Radio Broadcasting and Programming
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Industry Overview
The US radio broadcasting and programming industry includes about 6,800 companies with combined annual revenue of $16 billion. Major companies include Clear Channel Communications, Cumulus Media, Citadel Broadcasting, and CBS Radio. The industry is concentrated: the 50 largest companies account for about 75 percent of revenue, and the top four account for about 45 percent of the total. A typical midsized radio station has annual revenue of around $5 million.
The industry includes radio networks and stations, but not companies that broadcast only on the Internet or that primarily produce taped radio programs for sale.
Competitive Landscape
Business advertising and consumer demographics drive demand. The profitability of individual companies depends on advertisement volume, programming mix, and efficient operations. Large companies have advantages of market dominance, often owning the only radio stations in a geography. Small companies can compete effectively with special programming or broadcasters who attract large audiences. Average annual revenue per worker is $140,000.
Pay-for-service radio is a recent strategic development in the industry.
Products, Operations & Technology
Major industry product lines are broadcasts ("air time") and programming, production, and post-production services. Other products include program rights, merchandise sales, equipment rental, and sales of website advertising space. Air time, which includes advertising and network compensation, provides over 90 percent of industry revenue. Local advertising accounts for 65 percent of total revenue; national and regional ads, for 25 percent. Programming and broadcasting services provide over 5 percent of revenue. Radio broadcasting companies include radio stations, which comprise over 85 percent of industry firms, and radio networks, which account for the remainder.
Industry companies produce or acquire radio programs and/or operate radio broadcasting studios and transmission facilities. Radio networks and stations provide a variety of programs for consumers and sell advertising time ("inventory") to businesses and organizations. Ad sales and audience size are major industry metrics. Stations attract advertisers' targeted audiences by airing programs that appeal to them. A station earns a reputation for the type of programs ("format") it typically broadcasts. Radio stations sell air time directly or to brokers under Time Brokerage Agreements. The broker finds programming and sells advertising slots. Ad rates generally depend on the size of a station's audience, as measured by ratings firm Arbitron. Funding for public radio stations comes mainly from listener contributions and the Corporation for Public Broadcasting, but many stations also run subtle advertising.
Multiple radio stations often are owned by a large broadcast group that achieves advantages of scale in negotiating advertising and programming contracts and in centralizing backoffice operations, like accounting and finance. Broadcast companies are small compared with firms in other industries. Most large independent groups (non-network-owned) have annual revenue of less than $1 billion. Radio stations may affiliate exclusively with one network to receive its programming, or buy programs from multiple networks; some networks also own stations.
Program sources include local productions and syndicated and network shows. Stations often produce local news, sports, "talk," and local-interest programs, but may buy shows from local sources, such as sports teams. Stations buy syndicated programs from owners or independent producers or through brokers. Radio groups often produce their own shows for distribution to stations they own and for syndication to affiliates or other stations. Syndicated shows are available for cash or for "cash-plus-barter," which includes commercials that the syndicator sells. Radio music programming includes various categories, such as classical, oldies, country, or top 40. The majority of music programming is local, with fees paid to music distributors. Radio personalities are a major draw for stations, especially during morning and evening rush hours ("drive time"), when the largest number of listeners tune in.
The potential audience a radio station can reach depends largely on its location and the strength and quality of its transmission signal. The FCC allocates broadcast spectrum, regulates transmission signals, and issues licenses. A Class B radio station is a major station that covers a regional urban market. Because smaller radio stations are cheaper to buy, some radio groups buy several in one market and simulcast the same signal through multiple stations to achieve wider coverage at lower cost. A low-power radio station broadcasts at 10 to 100 watts and reaches audiences up to a five-mile radius. A high-power radio station broadcasts at up to 50,000 watts and reaches audiences up to 70 miles away. Radio stations transmit either an AM signal, for wider coverage, or an FM signal, for better quality.
Technology and equipment are changing rapidly, enabling stations to convert to digital production and broadcasting. Digital signals, compared with analog signals, are higher quality, easier to edit and to enhance with special effects, and use less broadcast spectrum. Satellite or subscription radio uses digital signal transmission from a communications satellite, unlike conventional radio, which is "terrestrial" and uses radio frequencies.
