A research paper that compares the consolidation that has taken place in the commercial radio industry in the US with the anticipated consolidation in the commercial radio industry in the UK that could follow the legislation of the Communications Act, written by Grant Goddard in March 2003.

1. U.K. RADIO INDUSTRY
CONSOLIDATION: HOW
RELEVANT IS THE U.S.
EXPERIENCE?
by
GRANT GODDARD
www.grantgoddard.co.uk
March 2003

2. DCMS: “Without any consolidation of ownership, the risk is that
a number of small companies will all tend to aim their content at
the same middle ground, all seeking the largest possible share
of the mass audience……… Research suggests that the
liberalisation of ownership rules in the US radio market has, to
some extent, alleviated [this] effect.”1
Chris Smith MP (& Disney consultant): “A certain amount of
consolidated ownership can help to create ‘localness’ by
committing the necessary investment………..2 Grouping
stations in a particular area under umbrella ownership – but not
under a sole owner – can help to increase investment in
genuinely local programme-making and news-gathering. The
more stations a company has in one area, the more likely it is to
invest in local output, events and support.”3
Unnamed analyst: “Why should you need three owners of
commercial radio in London…..?”4
CRCA Chairman Lord Eatwell: “Small stations seek to
maximise their audiences by going for the middle ground…. A
larger company can offer services to different parts of the
community.”5
GWR Chairman Ralph Bernard: “Listeners will be the real
winners, with companies like GWR being able to build local
centres of excellence offering local output of greater range and
quality.”6
Clear Channel International President Bob Cohen: “We’ve
got to immerse in the concept of multi-tasking – this business is
all about multi-tasking……. One programming team can easily
programme an additional station in or outside its own market.”7
1
DCMS, “Consultation On Media Ownership Rules,” DTI, November 2001, para 1.5
Chris Smith, “Debate – But Little Real Argument,” Financial Times, 19 November 2002
3
Chris Smith, “A Bill That’s Out Of Tune With Local Radio,” Financial Times, 23 October 2002
4
Damian Reece, “Government Signals Radio Revolution,” Sunday Telegraph, 10 November 2002
5
Saeed Shah, “Jowell Poised To Allow Major Radio Consolidation,” The Independent, 14 November 2002
6
BBC, “Radio Reform Unveiled,” BBC Online, 14 November 2003
7
Emmanuel Legrand & Jon Heasman, “NAB In Prague: Doing More With Less,” Music & Media, 9 November 2002
2
U.K. Radio Industry Consolidation: How Relevant is the U.S. Experience?
©2003 Grant Goddard
page 2

3. Recent debates concerning the effects of impending ownership consolidation
in the UK on listener choice have often referred to the experiences in the US
market since greater consolidation was permitted in 1996. It is important to
realise that the extent of consolidation being anticipated within the UK radio
industry bears little or no comparison to the experience in the US of recent
years. What has been conveniently forgotten or simply ignored in the recent
debate is that:


the US radio industry is at a far more advanced stage of maturity than the
UK industry;
the recent consolidation in the US radio industry still leaves it with a more
diverse range of owners, a greater number of stations, and a greater
variety of formats in each market than has ever existed in the UK.
TABLE 1: COMPARISON BETWEEN COMMERCIAL RADIO MARKETS IN US & UK
U.S.
U.K.
Commercial radio in the US started in
1920 and is now 82 years old
Commercial radio in the UK started in
1973 and is now 29 years old
Diverse formats developed in the postwar period
Diverse formats developed only since
1990 (incremental radio scheme)
Formats determined by free market
Formats mandated by licensing authority
Intense competition within markets since
1930s
Direct competition within markets only
introduced in 1990. Until then, each ILR
contractor had local monopoly in radio
advertising (except London – duopoly)
No national commercial radio
National commercial radio since 1992
Metropolitan markets are generally
discreet (except in NorthEast states)
Many metropolitan markets overlap
others, particularly in SouthEast and
Midlands/NorthWest England
10,807 commercial local AM/FM stations
259 commercial local AM/FM stations
5% increase in stations over last 6 years
144% increase in stations over last
decade
3,408 station owners
13 owners hold 177 stations, the
remainder are stand-alone or in tiny local
groups
High penetration, low entry cost and low
connection fees for additional radio
delivery systems – internet and cable
Low penetration, high entry cost and high
connection fees for additional radio
delivery systems – internet, cable &
digital radio
U.K. Radio Industry Consolidation: How Relevant is the U.S. Experience?
©2003 Grant Goddard
page 3

