Resource Interdependence: Radio Economics and the Shift from AM

156 I
DIMMICK
Pianka, E. (198~). Etrolutionary ecology (~rd ed.). New York: Harper & Row.
Pleck,.J. (1985). Working u-ires/toorking busbands. Beverly Hills, CA: Sage.
Ricklefs, R. (1979). I,'c()/0J!.:Y (2nd cd.). New York: Chiron Press.
Rohinson , J. (1977). How Americans lise time, New York: Pracger.
Slohodchikoff, C., & Schulz, W, (1980). Measures of niche overlap, Ecology, 61,
1051-1055.
Umphrey, D. (1988), Segmenting the cable audience by reason for subscribing.joumalism
QllarterZy, 65, 972-975.
t7
Resource Interdependence:
Radio Economics and the
Shift from AM to FM
Jonathan David Tanke!
Wen mouth Williams, Jr.
Ithaca College
The economic activities of the commercial mass media are based on the
delivery of program material to an audience. Although not all specific
transactions involve the technology of reception, without it there can be
no expectation of sales and profit. By definition, mass media arc
organized around some type of technology that links the program
supplier to the audience. It is this link that requires media operators to
acquire or produce program material that will attract audiences, who
may pay directly (as in pay-cable) or be offered to advertisers (as in
commercial broadcasting). For this reason, understanding the role of the
dclivery technology in the mass media industries is a necessary, although
not sufficient, condition to understanding the formation of the mass
media marketplace.
Mass media economists need to examine how technologies arc made
available to media consumers and the ways in which newer technologies
mayor may not alter the structure of the media marketplace established
by the older technologies. An example of market disruption caused by
consumer acceptance of a new technology is the replacement of vinyl
discs by compact discs (CDs). In this case, the pricing pattern reduced
the number of units sold while increasing revenue. In other words,
fewer CDs are bought because of the price (higher than vinyl LPs), but
higher prices generate more income than for LPs. The net effect of the
shift away from vinyl discs is a product marketplace increasingly
focused on a narrower demographic base for a larger portion of revenue.
157
158
I TA~KHAND WII.LIAMS
Conversely, an example of consumer rejection of a new technology is
the failure of stereophonic AM transmission to recapture radio market
share for the once dominant AM radio broadcasters. In this case, the net
effect ha: been to strengthen the existing market structure. In both
cases, however, the marketplace was defined by the interplay of tech­
nology, consumer preference, and economic power and case studies
that highl ight these relationships aid in understanding the complex
nature of mass communication as an economic process.
The inrerplay of technology, consumer preference, and economic
power can be seen in the formation of the contemporary radio market­
place. From the mid-1960s to the late 1970s, the majority of commercial
radio listeners shifted from AM stations to FM stations. By 1989, FM
listenership accounted for 73% of the total radio audience (Duncan,
1989). This shift was actually the second reconfiguration of the radio
marketplace since World War II. The first reconfiguration (the shift of
radio from a national to a local medium) was the result, in part, of
competition from a different media technology (television). An exami­
nation of! he shift from AM to FM within the radio audience provides a
case history uncontaminated by competitive media habits. In addition,
the shift occurred long after PM technology was actually available, so the
availability of the tee hnology is inadequate by itself to explain consumer
preference.
The dominance of FM over AM that resulted from various forces
described in this study is irreversible. The financial base for radio in
general has eroded drastically. The attempt to give AM the capacity to
compete sonically w itl. FM, the ill-fated AM stereo, failed due to a radical
distortion of traditional technical rulemaking procedures during the
federal government's championing of free market economic forces. The
lack of technical standards prevented beleaguered AM stations from
engaging in a rational and reasonable transition (Klopfenstein & Sedman
1990). Today, the AM "and has lost so much audience that the Federal
Communications Commission (FCC) now allows ownership of more
than one station in a market, in the hope that multiple station ownership
would reduce competition and contribute to the stability of AM reve­
nues. The commission has also considered letting some AM stations go
off the air ("go dark") in order to clear away low powered stations so
that the remaining stations can capitalize on their one advantage over FM
stations: transmitting long distance. The eventual fate of both AM and
FM broadcasting is now clouded by the potential for digital audio
broadcasting (DAB) to absorb both AM and FM broadcasters into a single
transmission system superior to both in reach and sound quality respec­
tively. In the meantime, understanding how the current radio market­
7.
RESOURCE INTERDEPENDENCE
I
159
place developed will go a long way to explain the current dire economic
condition of the radio industry, and the AM stations in particular.
