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By the Project for Excellence in Journalism

No matter how fast the delivery method, regardless of how elegant or clever the design, the continued survival of traditional radio lies less in theoretical discussions of cultural worth and social value and more in the hard reality of continuing economic viability. Looking at the available figures, the forecast for traditional radio appears more complicated than it has in years. At the same time, satellite radio has yet to make a dime in profit.

As 2005 began, two of the most prominent corporate names in radio appeared to be signaling trouble ahead. In February, both Clear Channel Communications and Viacom, parent company of Infinity Broadcasting (now CBS Radio) announced dramatic write-downs for their radio holdings ($4.9 billion and $18 billion respectively). The companies said they were reacting to new federal reporting guidelines. Whatever their motivations, the step came at a time when the values of several ownership groups — Clear Channel, Citadel and Westwood One — were being downgraded by investment banks.

By the time satellite radio emerged, it was increasingly clear to radio listeners that a large amount of time on terrestrial radio was occupied not by programming but by advertising and promotional content. Satellite offered listeners an option (though it has since begun playing ads on some of its programming). At the same time, Internet radio stations and podcasts and smaller and smaller Mp3 players with larger and larger storage capabilities were actively reminding audiences how many songs and bands they loved were not being played on commercial radio.

In July 2004, Clear Channel (a company that has been the target of much criticism by critics of media consolidation) announced a plan to cut back the amount of air time it devoted to commercials and promotion. Starting in January 2005, Clear Channel music stations would run a maximum of 10 minutes of spots between 10 a.m. and midnight , news/talk stations 15 minutes.1 The strategy became known as “Less is More” or “LIM.” Clear Channel’s CEO, Mark Mays, publicly acknowledged that the reduction in advertising revenues had been financially difficult for the company (revenue was down 7% for the first quarter of 2005), but in a May 17, 2005, progress report the company “pointed to higher ratings and noted that more national advertisers were buying shorter-length commercials of 30 and 15 seconds versus the traditional 60-second unit spot.”2

Heading into the end of 2005, Clear Channel’s gamble appeared to be paying off. With reductions in advertising inventory, what remained became more valuable. The format change also seemed to be attracting listeners, adding further value to the shorter, less frequent advertising spots. According to Media Life Magazine, “In the fall, Clear Channel outperformed the average radio station among adults 25-44 in New York , Los Angeles and Chicago … Clear Channel’s average rating in New York was up 2.8% from the summer, compared to a 7.1 % decline for all publicly traded radio owners. It was up 3% in Los Angeles , compared to an industry decline of 4.1%. And in Chicago it was up 2.7%, while the average station was up 2.1%.”3

At a small number of stations, a second change involved the music format. Aware that listeners like the often-eclectic hundred-song library they have on their iPods, the stations tried to respond by going eclectic themselves. They reformatted by making their format no format. In 2005 some stations adopted the newly minted formula of JACK, a concept that started, according to an article in the August 15, 2005 , issue of Time magazine, as an online experiment by a former disc jockey and station manager. Sitting in polar opposition to the narrower and narrower playlists of many commercial radio stations (as they were largely being programmed at corporate headquarters and not by local DJs) JACK is a computerized system that shuffles a massive library into a seemingly random collection of songs that runs largely uninterrupted. According to data available from BIAFn, by December 16, 2005, some 21 stations were using the JACK format. Reports of public reaction were mixed. The Time magazine article noted that New York City’s Mayor Bloomberg “said a very bad word”4 when his favorite oldies station went to JACK.

