How Radio Became Big Business
by Alex Cosper
Commercial radio was ushered into American culture in the early 1920s by some of the biggest
corporations in the nation. The early pioneers of the industry were GE, AT&T, Westinghouse and RCA.
GE and Westinghouse owned stations and made receivers. AT&T made transmitters while RCA marketed
radio receivers made by GE and Westinghouse.
Soon the medium attracted local owners such as local
newspapers, churches and various mom and pop businesses. One newspaper owner, Ohio Governor James
Cox, unsuccessfully ran for U.S. President in 1920, but then went on to concentrate on what became
Cox Radio, a major radio chain.
By the end of the twenties radio networks emerged to own or program several stations across the
country. In the 1940s the three major radio networks were ABC, CBS and NBC. A fourth network was
Mutual Don Lee.
The FCC was established in 1934 to oversee media communications in the United States. Radio had
previously been overseen by The Department of Commerce. With the establishment of the FCC came
new rules to keep big players from dominating local markets or the industry, as radio was seen as a
local public service funded by advertisers.
In 1940 the FCC began to limit the amount of time a station could broadcast network programming.
This new direction, combined with the popularity of television in the 1950s, which cut into radio
listening, created a whole new sound as radio moved away from "block programming" (various scheduled
formats on one station) and began to adopt one format per station.
Up until the early 1990s, American markets were filled with a mix of small radio owners and a handful of
big national companies. RKO had been a successful national radio chain for decades until its demise
in the eighties due to legal problems of parent company General Tire. Other large chains for the era
with under 40 stations included Gannett Broadcasting, ABC Radio, MetroMedia, Group W and Nationwide.
In the 1980s the FCC began to loosen up ownership rules as part of the Reagan Administration's
federal de-regulation policy. With further de-regulation in the Bush Administration, by 1992 companies
could now own up to two AMs and two FMs per market. The biggest sweeping changes came with the Telecom
Act of 1996, signed by President Clinton. This new law allowed radio companies to own as many as eight
stations in a market. The limit was also removed on how many stations across the nation one company could own.
Prior to the Telecom Act, the most number of radio stations one company could own in America was
about 40. But the new law now allowed for the possibilities of huge empires. By 1997 CBS Radio had
taken the lead to become the first industry giant, after buying American Radio Systems, which had just
merged with EZ Communications.
CBS Radio also merged with Infinity Broadcasting that year to become
CBS Radio, which was acquired by Viacom for $37 billion in 2000, as the radio division name changed
to Infinity Broadcasting. The company changed its name back to CBS Radio in 2006 upon Viacom's split
with the radio division.
Mergers became the catalyst for creating huge radio companies. Clear Channel became the biggest radio
company in 2000 after a series of mergers. Clear Channel had been a much a smaller company through
most of its development, founded in 1972 by Lowry Mays and Red McCombs in San Antonio, TX. Prior to
the Telecom Act, Clear Channel owned 43 radio stations across America.
Jacor had become a top three radio
company in 1996 after buying Citicasters and Regent Communications. Within a year 200 Jacor stations
were purchased by Clear Channel for $6.5 billion. The next year Capstar had purchased SFX Broadcasting
while Chancellor merged with Evergreen Media. Then in 1998 Hicks merged Chancellor Media with Capstar
to become the biggest radio chain in the country, AMFM.
What put Clear Channel on top of the radio industry with most number of stations was the merger
with in 2000 that stunned the industry as the smaller company bought out the top player in the
industry, AMFM. The acquired chain was an investment of Thomas Hicks, who had started the company as
Chancellor Media in 1994. Hicks had been a radio investor for years with his Texas firm Hicks, Muse,
Tate, Furst, the firm that also purchased George W. Bush's share of the Texas Rangers in 1999. Hicks
decided to trade radio for sports. In 2000 Hicks sold AMFM to Clear Channel for $23 billion.
Throughout the 2000s Clear Channel has owned up to 1200 radio stations, topping out around
ten percent of all U.S. commercial radio stations. But since 2006 the company has been selling
off many smaller market stations to concentrate on the larger markets. At the end of 2006
Clear Channel announced it would go private, after years of the stock price hanging well below
2000 levels. It was still the biggest player in the radio industry, in terms of revenue and number of
stations. The other big player throughout the consolidation era continues to be CBS Radio.