RESOURCE INTERDEPENDENCE AS ECONOMIC MODEL
Media economics are not simple processes, and, therefore, the means to
explanations are not simple. It is not sufficient for analytical purposes to
simply assert that the shift happened, as number of authors have (cf.
Barnes, 1988), nor is it adequate to enumerate the factors without
offering an analysis of how those factors interact (see Sterling & Kittross,
1990). An assessment of the dynamics of a media marketplace, such as
commercial radio, requires an analytical framework that permits a
contextual interpretation of the technological, political, cultural, and
economic influences on that formation. Understanding the economics
of commercial radio must begin with understanding the structure of the
marketplace because that structure dictates other economic transactions
(such as changes in ownership patterns or programming philosophies).
In the past two decades, studies of media organizations and the
individuals involved in media organizations have highlighted the inte­
gration necessary to an understanding of the formation and functioning
of the media marketplace (d. Hirsch, 1972). As McQuail (1987) summa­
rized, media organizations and individuals within those media organiza­
tions make "decisions at the cent[er] of a field of different constraints,
demands, or attempted use[s] of power and influence" (p. 111). McQuail
identified relationships among the society, clients (owners and suppli­
ers), sources and audience, and, finally, relationships within the organi­
zation.
One means to highlight these relationships is the Resource Depen­
dence Model formulated originally by Gerbner (1969, 1973) and later
adapted by Turow (1981). This model focuses on institutionalized
leverage and how power is exercised in the mass media marketplace. In
this model, power is defined as the ability to provide sanctions over
other institutions. The power of an organization is inversely related to
the degree of dependence that organization must concede to other
participants-direct and indirect-in the production/transmission pro­
cess. For example, the individual local television network affiliate has
very little power in program content because it is almost totally depen­
dent on networks and syndicators for programming; these program
suppliers possess power because they control the necessary resource­
programs. Yet the local television network affiliates acting in concert (as
160
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TANKEL AND WILLIAMS
in an Affiliates Board) can exercise leverage because they control a
resource needed by the networks-air time (access to audience).
Based on an analysis of leverage and power in media industries,
Turow (1984) identified 13 power roles that affect media production.
These roles are Produce-r (prepares material/programs for release), Au­
thority (issues government sanctions), Investor (contributes money),
Patron (purchases time/resources), AUXiliary (provides material sup­
plies), Creator (provides talent), Union (regulates personnel), Distributor
(selects material for dispersal), Exhibitor (offers material to audience),
Linking pin (moves rnar-rial from and to production firms), Facilitator
(helps production firms), Pressure Group (demands policy support), and
Public (audience). The value of analyzing media events in terms of the
leverage/power analysis as it applies to the 13 power roles is its ability to
account for 1 he interdependence of participants that have distinct, and
possibly differing, motivations and goals. The shifting relationships are
better described by "interdependence" rather than Turow's use of the
term dependence, as the following analysis of radio demonstrates.
Power in the Radio Market
Power roles m:ly be assumed by any participant: The dynamic of
interdepenc' nee derives from relations between participants, not the
specific function served by the participant in the production process. In
other words, an organization calling itself "Producer" in the traditional
sense may r )t be a Producer in terms of the Resource/Interdependence
approach.
radio station produces a continuous program flow by
creating, organizing, and reproducing "material for release to the public
via mass media" (Turow, 1984, p. 12)-by this definition is a Producer.
But in order to understand how the station arrives at its specific program
content, it is necessary to view radio stations as Exhibitor, the final link
in the chain "onnecting Creator to Public.
The selection of program content on the part of the radio station (the
act of programming) is designed to enlarge and maintain the radio
station's audience in order to attract advertisers. Patrons make "ongoing
organizanorut purchases in support of specific products," and "con­
tribute to ... the most direct cash flow in exchange for mass media
material created" (Turow, 1984, p. 12). The advertisers exert their
influence indirectly-the radio stations construct their program format
in anticipation of selling their audience to the advertiser and the type of
programming often preselects the audience (Public)-those whom indi­
vidual advertisers are most eager to reach. The recorded music industry,
and other suppliers of program material such as syndicators, thus
7
RESOURCE INTERDEPENDE:-.lCE
I
161
,·,.quire leverage in their Producer/Distributor roles vis-a-vis the radio
',lations, who require programming able to attract the necessary audi­
ence (Public), who, in turn, attract the Patron in order to produce
revenue. In addition, recording companies exert great leverage on
Creators who rely on Producers/Distributors for their outlet to the
Public.
