The year that changed radio forever: 1996
Congress passed the Telecom Act, paving the way for consolidation
September 1, 2016
By the editors of Media Life
This is one in a number of stories on radio in Media Life’s ongoing series “The new face of radio in America,” examining all the changes taking place in the medium. Click here for earlier stories.
Talk to old radio people and they’ll tell you that the Telecommunications Act of 1996 destroyed radio. If it didn’t destroy radio, the law certainly changed it forever, and none of it for the good.
It’s done no good for anyone, not the industry, not listeners, not advertisers.
The only people who ever stood to come out ahead were the fast-money people, the folks who financed the explosive growth of giants like iHeartMedia. In end they too may take a hosing.
The problems radio faces today trace directly back to 1996. Indeed, 1996 is the great divide in the history of radio—radio before 1996 and radio after.
The irony of the 1996 law—and all great disasters have their ironies—is that the act’s intended purpose was to open up whole areas of the telecom industry to competition, such as cable and long-distance service.
But radio, though just a small part of the legislation, was already a highly competitive industry, and had been one since the creation of the Federal Communications Commission in 1934, which capped the number of radio stations any one company could own.
The aims of the 1934 legislation were two. One was to ensure competition in local radio markets. The other was to ensure that radio served the public. It was a time when many markets were dominated by newspapers controlled by political machines. Radio was intended to be independent, above politics and on the side of the listener.
Law of unintended consequences
Against that history, think of the 1996 legislation as a case study in the law of unintended consequences hard at work.
Here’s what the law did. Prior to 1996, a company could own one AM station and one FM station in any market.
The new law allowed ownership of up to eight stations in larger markets and put no cap on total number of stations.
The impact was immediate. Clear Channel, among others, went on a buying spree, amassing some 1,200 stations, up from just 43, financed by outside capital.
And just as quickly the slashing began. Stations that before might have employed 20 had payrolls cut to just several people as the new radio giants merged station operations in their markets. On-air talent was let go, replaced by syndicated feeds of anonymous DJs recorded in far off places.
By one count, 10,000 radio people lost their jobs in those first several years. Longtime radio people were replaced by managers who knew little about radio but were willing to make the cuts ordered by headquarters.
The new radio giants used their market dominance to squeeze out smaller competitors, offering advertisers price cuts and packages those smaller players could never match. Many sold out or simple closed up. They could not complete in the new climate.
All who lost from consolidation
Advertisers also lost. The new radio giants jacked up prices and increased spots per hour, sometimes packing up ad pods with six or more spots. Advertisers who wanted the first slot in the pod paid a premium.
And of course listeners lost. They lost their favorite DJs. The playlists were shortened and homogenized, selected by someone at corporate. Listeners heard the same songs over and over.
But the real loser has been the radio industry.
All these years later, the two largest radio companies, iHeartMedia, formerly Clear Channel, and Cumulus, are teetering on the brink of bankruptcy, saddled with huge debt loads and likely to be broken up.
The industry has been slow to adopt to digital, despite its promise.
And media buyers, as well as a number of sellers, characterize the industry is struggling, even as listenership levels remain high.
“Conglomerates bought up stations and have taken on too much debt, cut local relevant programming and continue to expect top rates,” one buyer wrote in a recent Media Life survey on radio.
“As a result, they have lagged in adopting new technologies in the digital domain, and much of the newer syndicated replacement programming has become irrelevant.”
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