4. In the UK the myth exists that, as a consequence of consolidation, there
remain only a handful of radio owners in the US. Nothing could be further from
the truth. Consolidation between March 1996 and March 2002 reduced the
number of station owners by 34%, but there are still 3,408 owners of 10,807
radio stations. During that same period, the total number of radio outlets in the
US increased by 5%.8
Each local radio market in the US is served by many more commercial radio
stations than an equivalent size market in the UK. In May 2002, the average
radio market in the US was served by 23 commercial stations. Of the 285
researched US radio markets, almost half were served by more than 20 radio
stations, and 90% were served by more than 10 radio stations.9
Across all US radio markets in 2002, the average market had 22.3 stations
owned by 9.9 owners operating 10.2 formats. In the top ten markets, an
average of 55.9 stations were owned by 25.4 owners operating 16.2 formats.10
Additional delivery systems are comparatively well developed and well used in
the US, and these offer the average US radio listener a much enhanced choice
of radio stations at a significantly lower cost than in the UK. Almost 60% of the
US population has internet access at home11, and 64% of households
subscribe to cable television systems.12
TABLE 2: COMPARISON BETWEEN TOP 20 RADIO MARKETS IN UK & US (numbers
refer to commercial stations only, local and national)
UNITED KINGDOM
UNITED STATES
market
TSA
stations owners formats market
TSA
stations owners formats
(000s)
(000s)
London
10,384
23
17
18 New York
15,098
42
22
16
Manchester
2,751
10
8
8 Los Angeles
10,407
74
28
Birmingham
2,057
11
7
9 Chicago
7,477
87
37
17
18
Glasgow
1,850
8
7
8 San Francisco
5,952
49
18
16
Liverpool
1,814
9
7
8 Dallas/Ft Worth
4,418
62
25
17
Newcastle
1,415
8
7
7 Philadelphia
4,221
42
23
15
Sheffield
1,317
8
7
7 Washington DC
3,929
47
21
15
Wolverhampton
1,317
11
7
8 Boston
3,839
62
36
18
N Ireland
1,317
10
6
6 Houston/Galveston
4,055
55
27
16
Bristol
1,300
9
6
9 Detroit
3,812
39
17
14
Southend/Chelmsford
1,165
17
10
14 Atlanta
3,617
69
34
16
Humberside
1,142
8
6
15
Maidstone/Medway
1,130
8
Edinburgh
1,109
7
Nottingham
3,377
46
23
5
7 Miami/Ft
Lauderdale
6 Puerto Rico
3,263
93
53
4
6
7 Seattle/Tacoma
3,085
57
27
17
1,072
7
6
7 Phoenix
2,718
46
21
15
Southampton/Portsmouth
977
10
7
7 Minneapolis/St Paul
2,507
45
19
15
Dunstable/Luton
971
18
10
2,416
30
13
14
Brighton/Eastbourne
965
7
6
6 Nassau/Suffolk
2,304
26
14
11
Leeds
952
8
7
7 St Louis
2,170
51
29
15
Cardiff/Newport
901
8
7
8 Baltimore
2,185
31
17
12
8
14 San Diego
Scott Roberts, Jane Frenette & Dione Stearns, “A Comparison Of Media Outlets And Owners For Ten Selected
Markets,” FCC Media Bureau Staff Research Paper #2002-1, Appendix A
9
BIA Financial Network Inc, MEDIA Access Pro database (May 2002)
10
George Williams & Scott Roberts, “Radio Industry Review 2002: Trends In Ownership, Format & Finance,” FCC
Media Bureau Staff Research Paper #2002-11, Appendix A
11
Newspaper Association Of America, “Facts About Newspapers 2002,” at 8
12
FCC, “Annual Assessment Of The Status Of Competition In The Market For The Delivery Of Video Programming,”
17 FCC Rcd 1244, 1254-1255 (2202)