Going further, radio stations compete for the public's attention with
other radio stations (not to mention other leisure-time activities). The
radio station must! 'HT (ore also be viewed as a Producer competing for
limited resources (c.g., programming and advertising) with other Pro­
ducers, in addition to acting as an Exhibitor. These two perspectives
»rovide a framework for analyzing the actions of radio stations. The
-xcrcise of power on th.: part of a specific radio station as Producer is
directly related to the ability to negotiate the web of interdependence
created by the station's role as Exhibitor. Leverage is acquired by the
:'adio station as Producer by finding and exploiting :1 niche in the
marketplace. A niche is a "distinct combination of resources sufficient to
support organizations with specific goals, boundaries and activities"
/Turow, 1984, p. 15). Control over a niche makes it difficult for
competitors to enter the marketplace. The segmented and specialized
radio industry has become a nexus of distinct niches or, as more
'ommonly known, formats.
IIny discussion of resource interdependence in the electronic media
industries has to account for the influence of Authority in the form of
i~ov('rnment regulators (such as the FCC). According to Turow, Author­
it;Cl: regulate the mass media in three areas: structure, technology, and
«ontent. Changes in government policy will affect the resources avail­
able to radio stations because the market in which that radio station must
operate has been altered. The effect of changes in regulatory policy may
be intended by government, or may be the by-product of that action.
The web of interdependence is completed if one assumes, not always
correctly, that the regulatory action of the Authority is primarily
intended to serve the interests of the Public, who h-ive little direct
influence on the producer.
Players occupying :111 13 power roles had some impact on the
development of FM radio; however, only the 6 identified fulfill the
critical test established hy Gerbner (1969, 1973). The rationale for this
conclusion lies in the inability of the other players (Investor, Union,
Distributor, Linking Pin, and Facilitator) to influence the development
of FM radio at that time. Of those identified here, the most visible power
to allocate resources in the radio environment rested with the Authority
as embodied by the FCC, because it determines the regulatory and
technological shape of that environment. The second player is the
162
I
TANKE!. AND WI LLIAMS
Exhibitor (radio station), exercising day-to-day control over the neces­
sary resources allocated by the Authority. The third participant, the
Public, responds to the actions of the Exhibitor, and provides the
Exhibitor with the resource necessary to exchange in the electronic
media marketplace-s-audience. If the Public shows indications of sup­
port, the fourth player, the Patron (advertiser), enters and exercises
control over the Exhibitor's most sought resource-advertising revenue.
The fifth participant, the Producer (record company or program syndi­
cator), provides the Exhibitor with its means of exchange with the
Public-programming-in return for exposure to that Public (record
company) or direct payment (syndicator). (The Producer may also
interact with the Public outside of the Exhibitor's sphere of influence.)
The sixth contributor is the Auxiliary, who provides the technology of
transmission and reception, the media link that molds the radio market
together.
THE ROLE OF THE AUTHORITY: AUTHORIZATION
AND PERMISSION
The development of the FM band has been characterized by the role of
the Authority from the very beginning, first in the form of the U.S.
Patent Office, and later in the form of the FCC. Edwin Armstrong was
granted four FM patents in December 1933 and he organized the first
public demonstration ofFM radio broadcasting in January 1935. Despite
his patent claims, Armstrong realized that invention was not the same as
innovation. He recognized the need for manufacturers to build transmit­
ters and receivers, but more importantly, "he needed as much support as
he could muster to persuade the FCC to authorize FM broadcasting"
(Inglis, 1990, r. 122). In the framework of Turow's taxonomy, although
Auxiliaries (material supphcrs) would be necessary, permission to pro­
ceed with innovation was needed first.
Armstrong's initial working relationship with RCA, the dominant
manufacturer (Auxiliary) and radio broadcaster (Producer/Exhibitor),
quickly deteriorated, so that by 1939, Armstrong was allied with RCA's
main manufacturing competitors, Zenith and GE. In that year, a FCC
Rulemaking hearing was convened to decide whether to assign a perma­
nent spectrum allocation to commercial FM broadcasting. The FCC ruled
in 1940 that "Frequency modulation is highly developed. It is ready to
move forwarc. on a broad scale and on a full commercial basis" (Inglis,
1990, p. 127). So, despite substantial opposition in the marketplace from
the major program suppliers (RCA, and to some extent CBS), the federal
7.
RESOURCE tNTIcRDEPENDEI\'CE
I
163
government altered the marketplace by executive fiat (cf. Inglis, 1990;
Mosco 1979; Sterling & Kittross, 1990).
