1 Radio Chapter 7 © 2009, The McGraw-Hill Companies, Inc. All rights reserved.

2 CHAPTER OUTLINE History Radio in the Digital Age Defining Features of Radio Organization of the Radio Industry Ownership in the Radio Industry Producing Radio Programs Economics Feedback

3 HISTORY Heinrich Hertz Guglielmo Marconi Reginald Fessenden Lee de Forest World War I -- US Navy takes over patents

4 Big Business After the War, corporate America saw radio’s potential –RCA Radio seen as wireless telegraphy Few thought of broadcasting to wide audience –David Sarnoff, “radio music box”

5 Mass Audience Frank Conrad began broadcasting from his garage –KDKA, Pittsburgh, 1920 RCA, GE, ATT started radio stations –Radio listening became a national craze Radio found its role as a broadcast medium

6 Better Receivers Before 1926, radios were bulky, filled with tubes and batteries, and hard to tune Between , 17 million radio sets were sold

7 Radio Goes Commercial Early broadcasters were stores, newspapers, schools, businesses, not broadcasting companies Radio stations needed revenue source –ATT station aired first “toll” broadcast

8 Networks Allows stations to share program content –Cuts costs Allows advertisers to reach larger audience First network was NBC (actually two networks), then CBS –Amos ‘n’ Andy

9 Government Regulation Interference was major problem Radio Act of 1927 –Federal Radio Commission Defined AM band Standardized channel designations Abolished portable stations

10 The Depression: Radio fared well during the Depression Federal Communications Commission (FCC) created in 1934 –Regulated all electronic communications

11 Birth of FM Mid 1930s, Edwin Howard Armstrong Frequency modulation (FM) superior to amplitude modulation (AM) Demonstrated to RCA, which was more interested in developing TV than FM Development hampered by World War II

12 Radio Programs During Depression, people wanted diversion and escape –Action-adventure programs –The soap opera Network radio news grew –Live coverage of special events –Coverage of World War II Edward R. Murrow

13 World War II Radio thrived during World War II –Ad revenues increased NBC divested itself of one network (became ABC)

14 Innovation and Change: FM –Technically superior to AM, but struggled –Spectrum location changed in 1945 TV –Changed content, economics, functions of radio Specialized radio formats were introduced –Clock hour

15 Growth and Stabilization: Number of stations more than doubled Payola – record producers bribed DJs to play certain music FM emerges and evolves FCC non-duplication rule National Public Radio begins, grows to 160 affiliated stations by 1980

16 Radio: 1990-Present Telecommunications Act of 1996 –Unlimited station ownership –Same-market ownership increased to 8 stations Flurry of mergers and acquisitions A few group owners dominate the industry Talk became hottest AM format Format specialization increased on FM Competition from satellite radio, Internet radio, iPods

17 RADIO IN THE DIGITAL AGE Radio stations slowly entered the digital age, but they may be speeding up

18 Web sites Early radio station web sites simply streamed broadcast content Now, sites contain additional information and services Stations use web sites to generate revenue

19 High Definition (HD) Radio HD radio improves signal quality of terrestrial radio stations –FM sounds as good as CD –AM sounds as good as FM Compression allows stations to send multiple programs simultaneously Free to receive content, but HD receiver needed Broadcasters and listeners find the technology expensive Currently there is little additional programming

20 Satellite Radio XM Radio and Sirius Radio –Digital radio services to car or portable receivers for home use –Local channels for major cities with weather and traffic information –XM and Sirius would like to merge –Exclusive programming (Howard Stern, Oprah Winfrey) –Churn – subscribers don’t renew

21 Internet Radio Traditional broadcasters stream signals on Internet Internet-only stations –Specialized music formats –Target listeners dissatisfied with traditional radio –Biggest challenge is financial Must pay royalties to writers and composers, plus performers – broadcast doesn’t pay royalties to performers

22 Mobile Radio Mobile radio on cell phones –Vast potential audience

23 User-Generated Content Podcasting – recording an audio program and making it available for download

24 DEFINING FEATURES OF RADIO Portable Supplemental Universal Selective

25 ORGANIZATION OF THE RADIO INDUSTRY Half a billion working radio sets in US About 13,500 radio stations

26 Local Stations, Nets, and Syndicators Local radio stations Network radio –Dominant –Today’s leading networks: ABC, Westwood One, Dial Global Syndicated programming –Star-based programs: Rush Limbaugh, Sean Hannity, Tom Joyner –About 50 companies provide specialized shows for syndication

27 AM and FM stations Amplitude Modulation (AM) –Signals travel further (especially at night) –Vulnerable to interference –Clear, Regional, Local channel classifications Frequency Modulation (FM) –Better sound quality –Less vulnerable to interference –Three classes reflect station’s power: A,B,C AM-FM distinction is not applicable to digital radio

28 Station Formats Format: consistent programming designed to appeal to specific audience –Attracts advertisers wanting to reach that audience Three basic format categories –Music –Ethnic –News/Talk Format Homogenization Voice Tracking

29 Noncommercial Radio FCC set aside frequencies 2007 – about 2400 noncommercial stations –Universities, private foundations –Funded by gifts, grants, donations, underwriting National Public Radio (NPR) Public Radio International (PRI)

30 OWNERSHIP IN THE RADIO INDUSTRY Telecommunications Act of 1996 –Flurry of mergers and acquisitions –Industry controlled by a few big companies, including Clear Channel, Cumulus, and Entercom By 2007, there are signs that this trend may be changing

31 PRODUCING RADIO PROGRAMS The departmental structure of a radio station depends on its size

32 Departments and Staff General Manager Program Director –Announcers and DJs Sales Department News Department Engineering Department

33 Putting Together a Program Music format –Format wheel (format clock) Talk format –Topics geared to local audience –Requires more equipment and technical expertise All-News format –Also uses programming wheel and cycle –Costly: Large staff and many technical facilities

34 ECONOMICS Competition from satellite services and devices to play iPods and MP3 players in cars. Drive time audience, time spent commuting are both increasing Radio is cheap to produce and distribute Radio lends itself to target marketing

35 Sources of Revenue Rate card: station’s advertising fees Three sources of commercial revenue: –Network ads –National spot ads –Local ads

36 General Expenses Five categories of expenses: –Technical –Programming –Selling –Administration –News

37 FEEDBACK The radio industry seeks feedback about audience size and composition

38 Ratings and Shares Arbitron major provider of radio ratings –Surveys 280 markets, about 3,000-4,000 people per market asked to complete diary Rating: ratio of listeners to a particular station to the total number of people in a given market Share: ratio of listeners to a particular station to the total number of people actually listening to radio at that time People Meter: Arbitron and Nielsen Media Research. Automatically detect and record exposure to radio.

39 Radio Audiences 575 million radio sets in US –1/3 of these in cars On a given day, ¾ of adults will listen to radio Average person has radio on 3 hours daily Listening highest during drive time (6-10 am; 4-7 pm) As people age, they prefer different formats