For too long, musicians have had too little voice in the manufacture, distribution and promotion of their music and too little means to extract fair support and compensation for their work. The Future of Music Coalition was formed in June 2000 as a not-for-profit think tank to tackle this problem, advocating new business models, technologies and policies that would advance the cause of both musicians and citizens. Much of the work the FMC has done in the past two years has focused on documenting the structures of imbalance and inequity that impede the development of an American musicians’ middle class, and translating legislative-speak into language that musicians and citizens can understand. Our most challenging work, however, and the project of which we are most proud, is our analysis of the effects of radio deregulation on musicians and citizens since the passage of the 1996 Telecommunications Act.
Radio is a public resource managed on citizens’ behalf by the federal government. This was established in 1934 through the passage of the Communications Act, which created a regulatory body, the Federal Communications Commission, and laid the ground rules for the regulation of radio. The act also determined that the spectrum would be managed according to a “trusteeship” model. Broadcasters received fixed-term, renewable licenses that gave them exclusive use of a slice of the spectrum for free. In exchange, they were required to serve the “public interest, convenience and necessity.” Though they laid their trust in the mechanics of the marketplace, legislators did not turn the entire spectrum over to commercial broadcasters. The 1934 act included some key provisions that were designed to foster localism and encourage diversity in programming.
Although changes were made to limits on ownership and FCC regulatory control in years hence, the Communications Act of 1934 remained essentially intact until it was thoroughly overhauled in 1996 with the passage of the Telecommunications Act. But even before President Clinton signed the act into law in February 1996, numerous predictions were made regarding its effect on the radio industry:
§ The number of individual radio-station owners would decrease. Those in the industry with enough capital would begin to snatch up valuable but underperforming stations in many markets–big and small.
§ Station owners–given the ability to purchase more stations both locally and nationally–would benefit from economies of scale. Radio runs on many fixed costs: Equipment, operations and staffing costs are the same whether broadcasting to one person or 1 million. Owners knew that if they could control more than one station in a local market, they could consolidate operations and reduce fixed expenses. Lower costs would mean increased profit potential. This would, in turn, make for more financially sound radio stations, which would be able to compete more effectively against new media competitors: cable TV and the Internet.
§ There was a prediction based on a theory posited by a 1950s economist named Peter Steiner that increased ownership consolidation on the local level would lead to a subsequent increase in the number of radio format choices available to the listening public. (Steiner, writing in 1952, was not talking about oligopolistic control of the market by a few firms, as we have in the United States; rather, he was basing his predictions on an analysis of BBC radio, which is a nationally owned radio monopoly, not an oligopoly.) According to Steiner’s theory, a single owner with multiple stations in a local market wouldn’t want to compete against himself. Instead, he would program each station differently to meet the tastes of a variety of listeners.
But what really happened?
Well, one prediction certainly came true: The 1996 act opened the floodgates for ownership consolidation. Ten parent companies now dominate the radio spectrum, radio listenership and radio revenues, controlling two-thirds of both listeners and revenue nationwide. Two parent companies in particular–Clear Channel and Viacom–together control 42 percent of listeners and 45 percent of industry revenues.