Despite the initial victory, the development of FM as a radio broad­
casting service from 1941 to the late 1950s was inhibited by Authority
action: specifically, the Commission's decision to move FM's spectrum
allocation. Although the move guaranteed the availability of FM broad­
casting throughout the country and increased the potential number of
channels, the action effectively destroyed the pre-war FM broadcasting
industry. Through the 1950s, AM broadcasting become locally based,
with the dominant AM broadcasters acquiring FM licenses in the same
markets (known as "combos") in order to actively inhibit FM as an
alternative for local radio audiences. The FM stations licensed to AM
broadcasters invariably broadcast the same programming as their AM
sisters, often with the same primary call letters. Although a limited
number of independent jazz and classical music FM stations served
listeners attracted by alternative programming enhanced by better sound
quality, these stations were no economic competition for AM and
AM-FM combos programming for more broad-based audiences (see
Table 7.1).
Because radio broadcasting is regulated by the FCC (Authority), a
number of analysts have considered the manner in which FCC technical
decision making has affected the functioning of commercial radio.
Sterling (1971) and Mosco'(1979) attributed the development of FM as a
service ancillary to AM to the organizational dynamics of the FCC. The
Commission intended for AM and FM to coexist and for additional and
larger audiences to be served. But a number of interdependent actions
thwarted the FCC's intent when the audience and advertisers chose FM
over AM, a choice the Authority did not demand.
FM broadcasting developed slowly through the 1950s, although the
ability to broadcast with greater frequency response and lower signal­
to-noise ratio was inherent in the basic technology of frequency modu­
lation. FM technology was compatible with stereophonic reproduction
introduced in the late 1950s and the FCC authorized stereo multiplex
transmission in 1961. The enhanced sound quality of FM as compared to
AM was a result of the Authority (FCC) allocating resources (frequencies)
it controlled. The permission to broadcast in stereo was a shift in
previous FCC actions that limited the exploitation of the FM band in
order to preserve AM primacy in the radio environment (Mosco, 1979).
The impression that FM was sonically different from AM was crucial
to the FCC action. At this time, the Commission, controlled by Kennedy
appointees, was primarily interested in creating competition in specific
sectors of the marketplace, as evidenced by the discussion of the
deintermixture rule (Williams, 1976). This same regulatory philosophy
\(J.]
I
TANKEL AND WILLIAMS
7.
TABLE 7.1
I'M Station Revenue 19411-1977
FII·' Stations
In Millions S
Year
# Reporting
19411
1949
19S0
19S1
19S2
19S;;
19S4
19S5
19S(,
19S7
19SH
19S9
1%0
1961
1%2
1963
1964
19(>S
1966
1967
1%8
1%9
1970
1971
1972
1973
1974
1975
1976
1977
117
104
116
(,6
s6
4S
43
.~8
SI
67
93
14H
218
249
279
294
306
33H
3111
405
433
442
464
S27
590
616
678
703
713
Nl
# Reporting Profit
Reuenue
Income
1.1
1.6
1.4
25
3H
50
51
71
116
93
102
11 I
115
148
136
144
182
224
239
273
284
351
3HS
1.2
1.1
.11
.11
1.0
1.4
2.0
2.5
4.3
5.H
7.1
9.3
11.4
12.H
15.7
19.4
22.6
2H.3
33.4
40.6
55.3
77.4
%.1
12H.0
142.9
180.0
22S.3
(3.2)
(3.2)
(3.0)
(3.3)
(3.3)
(42)
(3.9)
(5.5)
(6.2)
(9.0)
(H.8)
(10.0)
(13.1)
(9.4)
4.3
9.4
Note: Figures in parcnthesc-: represent net loss. Figures underlined represent I'M
turning points achieving overall profitability with 50% of I'M stations being profitable.
Sources: FCC (19SI1-19H6).
applied to the adoption of the Nonduplication Rule (banning more than
50% AM-PM duplication in markets of more than 100,000 people
beginning on July I, 1965), effectively limiting the amount of simulcast
or duplicate programming on AM-FM combos. This decision, a shift
from the protectionist attitude held by the FCC toward AM stations,
affected nearly 60% of r he FM stations broadcasting at this time
(Williams, 1976). Commissioner Kenneth Cox told an audience at the
1965 Narioual Association of Broadcasters (NAB) convention that
AM-FM duplication W2S "a luxury we can't afford" ("FM," 1965, p. 88).
RESOURCE INTERDEPENDENCE
I
165
Many radio broadcasters objected to the new rule. They felt there was
not sufficient programming or revenue for more radio program services.
