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NAB Lays Out Precarious Financial Position of Radio

Association again urges the FCC to raise or eliminate local ownership caps

The National Association of Broadcasters paints an increasingly grim picture of the financial state of the U.S. commercial radio industry, and said the woes have affected FM stations as well as AMs.

In a 75-page filing to the FCC about ownership rule reform, the NAB listed evidence that it says shows the impact of increased audio and advertising competition on radio.

“Aside from losing nearly 200 radio stations in the past two years, growing numbers of stations are unprofitable and experiencing negative advertising growth, while at the same time are constrained by outdated ownership restrictions from responding to these competitive conditions,” NAB wrote.

“The managing director of a nationally-known media brokerage firm stated in a declaration that there are increasingly no buyers for struggling AM and FM stations, especially in mid-sized and small markets, other than a same-market competitor who often may not be allowed to purchase the troubled stations due to the local radio caps.”

As a result, it said, more stations, both AM and FM, are “unable to maintain a significant local presence and offer a high level of local services, and their owners are both financially unable to improve their stations or sell them to a competitively viable local broadcaster capable of upgrading the underperforming outlets by leveraging scale economies.”

NAB said it had “submitted unrefuted evidence demonstrating the increasing parlous financial position of the radio industry, which directly and negatively impacts stations’ ability to hire additional or even retain existing staff; upgrade their facilities; and maintain, let alone improve, their programming, including locally oriented content.”

It said local radio stations’ OTA ad revenues fell almost 45 percent in nominal terms ($17.6 billion to $9.7 billion) from 2005 to 2020, “and even when taking stations’ 2020 digital ad revenues into account, their total ad revenues still dropped 39.8 percent in nominal terms ($17.6 to $10.6 billion) over that time period.” Further, it said, analysts expect only a very modest recovery from the pandemic recession.

“The advertising revenues of FM stations mirror the radio industry as a whole, with FM stations’ revenues over the same 2005–2020 period showing a similarly stark decline.”

It cited BIA data showing that the OTA ad revenues of FM stations in the 253 continuously surveyed Arbitron/Nielsen Audio markets fell from $10.5 billion in 2005 to $6 billion in 2020, a decline of 42.9% in nominal terms.

These data, it said, show a clear and present threat to FM stations’ “ability to serve the public interest in the spirit of the Communications Act.”

Further, FM stations as well as AMs have experienced declines in listenership. “According to Nielsen Audio, the Average Quarter Hour (AQH) Listening of FM stations dropped 23.5% in just the past five years. Falling AQH audiences directly impact the competitive and financial viability of FM (and AM) stations because advertising is sold based on stations’ AQH listening, rather than stations’ audience reach or weekly cume.”

These findings, it said, are proof of its argument that commercial U.S. radio stations compete in a broader market and should be regulated accordingly.

The NAB believes current caps on how many stations a given company can own in one market need to be eased or eliminated in the face of audio and advertising market competition and recent marketplace developments. (Not all major broadcasters agree.)

And it says those who support the existing rules ignore the fact that commercial stations, upended by digital technologies, “cannot function in the public interest as Congress intended unless they remain economically viable.”

Read the filing (PDF).

More comments

The NAB’s filing also touched on a number of other issues.

It said some critics are misinterpreting the Supreme Court’s recent decision in FCC v. Prometheus Radio Project to mean that the court affirmed the FCC’s “full discretion to implement its conception of the public interest as to diversity.”

In fact, NAB said, the high court did not “affirm” any such thing, rather that it left open questions about the FCC’s authority to consider minority and female ownership in its quadrennial reviews. NAB says structural ownership rules will do nothing to promote future ownership diversity.

In addition to dealing with several TV-specific issues, the association also told the FCC it needs to act quickly to finish this 2018 quadrennial review, which should have been finished by now. It said the FCC has no flexibility to defer the process.

“In particular, the commission has no authority to skip the 2018 review and roll that quadrennial into the upcoming 2022 review, despite the urging of certain commenters.”

But others commenting to the FCC in the proceeding include the MusicFirst Coalition and the Future of Music Coalition, who oppose changing the caps. Those two groups want the FCC to “chart a different course … rather than assenting to calls to further weaken important public interest protections on the flimsiest of justifications,” and they called into question NAB’s descriptions of the financial woes of many broadcasters.