PLEASE NOTE: This article has been archived. It first appeared on ProRec.com in September 2000, contributed by then Senior Editor Bill Park. We will not be making any updates to the article. Please visit the home page for our latest content. Thank you!
Last week I had occasion to attend one of the NARAS “Ask A Pro” Series events. This one was Called “Radio Today” and the panel contained radio execs, program directors, DJs, and label representatives.
It was an interesting, if somewhat disheartening event.
The Spirit of Radio
Since the late 1920s, it has been all about radio. In the 40’s the first rock and roll records were played on the radio and a synergy was created that exists to this day. Rock and roll radio rules the airwaves, and impacts the lives of most Americans at one point or another as they follow their daily routine.
The really cool thing about radio was that it seemed to be a place for rebels. Small owners ran stations the way that they wanted to, playing the music that they wanted to, supporting the causes that they believed in, and catering to their own particular if not peculiar audiences. The parallels to rock and roll are inescapable.
When I was a kid, I lived for the music on the radio. It was my escape from the loneliness of being an American kid living in Germany, unable to speak the language very well, and having a hard time being a stranger in a strange land. The mountains and snows of southern Germany were nothing like the sun and sand of Virginia Beach. At night I could almost warm my room with the heat coming from the tubes on my old mono Bakelite AM radio, some cast-off relic donated by one relative or another.
Because of atmospheric conditions I could often pick up stations hundreds of miles away. I sat in my dark bedroom and listened to the “new” music of what would become the British invasion on Radio Luxemberg and, on particularly lucky nights, one of the pirate radio stations. For those who don’t know, in the 1960s five pirate radio stations were broadcasting rock music illegally into the British heartland from ships floating off the coast of England outside of the territorial waters. Their efforts broke the BBC monopoly on what music the British public got to hear, and the BBC was forced to acknowledge existence of The Rolling Stones, The Kinks, The Animals, Them (Van Morrison’s band) and the other slightly disheveled R&B bands from the northern provinces and other artists who were changing the meaning of the term “long-haired music”.
When I got older, my band played live on the radio. I couldn’t wait to hear my first single being played on the radio. I moved to a small mill town in Western Pennsylvania, and the radio was my only relief from a horrible culture shock. My long hair and Mod clothing didn’t play well with the other high school kids in the industrial steel mill belt, but I knew that Mick, Brian Jones, and Ray Davies were all on my wavelength, and I listened to them faithfully every day.
My love affair with the radio continued through college, and on into my adult life. The most interesting thing about the diversity of the medium though, is that my parents listened to the radio, and their parents listened to the radio. All of my friends listened to the radio, though we all didn’t always listen to the same stations. There was country music, there was big band music, soft jazz, oldies, soft rock, hard rock, metal, soul, Christian, Latin, classical, ‘classic rock’, alternative, polka, other ethnic, and just about any other type of music you can imagine, all available at the twist of a dial… dozens of stations in every major market covering every interest that you can imagine.
In my travels I have heard stations that started out playing polkas in the morning, but switched to underground rock in the afternoon, and stations that ran basically a “Green Sheet” on the air (“Lila over at Twin Forks is looking for a tiller. She’s got three golf clubs, a used ten-speed, and a bushel of apples to trade. Meanwhile, Clem around Sawmill Run is looking for…”). The airwaves were a vast, crowded, jumbled cacophony of free choice and strange ideas… much like the Internet is today.
Even today, you may think that you want your recordings to be played on MTV, VH-1, BET, or whatever…. and this is fine for breaking a record. But your label is looking for heavy rotation in the radio market. Industry experts estimate that there are five radio sets in every American home. That’s a stunning number of radios, and over 17 million more radios were sold last year alone. As a people, we Americans are indeed influenced by our radios, and as musicians, producers, songwriters, recording engineers, and studio owners, how the business of radio is operated is of critical importance to us.
But the face of radio is changing. Let me tell you a little story.