Ben Strouse, head of the NAB's FM Committee, told the same 1965 NAB
convention audience addressed by Commissioner Cox of doubts about
the ability of the Washington, DC market to absorb the additional
program services. While praising the FCC's support of FM, Strouse felt
" ... sometimes the love of a government agency can be the kiss of
death" ("FM," 1965, p. 88). How ironic this sounds in light of the
ultimate effect of the Commission's actions on both FM and AM stations.
In response to growing protest from AM broadcasters, the FCC post­
poned full compliance with the Nonduplication Rule to January 1, 1967.
The intent of the FCC in issuing the Nonduplication Rule was to separate
the AM and FM bands in order to increase the number of radio services
available to the Public. The effect of the Commission's actions, how­
ever, was to enhance the popularity of the FM band to the detriment of
the AM band.
THE ROLE OF THE AUXILIARY: HARDWARE SUPPLY
The role of Auxiliary in the AM-FM shift was occupied by a number of
manufacturers because the supply of necessary material can be defined
in different ways. First, transmitters needed to be supplied. Inglis (1990)
described the ease with which FM transmitters were designed, utilizing
the increasingly sophisticated vacuum tube technology developed
during and after World War II, thus bypassing the power fluctuations
that plagued AM transmission. Second, the supply of PM receivers
increased markedly as the use of transistors brought down the cost and
reduced the size (see Table 7.2). FM receivers were initially bought in
addition to AM receivers, and cost was an important aspect of the
purchasing decision. These are examples of how unintended conse­
quences of Authority (FCC) actions affected the spread of FM: adminis­
trative delay allowed Auxiliaries (suppliers of FM hardware) to take
advantage of technological innovation separate from the invention of
FM broadcasting itself.
The most evident area for technological innovation was the develop­
ment of stereo sound reproduction. The 1961 FCC decision to authorize
FM stereo transmission (see the "Role of the Authority") provided
additional, but significant differentiation of FM from AM. The Auxiliaries
began to manufacture stereo FM radios, but more importantly, the
manufacturers began to integrate PM stereo radio reception into transis­
tor-based home audio systems that also included turntables and tape
decks. These systems became an increasingly larger share of the home
166
I
TANKEL AND
\~'11L1A\[S
7.
TABLE 7.2
Deve loprnent of Home Audio Market Since 1960
FM Receivers as Percentage of
Households with
Year
All
Radios Sold
All
Hnuseh()lds
Radios Sold
Cars with
Radio
Component
Audio
1%0
[%5
1970
1975
1()80
1985
t988
R%
15
48
6')
78
na
na
na
na
74'?{)
93
95
na
na
na
6%
14
38
78
na
90
68%
79
93
9')
9')
95
95
na
na
na
na
na
39%
44
Automobile
Compact
Disc
2%
8
Sources: From Sterling and Kinross (1990, p. 657). All data through [980 as reported in
Sterling (1984, pp. 225-226), citing Electronics Industries Association estimates for all but
household penetration of FM, which is from Pulse Inc. for data through 1975 and from
Radio Advertising Bureau for data since 1975.
Data since 1980 from Electronic Industries Association and Radio Advertising Bureau.
electronics market (see Table 7.2). The increased quality of home sound
reproduction, even in cheaper units, demanded better sound production
from radio broadcasting. PM stereo transmission was better equipped
than AM transmission to transmit stereo phonograph records in terms of
frequency response and clarity. The success of stereo transmission was
a result of, and contributor to, the increasing manufacturing of records,
and later tapes and CDs, the very technologies t hat provide PM broad­
casters with primary programming material.
The rapid domination of stereo reproduction over monaural posi­
tioned PM transmission as the progressive technology in opposition to
the established AM system, a key differentiation in the battle for market
share among the youth, who comprise a large share of the radio
audience. By the mid-1960s, Auxiliaries were capable of providing the
necessary hardware to allow FM broadcasters to utilize technologies
capable of attracting listeners underscrved or ignored by AM broadcast­
ers. This, in turn, allowed FM broadcasters to more quickly respond than
their AM counterparts to the changing demographics of the radio
audience. In Turow's taxonomy, these listeners comprise the Public,
whose role is examined next.