Still a third option has been to go in the opposite direction — to format traditional radio stations so precisely that they would capture a smaller but fiercely loyal niche audience. Grab the underserved bluegrass listener. Program for the old-school rap lover. As Pat McNew, executive vice president and director of operations, PHD Local Media Network told the Radio & Television Business Report, “We are seeing more networks reconfigure due to this need to reach a certain demographic — such programs are ‘Country only programs’, rock programs, specific political talk, etc. Again, because buyers and clients are searching for their own desirable audience specific programming is necessary. Networks need to be more to creating programs that will cater to specific categories, enabling clients to own a specific program.”5

Despite all those changes, Wall Street remained worried. Analysts who had tried to be optimistic early in 2005 began rapidly scaling back predictions. In late August, the Radio Business Report Newsletter reported that Universal McCann’s Bob Coen was cutting his prediction of a 5% rise in radio revenues back to only 3.5% for local radio. About a week earlier, Marcia Ryvicker, an analyst for Wachovia Securities, cut her 2005 growth estimate to 1.5%.6 By late September Wachovia was lowering its 4th quarter expectations for radio companies as well (from 3% to 2%).7

The industry was struggling to gain control over pricing for advertising and dealing with the impact of having an inventory of advertising and promotional minutes that were less and less valuable to clients. There was also the broader economic impact of Hurricanes Katrina and Rita.8

Satellite radio networks, on the other hand, reaped large revenue gains through the first half of 2005 and were raising their estimates of year-end revenues.

In the third quarter, XM was reporting revenues of $153 million, up 134% from the same quarter in 2004. Sirius reported third-quarter revenues of $66.8 million, up 250% over 2004 ($19.1 million).

What must be kept in mind, however, is that neither XM nor Sirius is making a profit yet. And, it would seem that some have begun to pay attention to their dropping stock prices and investment company downgrades. In mid-February 2006 it was announced that Pierce J. Roberts, Jr., a director at XM radio (and former head of the telecom investment banking unit of Bear Stearns) resigned based on fundamental disagreements with the company’s strategic direction. Reportedly, Roberts believed that XM needed to reduce what they were spending on marketing and creating new content.

Indeed, both XM and Sirius “…have racked up huge losses while pouring tens of millions of dollars into professional sports broadcasts and big name talent.”9 Much media attention was paid to Sirius’s five-year contract with Howard Stern that would cost the company $500 million.10 More recently, XM signed a three-year $55 million deal with Oprah Winfrey.11 But some observers, like Michael Goldman of the Yankee Group, have reasoned that the success of the satellite carriers depends greatly on their ability to develop unique identities through personalities like Howard Stern or Martha Stewart. Goldman was quoted in the New York Times as saying, “The music on both is pretty much the same… It’s the N.F.L. and Ellen Degeneres that builds a brand in the market, not 30 channels of rock music.”12 And while both networks are building impressive numbers, one wonders how long they will be able to keep moving forward without turning a profit.

Meanwhile, the important question for this report is where does news fits into the economic equation?

Revenues from News Stations for Top Companies
Design Your Own Chart
Source: BIAfn Media Access Pro, unpublished data
* Top companies by number of stations whose holdings include news format stations.

News Format Stations

Figures for the top radio companies show an almost across-the-board decline in revenue generated by news-format stations.13 According to data from BIA Financial Network, in 2004, the latest data available, total revenue for stations identifying news as their primary format dropped for four of the top five largest owners. To be sure, news stations still contributed significantly to their companies’ total station revenue.

Revenues for Infinity (now CBS Radio) news stations dropped more than $70 million, or 15%. Over all, 19%, or $420 million, of Infinity’s station revenue of $2.2 billion was generated by stations that list news as their primary program format, down from 22% a year earlier.

Entercom’s 2004 news-station revenues dropped $2.1 million, or 3%, from the year before. Revenues from those stations made up 14%, or $69 million, of the company’s total station revenue of $486 million, close to the previous year’s 15%.

Citadel’s news stations accounted for 7% of the company’s total station revenue. The amount, $28 million, was $2.1 million less than in 2003.

Revenues for Cumulus’s news stations dropped 16%, or nearly $5 million, from 2003 totals. Those revenues, $20 million, were just 6% total station revenue of $324 million, down slightly from the previous year’s 8%.