A very long time ago I was at a high-level meeting at Westinghouse. Westinghouse was one of the largest employers in Pittsburgh. A major corporation with plants and facilities all over the world and its corporate headquarters as well as many research, design, and manufacturing plants in this area, Westinghouse had a long history in many aspects of the corporate world, from air brakes and electronics, radios and air conditioners, furnaces, through white goods (refrigerators, washers, dryers, etc.) and nuclear power plants, both for submarines and to generate cheap electrical power.
But Westinghouse had fallen on hard times. Huge investments in facilities and industries had not panned out, and even ten years after Three Mile Island, nobody was building any nuclear power plants. The government wasn’t building subs. The manufacture of white goods and electronics had moved mostly to offshore companies. Massive investments in technologies and personnel were either losing vast amounts of money, or were barely turning a profit.
The only shining star in the Westinghouse corporate cap was the tiny broadcast division, Group W, which was showing double-digit profits. This was not lost on the Westinghouse executives. But the Federal government prevented any serious expansion into this highly profitable area because of FCC licensing restrictions.
In the early days of broadcast radio the FCC set up the rules for licensing radio stations. The FCC was leery of the political power that was exercised at that time by the huge newspaper and magazine publishing firms. Wealthy publishers often touted their favorite candidates in their papers. Sometimes they even created their own candidates, inventing qualifications, and by the power of the press, managing to put their own boys in office.
In order to prevent Big Business from being able to stack the deck in elections and influence public opinion the way that it did at the time in newspapers and magazines, the FCC limited the number of radio and TV stations that could be owned by any one owner. Not a bad plan: more owners meant more diversity, more chance of a difference of opinion, and more choices reaching the public. By preventing a small cartel of businessmen from controlling the media, they were basically helping to insure our freedom… something that I find that modern government does seldom and poorly, if at all.
But this protection has been eroding since the 1970s as ownership restrictions have become more and more relaxed.
Fast-forward a couple of years. The FCC approves Westinghouse’s purchase of CBS. Westinghouse closes its non-broadcast facilities. Renames itself CBS. Moves its headquarters to the New York offices of the old CBS. So long Westinghouse, with its tradition of a family-oriented business with products that create a warm fuzzy feeling for your home. Hello, CBS Inc., faceless corporate media Golem, swallowing everything in its path and seeking to control the radio and television revenue streams and content in all the major markets of the US.
This is not a new or unique story. What seemed to be a Good Thing – the elimination of government control and restriction of the licensing of the airwaves – turned out to be a very bad thing indeed, at least for the average listener and particularly for those of us in the business of supplying content. As it turns out, huge media conglomerates have been evolving, with many stations under the control of fewer and fewer owners.
So just what does this mean to these media owners groups?
Radio Ga Ga
Well, it’s all about control and money. This is a Wall Street play, where corporations are contestants in the most powerful popularity contest in the nation, otherwise known as the stock market.
It works using a complex equation of market dynamics, and strategic buyouts. It almost resembles a magic trick. After all, how can a large corporation with its higher expenses run a radio station at a greater profit than the smaller independent owners?
Well, the smaller owners have a lot less clout. Think about it. You own a station or two, and you are trying to get ad agencies to buy radio time from you, but there are 30 stations in your market, the listener base is split among multiple station formats, and 29 other station owners are angling for the same business. You are not in a good position. Often you have to give heavy discounts on your published ad rates. You do a lot of trade-outs instead of billables. And you are lucky to see any national advertisers. This is important because the nationals expect to pay closer to ‘book’ than locals, so you make more money per minute by selling ads to nationals than you do by selling to local advertisers.
Now imagine that you are the sales manager for a company owning a couple of dozen radio stations, and you have a major share of the listeners in several markets and control of those markets. You have national advertisers knocking at your door. Your rates go up. Your profits go up. Your stock prices go up.
And the economics seem to bear out the theory. There is massive prosperity and profit in radio these days. More national advertisers are buying top-dollar ads on more stations, stations are able to upgrade facilities and make capital investments in new transmitters and broadcast equipment, and the events, giveaways, and promotions that stations are able to mount are of truly stellar proportions.