THE ROLE OF THE PUBLIC: THE SEARCH FOR A NICHE
The technical and administrative rules promulgated by the FCC were
neither a necessary, nor a sufficient, cause for a shift in audiences from
RESOURCE JNHRDEPENDENCE
I
167
AM to FM-they simply altered the business environment. Power in the
commercial media marketplace is ultimately a function of quantitative
success (see "The Role of the Patron.") and the shape of the new radio
environment would be determined by the ability of AM stations to
maintain their audiences while competing with FM stations, and the
ahility of both to attract new audiences. Radio stations achieve success
by attracting specific segments of a market, and young consumers were
an ideal target audience for FM stations (see Frith, 1981; Hebdige, 1979).
The existence of unserved audiences was implicit in the FCC's action,
and it was the way in which various audiences responded to the
seemingly expanded choice in radio programming that fueled the short
term development of the FM band in the mid-1960s (Denisoff, 1973;
Peterson & Davis, 1974).
The chief beneficiary of the Nonduplication Rule was to be the
listening Public (Sterling, 1971). Initially, FM broadcasters who did
attempt to establish FM-only stations tended to program for a select
audience interested in the types of music that could take advantage of
FM's superior sound quality (classical and jazz). However, a 1966
Business Week article summarized the plight of the FM pioneers.
The exclusiveness of the programming and the high cost of FM receivers
kept audiences small. For most people, there was little incentive to invest
in an FM set, since the programs they wanted to hear were available on the
AM dial anyway. Small audiences, plus growing competition from TV,
kept advertisers away from FM in droves. ("FM radio," 1966, p. 173)
Total advertising revenue for FM in 1965 was $16 million, only a
small portion of radio's total of almost $825 million (FCC, 1966).
Implicit in uonduplication was the need for FM stations to become
self-sufficient economic entities: (a) FM stations owned by AM broad­
casters could no longer be a "bonus" to advertisers buying time on the
AM side and (b) FM-only stations would face new and more vigorous
competition.
FM radio stations could employ two basic strategies. First, they could
take available audience from the established AM stations (and those few
successful FM stations), receive available programming from the estab­
lished recorded music industry and accept advertising from the existing
advertisers ("FM rising," 1976). Second, FM stations could seek new
audiences (enlarge the number of available listeners) with programming
that highlighted its technological superiority, tbus providing new op­
portunities to the record companies and program syndicators and
additional targeted audience demographics to the advertisers.
The initial increase in radio program services meant a new cornpeti­
l(lH
I
TANKEl. AND WILLIAMS
tive environment. For example, the search for new audiences occurred
as the 1960's counterculture emerged. Some FM programmers turned to
this audience segment previously excluded from AM Top 40 rock
stations by definition (Honan, 1967; Routt, McGr:nh, & Weiss, 1978).
The first FM rock stations in the early days of Nonduplication demon­
strated the economic potential for serving a "progressive market," and
helped determine the long-term success of FM radio (Honan, 1967;
Tankcl & Williams, 1987). FM rock music programmers, by the early
1970s, were already faced with a choice: program to the perpetual
group of 16- to 21-year-olds or mature with the audience (' 'The upbeat
tempo," 1974). As the demographics of the rock audience fragmented,
new niches appeared. ny 1977, there were 12 to 14 variations of
contemporary rock music formats, many exclusively on FM (Duncan,
1979; Rothenbuhler, 1985, 1987).
Overall listenership for FM radio as compared to AM radio continued
to increase during the l')70s, as FM stations began to isolate demo­
graphics attractive to advertisers. According to Tom Harrison of Blair
Radio, FM stations tended to focus on specific demographic groups: "In
other words, AM became the horizontal medium and FM the vertical"
("Special report," 1979, p. 35). By 1978, the national share of FM
listeners reached 50% of the total radio audience; FM radio had reached
parity in terms of the listening habits of the public. In 1978, the
programming/demographic profiles of the FM audience showed how
these stations successfully created new audiences, one of the competi­
tive strategies discussed earlier. FM stations steadily increased their
share of the growing radio audience, and particularly among young
listeners, who, it is safe to assume, were new radio consumers. The 1978
lists of the top ten radio stations indicate younger listeners preferred FM
to AM stations, in general. FM stations were more likely to program
music, and variations of rock in particular, than AM stations (Duncan,
1979; "Special report," 1979). This audience power was created by the
existence of the "baby boom" generation as a large potential audience
for FM. That new audience: (a) released FM from its subservience to AM;
(b) changed the structure of the recording industry; and (c) reinforced
the links between the radio and recording industry (Denisoff, 1975;
Fornatale & Mills, 1980).
THE ROLE OF THE PATRON: MONEY FOR LISTENERS
The role of the Patron in an advertiser-supported system such as
commercial radio is pivotal in any change in consumer behavior or
availability. Barnouw (1978) described the sponsor-broadcaster rela­
7.