5. The recent consolidation in the US is a reaction to more than fifty years of
continuous expansion, during which time the FCC had implemented very
interventionist policies to diversify the ownership structure of the industry. The
FCC now recognises that the commercial radio industry has reached full
maturity. In the largest radio markets, there is no FM/AM spectrum availability
to license additional stations. The industry has reached supply saturation level
and is about to face its biggest ever challenge from competing services
supplied to households by internet and cable systems. The only way for
traditional FM/AM radio to go now is down – the same inevitability that faced
the US TV networks in the 1990s as cable/satellite take-up grew and whittled
away their substantial audiences.
Thus the consolidation in the US is a result of the radio industry having already
achieved maximum levels of penetration, listening and revenue generation.
The golden age of the radio industry in the US is well and truly over.
“Convergence” may be a buzz-word in the UK, but in the US it is already a
reality. The convergence wolves are already at the door of radio and the
easiest course of action is for media owners to pursue both horizontal and
vertical integration as quickly as possible.13
In the present UK debate over consolidation, rather than look at the US
experience of the last few years, it might benefit the development of the UK
commercial radio industry to examine the policy challenges and changes that
the US experienced during its equivalent period of expansion and growth…..
twenty to thirty years ago.
Without wishing to re-construct here a history of US radio, it proves instructive
to look at the issues of ownership and diversity that the FCC has faced in the
past – several decades before those issues were even pertinent to the UK.
Contrary to perceived opinion in the UK, the FCC has consistently taken an
interventionist stance in the development of the US radio industry. Its policy
objectives have remained virtually unchanged since the earliest days of
commercial broadcasting, which is precisely why the recent wave of radio
consolidations has created such shock waves throughout the US industry.
FCC Experience
The FCC first limited local radio ownership in 1938 when Genesee Radio
Corporation applied for a second AM licence in a city where they already
owned one station. The FCC refused the request on the grounds that
“commonly owned, same service stations would not compete with each other
and that granting the application would preclude a competitive station from
entering the market.” This landmark decision comprised directives that would
become the cornerstone of FCC policy for the next two decades. In order “to
assure a substantial equality of service to all interests in a community” and “to
assure diversification of service and advancements in quality and effectiveness
13
An aside. Living in Toronto, my fifteen-year old daughter listened to radio stations for free on her mobile phone
(between calls) and dispensed altogether with her traditional AM/FM radio. At first she used the phone to listen to the
same local stations with which she was already familiar, but soon she extended her menu to any radio from anywhere
that took her fancy. As a consumer, her favoured station’s location and ownership was totally irrelevant to her.
U.K. Radio Industry Consolidation: How Relevant is the U.S. Experience?
©2003 Grant Goddard
page 5