Only Clear Channel saw revenue growth from its news stations in 2004. The stations earned $367 million in revenues, 10% of the company’s total station revenue and a 3%, or $12 million, climb from 2003. (Incidentally, Clear Channel has seen revenue growth in news during all nine years for which the Project has data.)

Revenues of Top Companies, 2004
News stations vs. other stations
Design Your Own Chart
Source: BIAfn Media Access Pro, unpublished data
* Top companies by number of stations whose holdings include news format stations.

How did Clear Channel buck the trend?

The answer is hard to pin down, but Clear Channel does have more news stations in bigger markets. Of its 1,190 stations, 136 list with BIAFn as having a news format. Ten of those are in the top 25 markets by population, and 50 are in the top 100. Cumulus, the second largest owner in numbers of stations, owns 33 news-format stations (out of some 300) but only one is in a top 25 market, and only two are in the top 100.

News Segments

While not as prevalent as they once were, some non-news stations still offer some form of news over the air, normally as top-of-the-hour blocks. The economic value of the segments is hard to determine. As more and more outlets were purchased and consolidated into larger ownership groups, radio newsrooms were pressed to produce for more and more outlets. The average news director is overseeing some four stations, according to survey data, which makes it increasingly difficult to parse out whether or not news is profitable. The product is diffused over too many outlets to tell.

Indeed, researchers from the RTNDA/Ball State University ongoing survey of news directors found an increase in the percentage of news directors who don’t know if their news operations are turning a profit or not. Between 2003 and 2004, the figure rose from 53% to 63%. Among news directors from major markets, it increases to 85%.

An examination of survey data over the last nine years shows that the number of stations saying they make a profit is consistently greater than those who say they are breaking even or reporting operating losses. But the uncertainty does not bode well. The last time so many stations were unsure of the future was during the economic downturn of 2000. That was followed by a better 2001, according to the Ball State surveys, but harder times thereafter. With new competition today that was not as robust back then, there is even more reason for doubt heading into 2006.

Radio News Profitability
Survey of news directors, 1996-2004
Design Your Own Chart
Source: RTNDA/Ball State University Newsroom Surveys


1. Sean Ross, “What CC’s Spotload Initiative Means For You,” Edison Media Research, July 22, 2004.

2. Katy Bachman, “Clear Channel Applauds Its ‘Less is More’ Initiative,” Billboard Radio Monitor, May 17, 2005.

3. Kevin Downey, “Payout: Clear Channel’s ratings are up,” Media Life Magazine (, January 24, 2006.

4. Joel Stein, “You Don’t Know Jack,” Time, Vol. 166, No. 7, August 15, 2005.

5. Carl Marcucci, “Buyers, sellers address the 2006 radio upfront — Part II,” Radio & Television Business Report, October 2005, Volume 22, Issue 10, pg. 14.

6. “2005 the roll of the Dice; Tracking of a Soft Year,” Radio Business Report, August 29, 2005.

7. “Wachovia points its arrow further down,” Radio Business Report, e-mail newsletter, September 21, 2005.

8. Ibid.

9. Jeff Leeds, “Director at XM Resigns as Costs Skyrocket,” New York Times, February 17, 2006.

10. Howard Kurtz and Frank Ahrens, “Sirius Lands a Big Dog: Howard Stern,” Washington Post, October 7, 2004.

11. Jeff Leeds, “Director at XM Resigns as Costs Skyrocket,” New York Times, February 17, 2006.

12. Eric A. Taub, “With Stern on Board, Satellite Radio Is Approaching a Secure Orbit,” New York Times, December 19, 2005.

13. Where designated, charts refer to companies that have stations whose primary format is designated as “news.” This year, Salem Communications Corporation owns more stations (104) than the No. 6 Entercom (103). Starting with this year’s edition of the State of the News Media (2006) we will begin tracking Salem Communications Corporation.

In 2004, revenues from news format stations were 17% of Salem’s total station revenue — $35 million of $204 million.