Chicago Tribune Knight Ridder/Tribune Business News
Oct. 7--Radio listenership is down, revenue growth is anemic and complaints about programming are omnipresent.
But the radio industry, says Stephen Soboroff, owner of KCJJ-AM 1630, a 10,000-watt independent station in Iowa City, has only itself to blame for its many troubles.
"Consolidation killed local radio, it dumbed-down content, stripped news departments and eliminated the diversity that once made it such an enjoyable medium," Soboroff said. "Big Radio has made it worse."
When Soboroff talks about Big Radio, he's referring to the handful of companies that purchased hundreds of stations following passage of the 1996 Telecommunications Act. That landmark law eliminated caps on the number of stations a company could own in a single market.
As a result, Clear Channel Communications owns more than 1,200 stations nationwide, including 19 in Iowa and nine in Illinois. The nation's No. 2 radio station owner, Atlanta-based Cumulus Media Inc., owns 305. Infinity Broadcasting, a unit of Viacom Inc., owns 185 stations.
Executives at Clear Channel and Infinity would not comment for this story.
Howard Stern's announcement Wednesday that he plans to jump to Sirius Satellite Radio beginning in 2006 illustrates the problems confronting the radio industry. Though still in its infant stage, the initial success of satellite radio reveals that a growing number of radio listeners are willing to pay a monthly fee to hear programming that can't be found over terrestrial air waves.
In just two years, Sirius has attracted some 600,000 subscribers. Its main competitor, XM Satellite Radio, has 2.5 million subscribers.
Satellite radio companies point to Clear Channel's recent efforts to negotiate reduced commercial airtime with its advertisers is a sign that mainstream radio is feeling pressure from satellite.
Clear Channel wants to cut down on ad length as well as make them more entertaining. The San Antonio-based company seeks to reduce commercials to 15 minutes per hour and not play more than six consecutive spots. Long commercial sets, the company's station managers say, prompt listeners to turn the dial.
Efforts by terrestrial stations to improve the audio quality of their broadcasts by adopting digital technology is another.
"You're talking about a business that over the last 30 years plays fewer and fewer songs. There are more and more commercials, there's less and less diversity," said XM spokesman Chance Patterson.
"Clearly, there's been an awakening, where music fans and listeners across the country have said, 'Wait a minute, Why are the songs always the same? Why are there so many commercials?'"
Satellite radio, though, remains tiny in comparison with broadcast radio. While 280 million Americans listen to broadcast radio each week, there are now just over 3 million satellite radio subscribers, says Inside Radio magazine's Tom Taylor.
Satellite radio, says Sean Ross, an industry analyst with the Edison Group, is just one of many problems affecting the radio industry. Radio professionals, he says, "view satellite radio as competition, but they view other stations in their market as competition, they view the iPod as competition. Satellite has just been one piece of that."
For the past three years, total revenue in the radio industry has grown at a paltry one to three percent, according to Smith Barney Citigroup.
Furthermore, radio listenership is down 8 percent over the last year, according to a study by economist Koleman Strumpf of the University of North Carolina.
Another issue is that more people are tuning into Internet-based radio stations and visiting Web sites for downloading music.
One panacea for the radio industry may come as stations migrate from analog to digital technology. By going digital, radio stations can offer listeners higher quality sound, and more importantly, transmit at least three stations over the same frequency.
Yet listeners will need to buy new radios to hear the crisper sound. Still, as digital radio become commonplace, listeners could choose from a far greater number of stations.
"That will certainly give radio companies more revenue sources," says Michael Bracy, policy director for the Future of Music Coalition. "The question remains whether that will improve quality and allow for the type of innovative programming that will attract listeners."
Bracy argues that the radio industry must be compelled through regulation to guarantee local programming and content diversity.
But as the radio industry digests Stern's departure to satellite, Soboroff insists that little will change unless the industry addresses the impact of consolidation. Concentrated ownership, he said, has given large radio companies incentive to pay government fines for indecency rather than fight them.
For example, Clear Channel agreed in June to pay a $1.75 million settlement with the Federal Communications Commission over complaints about Stern's morning radio show. Emmis Communications has paid $42,000 in indecency fines as a result of "Mancow" Muller's talk radio program heard locally on WKQX-101.1 FM.
"When you have big corporations more interested in the next station, the next property to buy, they'll do anything to get them," Soboroff said. "Even if that means giving up their first amendment rights."
Chicago radio executive Harvey Wells, who re-launched WRZA-99.9 FM as "Nine FM" in June, adds that station owners have to ask themselves "are you relevant, are you local, are you relating to the community? What do you have that satellite doesn't?"
WRZA plays an eclectic mix of music that many say recall the best days of FM radio. Commercials are limited to no more than nine minutes per hour; the industry average is 15 minutes.
By Leon Lazaroff and Maureen Ryan
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