6. of service”, the FCC would allow commonly owned “duplicate facilities” only
where a community need would otherwise remain unfulfilled.14
Between 1940 and 1964, the FCC examined applications for ownership
change on a case-by-case basis, rejecting those where an applicant already
owned a station in “substantially the same service area.”15 In 1964, this caseby-case consideration was replaced by a rule which forbade common
ownership where there was any overlap of two stations’ transmission areas.
The FCC wanted to:
 “promote maximum diversification of program and service viewpoints” and
 “prevent undue concentration of economic power contrary to public
interest.”
FCC local ownership rules were based upon two principles:
 “it is more reasonable to assume that stations owned by different people
will compete with each other, for the same audience and advertisers, than
stations under the control of a single person or group,” and
 “the greater the diversity of ownership in a particular area, the less chance
there is that a single person or group can have an inordinate effect, in a
political, editorial, or similar programming sense, on public opinion at the
regional level.”16
In 1970, the FCC further restricted local radio ownership by prohibiting
common ownership of any different service broadcast stations in the same
market, even if their signal areas did not overlap. These limits were specifically
designed to maximise the number of independent owners of broadcast media
in a market. The FCC categorically rejected arguments from radio groups that
“common ownership of local broadcast stations would enhance the ability of
station owners to provide better quality, more responsive programming.”
[author’s note: this will sound familiar!] It believed that permitting common
ownership could “lessen the degree of competition for advertising among the
alternative media” and that common owners could “use practices [such as
special discounts] which exploit [their] advantage over the single station
owner.”17
In 1971, the FCC relaxed the rules for the first time to allow, in any
circumstances, a single owner to hold one AM and one FM licence in the same
market, a move aimed to encourage the development of commercial radio
stations on the relatively new, unprofitable FM band.18
Greater relaxation of ownership rules only started in 1989 when the overlap
between closely located stations’ transmission areas was redefined more
loosely. The FCC noted that its policy of ownership diversity was not an end in
14
FCC, “Genesee Radio Corp.,” 5 FCC 183, 186, 187
FCC, “Amendment of Sections 3.35. 3.240 and 3.636 Of The Rules & Regulations Relating To Multiple Ownership
of AM, FM & Television Broadcast Stations,” Report & Order, 18 FCC 2d at 295-296 (aka “1953 Decision”)
16
FCC, “Amendment of Sections 73.35, 73.240 and 73.636 of the Commission’s Rules Relating To Multiple
Ownership Of Standard, FM & Television Broadcast Stations,” Report & Order, 45 FCC 1476-1477 (aka “1964
Decision”)
17
FCC, “Amendment of Sections 73.35, 73.240 and 73.636 Of The Commission Rules Relating To Multiple Ownership
Of Standard, FM and Television Broadcast Stations,” Report & Order, 22 FCC 2d 306, 307, 309 (1970)
18
FCC, “Amendment of Sections 73.35, 73.240 and 73.636 Of The Commission Rules Relating To Multiple Ownership
Of Standard, FM and Television Broadcast Stations,” Memorandum Opinion & Order, 28 FCC 2d 662, 671-672 (1971)
15
U.K. Radio Industry Consolidation: How Relevant is the U.S. Experience?
©2003 Grant Goddard
page 6

7. itself, but was only a means of “promoting diversity of program sources and
viewpoints.” Initially this appears to be a reversal of its earlier 1964 policy, but
the FCC believed that the rule change would no longer adversely affect
programming and viewpoint diversity because:
 the number of media outlets in each market had increased dramatically
since 1964;
 efficiencies that common ownership would generate could lead to
programming benefits;
 radio stations faced increased competition for advertising from television,
cable systems and newspapers.19
Then, in 1992, the FCC relaxed the ownership rules further, which it attributed
to:
 the increased number of media outlets;
 the increased number of formats available;
 the growth of cable, particularly cable radio networks;
 the radio industry’s share of the local advertising market which had
remained flat.
These factors made the FCC believe that its objective of achieving diversity
and competition within each market, which it had pursued for more than half a
century, would no longer be harmed by allowing an element of common
ownership.20
The FCC adopted a tiered approach, with different rules applied to markets of
varying size:
 in markets with fewer than 15 radio stations, one licensee was permitted to
own up to three radio stations, provided that these three represented more
than 50% of the total number of stations in the market;
 in markets with 15 to 29 radio stations, a single licensee was permitted to
own up to two AM and two FM stations, provided that their combined
audience share did not exceed 25%;
 in markets with 30 to 39 radio stations, a single licensee was permitted to
own up to three AM and two FM stations, provided that their combined
audience share did not exceed 25%;
 in markets with 40 or more radio stations, a single licensee was permitted
to own up to three AM and three FM stations, provided that their combined
audience share did not exceed 25%.21
Both the market size and the audience share calculations were based upon
the relevant Arbitron market data. If the market was too small for Arbitron to
survey, applicants for ownership change were required to commission an
audience survey in that market. The 25% limit on one owner’s audience share
was underlined when the FCC subsequently declared that, in markets of 15 or
more radio stations, “evidence that grant of any [consolidation] application will
19
FCC, “Amendment of Section 73.3555 of the Commission’s Rules, the Broadcast Multiple Ownership Rules,” First
Report & Order, 4 FCC Rcd 1723 (aka “1989 Decision”)
20
FCC, “Revision Of Radio Rules & Policies,” Report & Order, 7FCC Rcd 2755, 2773-2774 (1992)
21
ibid.
U.K. Radio Industry Consolidation: How Relevant is the U.S. Experience?
©2003 Grant Goddard
page 7