In 1999 radio ad revenue was up 11.7% over 1997, continuing a five-year trend of 5+% or more yearly increases.
The value of the transactions of publicly-reporting owners groups for the two year period covering 1996-97 was 27.3 billion, which is seven times more than the period covering 1993 to 1995. Assets rose from 4 billion in 1995 to 15.4 billion in 1997, which is nearly a four-fold increase in two years.
So with all of this prosperity, what am I bitching about? Success is good, right?
First, from a practical standpoint they are building a house of cards. In order to provide the requisite earnings after expense numbers that impress the stock market, they have to consistently come up with a profit. The profit expectations grow every year. It is just an artificial number that some corporate bigwig decides upon, having little to do with anything other than impressing Wall Street.
How do they do this?
In part, it is through increasing ad sales and ad rates. But they also cut staff, getting rid of the more expensive talent, and bringing in lower paid or no-pay interns. They are cutting the technical staffs. They are piling more and more hours of work on fewer and fewer people. Employee benefits get reduced or eliminated altogether, particularly for new-hires. Good people leave. Less qualified people fill the gaps, for less money and fewer benefits.
Years ago, in the hard manufacturing sector, the owners tried this system in their attempt to flirt with the sirens of Wall Street. They followed all the same strategies… downsize the workforce, replace long-term, highly paid experienced workers with cheaper, less-experienced workers, cut corners, consolidate. And they started to build crap instead of viable products.
What most of them found was that they had to go back to the old ways of doing business, which requires that you build a good product, treat your workers well, satisfy your customers, and let the market take care of itself. You cannot have a successful business if your product is crap. When your product degrades, the market will leave you. I don’t want to say that modern radio is turning to crap, but it is certainly beginning to smell funny.
Hmmmm… if you have been paying a little attention, you may have noticed that there seems to be little difference between the stations as you scan the dial. They are all beginning to sound the same. And you may also have noticed that whenever an upstart station comes to town and starts to make some noise with interesting programming or a new twist on things, it is rapidly bought up and absorbed in the milieu of corporate radio. Fewer choices.
What is happening here?
Now, I had mentioned controlling ‘a couple of dozen’ radio stations. But the stakes are now much higher than that.
Before the 1996 Telecom Act, the largest number of radio stations owned by any single corporation was 38. Currently, media giant Clear Channel / Jacor Communications owns something over 900 US radio stations, 19 US TV stations, and has interests in 240 international stations and over 700,000 outdoor ad spaces like billboards. CBS/Infinity and AMFM can tell similar stories. This triumvirate controls an awesome number of broadcast facilities and… get this… Clear Channel / Jacor Communications is merging AMFM under their control. This will soon (or may already have) put the control of a lot of media in the hands of just two large corporations.
Last year 35% of ALL radio ad revenue went to the top three owners groups.
In Rochester, the 14 stations owned by Clear Channel / Jacor Communications had 94% of the ad revenue from their market in 1997.
CBS / Infinity controls what 25% of Chicago’s radio listeners hear.
If a given media company can control a market, it can dictate rates, say what will and won’t get played, and exercise a tremendous amount of power in the marketplace.
In 1997, 5,222 owners controlled 10,246 radio stations. In 1998, 4,241 owners controlled 10,636 radio stations. That’s an 8.7% drop in owner numbers verses a 3.8% increase in the number of stations. The latest information that I could find has the total number of US radio stations to be 12,300.
Up-to-date stats on ownership transfers are harder to come by, mostly because there are stations transferring ownership every day. Between 1996 and 1999 a whopping 4,000 radio stations changed hands. Media conglomerates are involved in the majority of these transactions, and it is eroding the diversity of the medium.
In the time period covering 1995 through 1997, Black ownership dropped 26%, and Hispanic ownership dropped 9%. Not an encouraging sign.