RESOURCE INTERDEPENDENCE
I
169
tionship in both network radio and television, in which programming is
designed primarily to attract an audience. In the case of FM, the
technology allowed for adverttsers; to reach new and different audi­
ences, some already constituted, but all underserved or ignored. These
entrepreneurial decisions provide more evidence of the "audience
commodity" theorized by Smythe (1981), that power in media relation­
ships is generated by the sale of the audience as a commodity: commer­
cial radio was no different (Hesbacher, Clasby, Anderson, & Berger,
1976; Hesbacher, Rosenow, Anderson, & Berger, 1975) and FM pro­
grammers were able to take advantage of their technical superiority over
their AM competitors to secure the most important resource-audi­
ences.
Increased audience for the FM band occurred simultaneously with a
FM station profitability as a whole and individually. Aggregate FM
stations still reporting as AM/FM combos were profitable by 1974;
whereas independent FM aggregate revenues exceeded expenditures in
1976 (FCC, 1975, 1977). That same year, an NAB study indicated the
"typical" FM station was profitable ("FM stations," 1977). The desir­
ability of FM as an advertising medium was reflected in articles in Forbes
("Radio is hot," 1976) and Advertising Age ("FM rising," 1976). The
most public expression of faith in the FM band came from the Cox
Broadcasting Corporation, which issued Cox Looks at FM Radio: Past,
Present and Future, a report enthusiastic about FM short-term growth
("Cox says," 1976). Reports of the Cox study appeared widely in the
trade and business press.
The influence of the advertiser is most striking in the "formatization"
of FM ("FM stations," 1977). A recurring theme in the trade press of the
time was the change in music content on the FM band. What had been
clearly the domain of classical music, jazz, and beautiful music, was now
dominated by rock music. The limits on narrowing the format were
tested, and the result was "hyphenated" rock stations (such as mellow
rock, soft rock, and progressive rock), each designed to claim an
increasingly more specific demographic group. The advertiser's need
drove the programming marketplace in FM, eliminating unprofitable
formats and fine tuning successful ones (see Table 7.3).
Underground FM was one of the first attempts to bring rock music to
the FM band (see Nolan, 1969, and Post, 1974, for firsthand accounts of
underground FM). The rise and disappearance of underground FM
(Tankel & Williams, 1987) in the mid to late 1960s demonstrates how
advertisers (Patrons) determine radio station (Exhibitor) content. The
need to be different from other formats put special pressures on
underground FM, and the short-lived nature of underground FM's
success was inevitable given the dynamics of the commercial radio-ad­
>-'
TABLE 7.3
Radio Station Formats: 1964-1988
--..J
0
Year and Size
of Market
Number
of Stations
Middle
of
the Road
Top
40/
Contemporary
Beautiful
and
Background
Country/
U"estern
Black/
Soul
Progressive
Rock
1966
(FM only)
Top 50 markets
Other markets
244
564
49
64
15
4
30
23
1971
(AM and F~)
Top 100 markets
AM stations
FM stations
955
643
21
18
27
25
17
39
18
-
-
10
-
-
1975
(AM and FM)
Top 40 markets
AM stations
FM stations
600
75
26
13
17
21
5
24
16
9
10
5
2
10
1978
AM stations
FM stations
1,479
1,174
26
6
24
41
3
26
21
11
6
4
5
-
1980
AM stations
B1 stations
1,474
1,293
29
5
19
45
3
23
21
12
7
6
-
1982
AM stations
FM stations
1.530
1.374
29
11
8
39
2
18
21
17
11
6
-
1984
AM stations
FM stations
1,430
1,437
29
18
6
35
2
13
20
18
8
6
1986
AM stations
FM stations
1.323
1,551
30
24
3
33
I
11
18
15
9
6
1988
AM stations
FM stations
1.311
1,628
29
24
4
32
2
9
16
15
8
6
5
-
-
-
-
Neios
and
Talk
-
Classical
Other
-
6
4
-
17
8
9
2
2
6
13
10
6
4
1
3
11
5
-t
s
I
2
7
2
6
9
4
1
2
13
3
9
I1
1
5
2
16
2
11
1
18
5
2
4
12
I
4
2
20
7
6
10
Notes: Blank spaces generally indicate that the programming category has been included under "Other." In some cases, however, the
particular programming format was not broadcast that year. Figures for 1976 are based on the top 10 stations in the top 50 markets. Thus, while
the listing encompasses the top 50 markets, it excludes many stations in these markets that feature minority-taste programming. "Black/Urban"
represents Black and disco music combined. "Other" represents a variety of formats, including jazz, religious, nostalgia, Spanish, other ethnic
(except Black), and other/unknown categories.