8. result in a combined audience share exceeding 25% will be considered prima
facie inconsistent with the public interest.”22
Since 1960, the FCC had “sought to promote program diversity through direct
means” and introduced a Programming Policy Statement applicable to both
television and radio, which has never been superseded:
“the major elements usually necessary to meet the public
interest, needs, and desires of the community in which the
station is located,……..have included: (1) opportunity for local
self-expression, (2) the development and use of local talent, (3)
programs for children, (4) religious programs, (5) educational
programs, (6) public affairs programs, (7) editorialization by
licensees, (8) political broadcasts, (9) agricultural programs,
(10) news programs, (11) weather and market reports, (12)
sports programs, (13) service to minority groups, (14)
entertainment programs.”23
It took more than twenty years of regulated development under this directive
for the FCC to indicate for the first time that the markets themselves could
serve Americans’ demand for diverse programming more effectively than
government regulation.24 By 1980, the radio market had developed to the
stage where the greater New York City market supported 128 radio stations,
94 of which were commercial, and 100 separate owners. Between 1960 and
1980 the number of stations in New York City alone had increased by 73% and
the number of owners by 92%.25
The next substantial policy change occurred in 1996 once the internet and
cable access had reached the majority of US homes. The 1996
Telecommunications Act required the FCC to modify its local radio ownership
rule, but still required the Commission to “refuse to approve the transfer or
issuance” of a radio licence if it found that an owner would “obtain an undue
concentration of control or would thereby harm competition.”26
The FCC responded by issuing a new order in March 1996 that replaced a
portion of its local radio ownership rule, including both the numerical station
limits and the presumption that an audience share of greater than 25% was
prima facie inconsistent with the public interest.27
From 1996 onwards, a single owner could hold:
 up to 8 radio stations in a market with 45 or more commercial stations;
 up to 7 radio stations in a market with between 30 and 44 commercial radio
stations;
22
FCC, “Revision Of Radio Rules & Policies,” Memorandum Opinion & Order & Further Notice of Proposed
Rulemaking, 7 FCC Rcd 6387 (aka “1992 Reconsideration Order”)
23
FCC, “1960 Programming Policy Statement,” 44 FCC at 2314
24
FCC v. WNCN Listeners Guild, 540 US 582 (1981)
25
Scott Roberts, Jane Frenette & Dione Stearns, “A Comparison Of Media Outlets And Owners For Ten Selected
Markets,” FCC Media Bureau Staff Research Paper #2002-1, table 3
26
Telecommunications Act of 1996
27
FCC, “Implementation Of Sections 202(a) & 202(b)(1) of the Telecommunications Act of 1996 (Broadcast Radio
Ownership),” Order, 11 FCC Rcd 12368
U.K. Radio Industry Consolidation: How Relevant is the U.S. Experience?
©2003 Grant Goddard
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9. 

up to 6 radio stations in a market with between 15 and 29 commercial radio
stations;
up to 5 radio stations in a market with less than 15 commercial radio
stations.28
Most of the thousands of applications for station assignment and transfer of
control received by the FCC since 1996 have been granted summarily but the
Commission has, in some cases, conducted public interest analyses to
consider the potential competitive impact of the proposed transaction. The
FCC has flagged those transactions that would result in:
 one entity controlling 50% or more of the advertising revenues in the
relevant local market;
 two entities controlling 70% or more of the advertising revenues in that
market.29
Starting in 1998, the FCC committed itself to a Biennial Regulatory Review,
part of which examines the rules concerning multiple ownership of radio
stations. The Commission’s current aim is to:
 define more precisely its own policy goals;
 determine how to best promote these goals in today’s media market
consistent with its statutory mandate;
 establish the best measure for diversity, competition and localism;
 establish a balancing test to prioritise the goals if tension exists between
them.
Historically the FCC has looked at the number of independent station owners
as a proxy for source diversity and viewpoint diversity within a particular local
market.30 But, in searching for new criteria with which to evaluate the diversity
within a market, the Commission’s current Biennial Review asks almost exactly
the same questions that are busying regulatory minds here in the UK:

What measures of market diversity, qualitative or quantitative,
should be considered and what tools do we have that enable us to
measure diversity with a reasonable degree of accuracy?

Are audience demographics an appropriate measure of
diversity?

