The Future of AM Radio

My dissertation research details how AM talk radio developed beginning in the mid-1980s. AM radio was in dire shape when Rush Limbaugh inaugurated a new, edgy, boundary pushing, entertaining style of conservative political talk. This format ended up saving the AM dial (I'm summarizing a 60 page chapter in a sentence here). 

Yet, the reprieve now looks like it might have been temporary. Over the last twenty years a small number of large conglomerates have consolidated control over the radio industry.

These companies, especially Cumulus (approximately 525) and Clear Channel (now iHeartMedia) (850), own hundreds of stations. Through syndication arms, they have also vertically integrated the business (i.e. they produce nationally syndicated programs that are broadcast on stations that they own throughout the country). 

These companies also have massive debt loads (Cumulus has at least $2 billion in debt, and iHeartMedia has a whopping $20.7 billion in debt). These debt loads make it difficult to innovate or even to invest in their products in any way.

Additionally, private equity firms Bain Capital LLC and Thomas H. Lee Partners LP took over iHeartMedia in 2008, raising questions about how much ownership understands the radio business. 

Why does it matter how many stations these companies own and who owns the companies? Because the business model for these conglomerates does not fit well with the twenty-first century digital culture, nor does it match the product they have on the air. 

The best talk radio is controversial and unpredictable. It is virtually certain that an irreverent, controversial host who produces fifteen plus hours of content every week is going to regularly offend various groups, and occasionally cross the line in some way. 

Yet, especially as owners have broader business interests (i.e. radio is just a component of their business), they shy away from controversy. Similarly, as they seek out national advertisers, whose advertising dollars are spent by big ad agencies, these advertisers want to avoid being tied to controversial programming. 

This tendency has been exacerbated by the rise of social media, which makes it easy for a non-listener or a watchdog group to monitor the content of talk radio programs, and quickly blast out any potentially offensive comments through a blog or twitter. The stories often take off from there, and enter into the mainstream press. 

Subsequently, these same media can be used to pressure advertisers and to launch a boycott of a host and/or his her advertisers. 

Blue chip companies have no desire to offend any potential customers, so they ask that their ads not be placed on controversial programs, or programs adjacent to those shows (they end up on what is known as no-buy lists). 

The result may be that even a show that garners good ratings might have what is known as a low power ratio, which measures the relationship between advertising revenue and ratings. 

To avoid this problem, there is a push to convert stations from political talk to sports talk, which is thought to be a safe haven for advertisers. After all, sports talk evokes passions just like political talk does (which produces good radio), but it less likely to offend a large segment of the population, or to provoke boycotts (while a liberal might be willing to boycott an advertiser for supporting Rush Limbaugh, even an ardent Eagles fan probably won't boycott a company for advertising on a Dallas sports talk station). 

Accordingly, the number of sports talk stations has increased substantially in the past few years. As of last year, there was over 700 sports talk stations, and Cumulus CEO Lew Dickey expressed the desire to have a sports talk station in every market. Yet, as the competition on sports talk increases, hosts will feel pressure to differentiate themselves from competitors, which often means trying to be more outrageous or controversial.

This leads to sports hosts crossing lines (In July, after a Boston host made disparaging, sexist comments about Fox Sports personality Erin Andrews, Fox pulled its advertising from all of the station owner's more than 100 stations). Especially, as sports becomes enmeshed with issues that go far beyond the playing field— like domestic violence— the chances also increase that sports radio runs afoul of the same need to avoid controversy (ESPN's Stephen A. Smith, also a radio host, recently got suspended for offensive comments when discussing domestic violence). 

The current stance of ownership is a far cry from what many hosts (and executives) faced in the past. One host recently told me that in the 1980s his station owner told him simply not to lose the station's license. His general manager went further, telling him not to worry about losing advertisers because he had potential advertisers queued up to replace any advertisers who might bail. (The host recalled that when advertisers (who were local businessmen) disliked what he said, they expressed it to him personally during regular dinners that the station arranged to cultivate advertisers.) This fostered a freedom that allowed hosts to innovate and take chances on the air.

The inherent tension between the need to be unpredictable, controversial, and entertaining, and the desire of owners and advertisers to avoid offending potential customers is occurring at the same time that terrestrial radio is under siege from new digital platforms. 

Why would anyone listen to twenty-two minutes of commercials per hour when they can listen to a podcast or a streaming service and avoid the interruptions? Especially as our smart phones are integrated into our car dashboards, the difference in ease between listening to streaming programs and listing to the radio will disappear.

That will leave the monthly costs of streaming programs, satellite radio, and some podcasts as the main deterrent to leaving AM radio behind. Especially as the generations that grew up listening to the radio age and pass from the scene, terrestrial radio has a major, and growing problem. 

The budget crunch for the big corporate owners exacerbates this problem. In the interest of efficiency, they have done away with local DJs (on FM radio), and talk hosts, and replaced them with nationally syndicated hosts. 

On many iHeartMedia syndicated stations, a local morning host is followed by Glenn Beck, Rush Limbaugh, and Sean Hannity, three nationally syndicated titans whose shows are syndicated by iHeartMedia's Premiere Radio. The nighttime hours are covered by an array of syndicated hosts, and then Premiere Radio's paranormal talk show Coast to Coast overnight.

This model saves money on local talent, and often times these conglomerates also save money by skimping on local executives to gauge what programming will work best in their markets. 

Sometimes even successful local hosts are fired because the company thinks it can better profit by airing syndicated programming, even if that programming gets lower ratings (because it costs less). 

This model provides high quality programming in smaller markets where a talk format might not otherwise be economically viable. 

Yet, it also provides programming that is indistinguishable from what a listener could find online, on satellite radio, and on streaming services (except for all of those pesky commercials). As these methods become easier to access, more listeners will give up on AM radio to avoid commercials and have more choice.  

So what's the solution? Is AM radio doomed? 

Many of the people I interviewed for my research depressingly predict that the future of AM radio is brokered programming (infomercials), which already dominates the weekends on many talk stations, religious programming, and foreign language programming. 

I am more sanguine about AM's future, but only if ownership can find a business model that  allows them to invest in the product, and/or sells stations to ownership groups who are less encumbered by debt and can thus invest in the product and experiment. 

To me, what could save AM radio, and what online content providers will find hard to match, is good locally focused programming. Podcasts, internet radio, and satellite radio, by virtue of their boundary-less platform want/need to reach the broadest audience possible. Thus, it will be hard for them to focus specifically on the local news in any given market. 

By contrast, AM stations, with their limited geographic range, are ideally suited to spend the day talking about how the city failed to clean up yesterday's snowstorm, or the corruption in City Hall. These stations can become community institutions. If AM stations go back to providing this content, they will survive and thrive because people want to know about and discuss the world around them. 

If not, the AM dial might be unlistenable in 20 years as older listeners with allegiance to AM radio die off, and are replaced by the iPhone generation.