The merger deals that produced Clear Channel Communications and CBS Radio set precedents in the
radio industry that created a buying frenzy, driving radio property values to the moon. The consequence
appears to be that the public doesn't like corporate radio as much as a more market-defined sound.
Since the mid-nineties radio ratings
have been on a steady decline. Part of the problem is that radio faces new competition from new media
such as the internet and portable mp3 players. Another problem is that the duplication of programming
from one market to another seems to produce a very bland product for people who grew up on
unique radio personalities and music that reflected more the metro than the national scene.
Both Clear Channel and CBS Radio became known in the radio industry for favoring an aggressive sales
and marketing effort even to the point of over-shadowing programming. This new direction for radio
was in amazing contrast with previous radio mantras that dictated programming came first and if the
programming worked, then it would be marketed and sales would follow.
In the new scheme, however, programming simply
became a vehicle for sales and marketing, although attention was paid even closer to audience
research. This shift created a much tighter, more predictable sound than audiences had been
conditioned to hearing.
Another interesting development that happened at the same time as radio consolidation was record
industry consolidation. In the nineties, six companies ruled the music industry, but after a series
of mergers four major music companies stood in the 2000s. The decline in music industry shipments
and revenue that marked the era of the internet and the iPod, could also be seen as contributing to
Perhaps, people don't want their music to be so corporate after all. CBS Radio has tried to emulate
the benefits of the iPod in some of their programming, such as the Jack format, which comes off like
a shuffled playlist. The point is that corporate radio is now seen by many as either fading or jumping
on board as a partner with new media.
Throughout the 2000s even the leading radio companies have suffered from falling stock prices and
stagnant or declining revenue. Entercom purchased stations from Bonneville in 2007 in an attempt to
grow on leveraged purchases while other radio companies are selling off or suffering. In 1996 the
company jumped from being a very small chain to a top fifteen chain after buing into the Jacor
By the 2000s it was a top five company in the radio industry. But like many of the
other publicly-traded radio companies, in 2007 Entercom's stock price stayed below its late nineties
initial public offering price.
Disney sold off most of its radio division ABC Radio Holdings to Citadel, as ownership shifted in
June 2007. Included in the deal was San Francisco's long running top-rated station, KGO, KABC in
Los Angeles and all other stations under the ABC Radio umbrella except for the Radio Disney and ESPN
Ironically, Citadel's stock price - far below the Initial Public Offering - sank to all-time low
levels the week following the takeover, and continued to sink for several months. ABC Radio had a
lot of debt.
Cumulus Media, which purchased Susquehanna in 2006, emerged in the 2000s as another fairly big player.
They surprised the industry July 23, 2007 when they announced their plan to become a private company
after a buyout from an investment group for just over a half billion dollars.
Other companies that have a national presence in the 2000s are Cox Radio, Emmis, Radio One, Bonneville,
Salem Communications, Entravision, Hispanic Broadcasting, Univision and Saga Communications.
Today over forty percent of all radio stations in America are owned by corporations, but in most major
markets a majority of stations are corporate.
While radio companies saw their stock prices diminish in the 2000s with their staunch stance
on the product being shaped by audience research and marketing, a company with a very different
approach was tearing upward in the stock market. Apple Computer, which became Apple Inc in 2007,
saw its stock price more than quadruple in a three year period following the iPod and iTunes.
Apple's mission was not so much to give the public what they already asked for, but to give the
public an innovative solution to an underlying dissatisfaction in the purchasing and consumption of
In the nineties the public debate was non-existent on media ownership, but in the 2000s the public
has made its voice heard to the FCC and Congress. It appears that a growing group of people unhappy
with corporate consolidation are speaking up. The common complaint is
that diversity has been lost when there are only three big players in a market that own most of
the radio stations. With merger-mania, big companies simply bought out their competition and owned
corners of the market. For example, one company might own both rock stations in a market and both
stations might be programmed by the same person. That's exactly what happened with The Rise
of Alternative Radio.
The main difference between the pre-Telecom Act era and now is that then the competition was
across the street and now the competition is across the hall.