Is competition an appropriate proxy for diversity, such that the
presence of a competitive local market will assuage our concerns
about diversity?31
Market concentration
When examining a local market to assess the level of competition, the FCC
calculates the concentration levels within the relevant geographic market using
two yardsticks: audience share data and radio advertising share. In its
28
George Williams, Keith Brown & Peter Alexander, “Radio Market Structure & Diversity,” FCC Media Bureau Staff
Research Paper #2002-9
29
FCC, AMFM Inc, 15 FCC Rcd at 160666 n.10
30
1989 Decision, 4 FCC Rcd at 1724
31
FCC, “Notice Of Proposed Rule Making & Further Notice Of Proposed Rule Making,” FCC 01-329, para 31
U.K. Radio Industry Consolidation: How Relevant is the U.S. Experience?
©2003 Grant Goddard
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10. enforcement of the antitrust laws, the US Department of Justice determined
that the radio advertising market is a distinct and separate market from other
forms of media advertising, because advertisers find value in certain of radio’s
unique attributes.32
The Herfindahl-Hirschman Index [HHI] is used by the US Department of
Justice to measure pre- and post-acquisition market concentration within a
specific locality. It is calculated mathematically by summing the squares of the
individual market shares of all firms participating in the market.33 A market with
an index score between 1000 and 1800 is deemed moderately concentrated,
and a market with an HHI above 1800 is deemed highly concentrated. If an
acquisition would result in an increase of more than 100 points in the HHI, then
that acquisition is presumed likely to create or enhance market power.
When the HHI is applied to the commercial radio audience shares of the
twenty largest metropolitan radio markets in the UK, the results obtained are:34
TABLE 3: HHI MEASUREMENT OF MARKET CONCENTRATION OF TOP 20 UK RADIO
MARKETS (measured by commercial radio audience share)
TSA (000) HHI index
London
10384
1454 moderately concentrated
Manchester
2751
1572 moderately concentrated
Birmingham
2057
2461 highly concentrated
Glasgow
1850
2957 highly concentrated
Liverpool
1814
2027 highly concentrated
Newcastle
1415
2565 highly concentrated
Sheffield
1317
1730 moderately concentrated
Wolverhampton
1317
1987 highly concentrated
N Ireland
1317
3793 highly concentrated
Bristol
1300
5045 highly concentrated
Southend/Chelmsford
1165
2530 highly concentrated
Humberside
1142
[insufficient data]
Maidstone/Medway
1130
2453 highly concentrated
Edinburgh
1109
1573 moderately concentrated
Nottingham
1072
3162 highly concentrated
Southampton/Portsmouth
977
3332 highly concentrated
Dunstable/Luton
971
2828 highly concentrated
Brighton/Eastbourne
965
3613 highly concentrated
Leeds
952
1928 highly concentrated
Cardiff/Newport
901
2700 highly concentrated
32
US Department of Justice & FTC, “1992 Horizontal Merger Guidelines,” 1.1, 1.2
The Herfindahl-Hirschman Index is a commonly accepted measure of market concentration. It is calculated by
squaring the market share of each firm competing in the market and then summing the resulting numbers. For
example, for a market consisting of four firms with shares of thirty, thirty, twenty and twenty percent, the HHI is 2600
2
2
2
2
(30 + 30 + 20 + 20 = 2600).
The HHI takes into account the relative size and distribution of the firms in a market and approaches zero when a
market consists of a large number of firms of relatively equal size. The HHI increases both as the number of firms in
the market decreases and as the disparity in size between those firms increases.
Markets in which the HHI is between 1000 and 1800 points are considered to be moderately concentrated, and those
in which the HHI is in excess of 1800 points are considered to be concentrated. Transactions that increase the HHI by
more than 100 points in concentrated markets presumptively raise antitrust concerns under the Horizontal Merger
Guidelines issued by the U.S. Department of Justice and the Federal Trade Commission. See Merger Guidelines §
1.51.
34
RAJAR 2002Q3. Radio listening shares exclude all non-commercial radio listening but include national commercial
radio listening shares in addition to local commercial radio listening shares. Ownership information as of November
2002
33
U.K. Radio Industry Consolidation: How Relevant is the U.S. Experience?
©2003 Grant Goddard
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11. These results are significant but unsurprising, given the relatively slow
development of commercial radio in the UK compared to the US. Only the very
largest UK markets, such as London, have become less concentrated in the
last decade as the number of commercial radio licences issued there has
steadily increased. Many UK radio markets are still highly concentrated
because:
 heritage ILR stations that previously enjoyed a monopoly position in their
local market continue to enjoy substantial audience share;
 national commercial radio stations have had relatively little impact on
commercial radio audiences in most metropolitan markets;
 recently licensed small-scale ILR stations and regional stations are still
growing their audiences.
The impending consolidation of the UK radio industry will serve only to
increase further the high concentration levels already extant in these markets.
If these markets were in the US, there is no doubt that the Department of
Justice would intervene to prevent further consolidation of radio ownership
amongst all but the smallest existing owners. Consolidation at this mid-stage in
the UK radio industry’s development may simply turn the clock back to the
situation of the 1980s/90s where each metropolitan market was dominated (in
audience market share and revenue share terms) by one media owner. The
only difference now would be that such market domination will be achieved
through the ownership of several stations, rather than an AM/FM two-station
combo.
“[Chief Executive of Capital Radio, David Mansfield] said the
changes would enable Capital to own nine stations in London,
rather than the current three.”35
The mere existence of smaller stations within a market dominated by one or
two major media groups does not reduce the level of concentration, either in
terms of listening share or advertising share, if those small stations are
restricted to minority-interest formats. Even if such format restrictions were to
be lifted (as they are in the US), it still may prove impossible for one small
station to compete effectively in programming, marketing or promotion terms
with the economies of scale enjoyed by the larger group(s).
The FCC is examining the whole issue of competition within local radio
markets and seeks answers to these issues:
"Although a large market share in itself does not demonstrate
market power, market power may be inferred when a party’s
market share is protected by high barriers to entry [viz. United
States v. Microsoft Corp.]…. We tentatively believe that the
possible entry of additional stations would seldom be sufficient
to counteract the exercise of market power…. Because of the
scarcity of spectrum, a particular geographic area can support
only a certain number of radio broadcasting signals. Generally,
35
David Litterick, “Radio Cheers Softer Ownership Rule,” Daily Telegraph, 15 November 2002
U.K. Radio Industry Consolidation: How Relevant is the U.S. Experience?
©2003 Grant Goddard
page 11

