.

Satellite Radio. During much of the 1990s, radio broadcasters awaited the formulation of FCC guidelines that would give them the ability to market national services akin to that of cable television. In 1997 the FCC auctioned two satellite radio licenses to CD Radio for $83.3 million and its rival, XM Satellite Radio, for $89.8 million. Using a technology called the unified S-band, these satellite services sought to offer a range of programming choices to a national audience. After spending 1999 signing up content providers, CD Radio and XM Satellite Radio were set to launch satellites in early 2000. By 2003, the technology was being used in cars. Industry leaders like XM had poured several billion dollars into the technology and were pushing to sign up subscribers in order to recoup their investment. By 2004, General Motors—which had an ownership stake in XM—planned to offer XM's service in 44 of its 57 different vehicle models.

Internet Radio. A less pressing but inevitable source of competition emerged on the Internet. Netcasting of radio programming initially was hampered by technological obstacles that reduced the quality of its sound, but showed a potential to provide listeners with unprecedented options. As computer technology became more mainstream, with more than one-third of American households equipped with computer modems in 1999, competition for the "desktop" audience increased. This trend continued into the early 2000s, as more Americans obtained high-speed connections that enabled them to leave their computers connected to the Internet all the time. Most radio stations had their own Web sites by the early 2000s, and slightly less than half supplied streaming audio via the Internet. According to different estimates, by the early 2000s, 18 to 25 percent of people in the United States listened to Internet radio.

Low-Power Radio Stations. A low-power FM (LPFM) radio station initiative introduced by the FCC in 1999 might result in competition for local listeners with established FM stations. Since 1978, when noncommercial educational radio licenses were discontinued because of interference concerns, only college radio stations and specialized programming such as traveler's advisories had operated legally at low power. Between 1997 and 1999, the FCC shut down 480 LPFM stations that were operating without a license. Most of them specialized in alternative music, commentary, and news stories targeted to local communities. During 1999 the FCC commissioned studies of the interference issue and invited comments on the LPFM initiative. Although the proposal to license LPFM stations attracted the opposition of the radio establishment, it was supported by religious broadcasters and a coalition called the Media Access Project.

Digital Radio. In November 1999 the FCC formally began the process of creating a terrestrial digital radio service. It began evaluating competing technologies, with "in-band, on-channel" appearing to be the favored technology. Companies such as USA Digital Radio, Lucent Technologies, and Digital Radio Express, however, were pursuing competing technologies. The FCC has studied digital radio since 1990. In 1995 the FCC approved a satellite-delivered digital radio system. By 1999 the agency felt that digital technology offered promise for a land-based service. This technology was expected to become available sometime in 2003. Although it was expected to deliver very clear signals, digital radio required the use of special software, and transmission signals were affected by distance.

Further Reading

"18.4 Percent of American Adults Listen to Internet Radio." The Online Reporter, 21 December 2002.

Bachman, Katy. "For Industry, a Target of Opportunity." Mediaweek, 24 March 2003.

——. "Heftel Doubles Its Bets." Mediaweek, 15 March 1999.

——. "New Acquisitions Make Citadel a Bigger Fortress." Mediaweek, 1 November 1999.

——. "New Name, New Strategy in Store for Chancellor." Mediaweek, 24 May 1999.

——. "The Next Wave." Mediaweek, 12 April 1999.

——. "Tuning Out Last Year: On the Mend This year, Radio is Poised to Make Great Gains in 2003." Mediaweek, 30 September 2002.

Bomann, Mieke H. "Microradio Stations Pitch for Local Air Time." Nation's Cities Weekly, 6 September 1999.

"By Any Other Name, Heftel's Clout Grows." Mediaweek, 19 April 1999.

"Chancellor Puts Itself on the Block." Billboard, 6 February 1999.

Ditingo, Vincent M. "Radio." Broadcasting & Cable, 4 January 1999.

Federal Communications Commission. "Broadcast Station Totals as of September 30, 2002." 6 November 2002. Available from .

Fitzgerald, Kate. "Radio Struggles Up in the Air." Advertising Age, 27 January 2003.

Freeman, Michael. "CBS Projects Radio Station Sales after Viacom Deal." Mediaweek, 22 November 1999.

"Hot Properties." Broadcasting & Cable, 8 November 1999.

"Internet Audio Growing." Television Digest, 6 September 1999.

"It Was a Busy Week for Chancellor Media Corp." Broadcasting & Cable, 29 March 1999.

"LPFM Bill Introduced." Television Digest, 22 November 1999.

McConnell, Bill. "First Step for Digital Radio." Broadcasting & Cable, 8 November 1999.

"McDonald's of the Airwaves." Economist (U.S.), 9 October 1999.

Newman, Anne. "Radio Flyer." Business Week, 27 January 2003.

"November: Clear Channel—1 Web Radio Network; MusicMatch." The Online Reporter, 21 December 2002.

"Online Radio Listening Doubles in 6 Months." Content Factory, 8 February 1999.

Radio Advertising Bureau. "2002 Radio Revenue Recovers with a 6 Percent Jump in Ad Sales." 31 January 2003. Available from .

——. Radio Marketing Guide & Fact Book for Advertisers. 2002-2003. Available from .

"Radio Deals, Revenue Booming." Billboard, 17 July 1999.

Rathbun, Elizabeth A. "Citadel Builds 153-Station Radio Group." Broadcasting & Cable, 1 November 1999.

——. "Clear Channel, Jacor Spin-Offs." Broadcasting & Cable, 15 February 1999.

——. "A Radio Record." Broadcasting & Cable, 25 October 1999.

Taylor, Chuck. "Federal Communications Commission." Billboard, 1 May 1999.

Taylor, Chuck, et al. "Big Deal Rocks Radio Biz." Billboard, 16 October 1999.

——. "Radio Eyes Potential of New Media." Billboard, 18 September 1999.

Teinowitz, Ira. "Huge Merger Deals Inked in Radio, Telco." Advertising Age, 11 October 1999.

"U.S.—Satellite Radio Popular Among Early Adopters." The America's Intelligence Wire. 5 February 2003.

Weiskind, Ron. "Land Rush in the Radio Business." Pittsburgh Post Gazette, 25 May 1996.

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