The Department Of Justice – the same folks who don’t think that Bill Gates should be able to give you a browser for free when you buy his operating system – has no problem with this scenario.
In 1997, Joel Klein, an Assistant Attorney General at the DOJ, presented a paper called “The Analysis of Radio Mergers” in which he supports the current trend and found no fault with the power that has been placed in the hands of a very few individuals by the FCC.
Additional points for your consideration:
More national ads bought in huge blocks and a rising ad rate means that fewer local businesses can afford to advertise on radio.
With the large media conglomerates eating all the national ad money, it becomes harder and harder for the independent station owner to survive in the marketplace.
More stations under the control of fewer people means fewer people deciding what you get to hear. Now, in the least insidious form this means that you may have to hear the same 20 songs over and over all day long, with the same 20 songs being repeated on all of the stations. But already label reps are complaining that they have cities in which a group of stations owned by Owner’s Group A has a recording in their rotation, while Owner’s Group B won’t play the recording at all. Scary stuff. Obviously, what the listener wants to hear has little to do with what gets played.
And if all of this is not scary enough, Clear Channel Communications has received federal approval to buy the giant SFX. The deal is worth 4.4 billion dollars. SFX controls 120 major concert venues all over the country, and recently purchased the Pantage Theater in Toronto as well as the Ford Theaters in both New York and Chicago, and the rights to a large number of popular touring musicals. They also have sports interests. So now they not only control what you hear on the radio, but they control what artists you can see!
Last year both sound and lighting contractors expressed concerns over SFX’s control of the market. A consortium of independent promoters has been formed to try to battle the booking power of SFX, which they feel is compromising the industry and squeezing out competition.
In my view this can only lead to a situation where the “artists” are really just salaried front-men for the corporations, and all live entertainment in the large money-making sectors will be totally controlled by the corporations. I suspect that they will be buying up studios next, as well as sound and lighting companies. Brace for the day that the ‘lowest common denominator’ profit theory sends our business back to the dark ages.
As I said at the start, last week I attended a NARAS-sponsored event… part of their “Ask a Pro” series. The radio guys tried to soft-sell it, but the overwhelming message was that radio is now a corporate business, and there was little place in it for any content that wasn’t researched and proven by nationally tallied numbers and statistics.
Hard for a new band to break into that situation. Impossible for a local act.
Most local radio people tried to point out their support of local acts, and I do believe that their hearts are in the right place and that they would like to see local musicians succeed. But in truth they have pigeonholed local music into special shows.
Rather than allow the local music to rise or fall on its own merits and allow the audience response to determine each recordings place in the ratings, radio conglomerates emasculate the local scene, making it into an oddity rather than a legitimate music form. The conglomerates separating local music from fair competition with the current Top Ten and remove any responsibility to play this music in regular rotation, while still being able to hold up a bone to the public and say, “See, not only do we play local music, but we give it a special place all its own!” – as if this was a good thing. It would be if the local band had a chance to get played in regular rotation, too. But this is not the case.
Now, instead of being music professionals, we are like dancing dogs: it’s not that we do it well, it’s that we can do it at all. Local musicians are oddities to be used to promote the stations and try to ingratiate a false sense of community between the listener and the stations – without any serious intent of servicing the needs of the local artist. I’m offended by this, as I hope you are.
I am appalled by the statistics that I discovered while researching this piece. This whole issue is way past any simple concern of music or recording. Another freedom bites the dust, strangled in corporate greed and the mishandling of governmental powers.
I don’t know what to do about it. After all, I also believe in the right of a business to grow, expand, and make a profit. And I am a big-time believer in smaller government and fewer government restrictions.
But I have always looked to the concept of ‘The Public Airwaves’ as a fundamental freedom. I recognize that the airwaves have a profound influence on our lives, and our sense of behavior, and sense of what is right and wrong. Something is seriously screwed up here, folks.
I look forward to your comments. As Bette Davis said 60 years ago, “Fasten your seatbelts. It’s going to be a bumpy night.”