12. the good signals were taken many years ago, resulting in little
unused capacity that could support new station entry…..
Although we believe that entry by new stations is
unlikely, we seek comment on whether the mere existence of
other stations in the market negates market power, even where
the current market shares of those stations are low. Should we
consider the number of other stations in the market and their
signal strength, either as an alternative to or in addition to
market share?…..
Further, does the amount of concentration in the market
have an impact on the ability of stations to increase their market
share? Is it easier for a station with a low audience share to
increase its listenership in markets with low concentrations than
it is in markets where one or two owners control a majority of
the stations?"36
A recently published FCC research paper has examined the effects of
consolidation within the US radio market. It found that in March 2002:
 the largest radio owner in each market controlled, on average, 47% of the
market’s total radio advertising revenue;
 the largest two radio owners in each market controlled, on average, 74% of
the market’s total radio advertising revenue;
 the average number of formats available in large markets had declined
slightly, but had increased slightly in smaller markets;
 radio listening had decreased slightly since 1998;
 local radio advertising prices increased by 90% between March 1996 and
March 2002 (during the same period the consumer price index increased
by 16%).37
Grant Goddard is a media analyst / radio specialist / radio consultant with thirty years of
experience in the broadcasting industry, having held senior management and consultancy
roles within the commercial media sector in the United Kingdom, Europe and Asia. Details at
http://www.grantgoddard.co.uk
36
FCC, “Notice Of Proposed Rule Making & Further Notice Of Proposed Rule Making,” FCC 01-329, para 46-47
George Williams & Scott Roberts, “Radio Industry Review 2002: Trends In Ownership, Format & Finance,” FCC
Media Bureau Staff Research Paper #2002-11
37
U.K. Radio Industry Consolidation: How Relevant is the U.S. Experience?
©2003 Grant Goddard
page 12