Source: From Sterling and Kinross (1990. pp. 648-649).
>-'
--..J
172
I
TANKEL AND \VILLIA!>IS
vertiser relationship. Once rock music proved to be viable FM program­
ming, the practice of radio dictated a more controlled on-air format,
where the measurement of audience (quantity and quality) can be more
consistent. A former KMPX (San Francisco) employee noted in 1971,
"Even if [underground FM] was the most profitable format ever devised,
there was not going to be a big rush for it. It was anarchy on the air"
("Back above," 1972, p. 42).
The attraction of underground radio to its initial audience-a range of
musical content made possible by a loose structure-is similar to todays
college radio stations that program alternative music. This eclectic mix
quickly became the bane of the advertisers who were increasingly more
powerful as the FM band as a whole became more profitable (see Table
7.1). The original concept of underground FM was to program a wide
range of music for a small but diverse ·.~roup of people; the practice of
radio dictated programming a specialized range of music to attract an
audience well defined for the advertiser. For this reason, by 1973 (and
earlier), FM contemporary formats "were sounding like their AM coun­
terparts" (" Special report," 1973, p. 31).
THF. ROLE OF THE PRODUCER: OPPORTUNITIES IN THE
FM BAND
The popular music industry predates the appearance of recordings
(1877) and commercial radio (1922), although music, recordings, and
radio do exhibit a natural symbiosis. Hirsch (1972), Peterson and Berger
(1971,1975) and Denisoff (1973, 1986) have each described the func­
tioning of the popular music recording industry within the ebb and flow
of popular culture. The record industry constantly faces the conflict
between continual change in public tastes and the company's desire for
secure sources of profit. FM stations played music not played on AM
stations, affording a new exhibition mechanism for the record compa­
nies. These FM stations reached potential record buyers different from
AM listeners through the technically superior FM band.
Necessary to the financial well-being of the radio station is the
availability of programming, either recorded music from the recording
industry or programs supplied hy packagers and syndicators. The
opportunities presented by the increase in FM program services influ­
enced the recorded music industry (exemplified by developments such
as the introduction of the stereo 45 rpm single). The number of program
packagers and syndicators increased as the market for their services
widened. In particular, beautiful music stations, a staple of FM program­
ming from the pre-Nonduplication Rule era, were often automated
7.
RESOURCE INTERDEl)ENOENCE
I
173
(programmed entirely without on-air "live" announcers), a mode of
programming designed to accept prepackaged programs. Live (and
live-on-tape) rock concerts, which are compatible with many FM rock
formats, offered program syndicators an opportunity to supply rock
stations that traditionally programmed entirely in-house.
The case of underground FM and its interaction with the recorded
music industry Is illustrative of the resource interdependence created by
the Exhibitor/Producer relationship in the development of FM radio.
Underground FM was possible, at least in part, because of the existence
of recorded music that was not played on other forms of radio (such as
AM Top 40; Eberly, 1982). An unserved public already familiar wi: h or
sympathetic to a particular music makes offering that music as radio
programming a rational business decision. The underground FM stations
responded to market pressure by turning to record albums rather than
specific single releases, a reflection of the new dynamics of the music
industry.
The appearance of the new underground format created a mechanism
to market long-playing recorded albums by new artists or those not
played on AM. By the mid-1960s, major labels were signing under­
ground groups with the hope that their records would receive airplay on
progressive FM radio stations. For example, the Mothers of Invention
were signed by Verve (M-G-M) in 1966 and were able to sell 40,000
albums with minimal airplay. Labels such as Columbia (Moby Grape),
RCA (Iefferson Airplane), Capitol (Quicksilver Messenger Service, The
Steve Miller Band), and Warner Brothers (The Grateful Dead) began to
sign these, and other, unknown artists who had developed large public
followings based on public performances.
The new underground FM stations (such as KMPX-FM, later KSAN­
FM, in San Francisco, WMMR-FM in Philadelphia, WBCN-PM in Boston,
and WOR-FM, later WNEW-FM, in New York) offered this new recorded
music access to non-Top 40 AM radio audiences. Willis Duff, who was
associated with KSAN-FM (San Francisco's top progressive rock station),
recalled that underground FM radio stations set out consciously to
provide alternative music.
started out playing LP music that wasn't played on radio and parricularlv
on top-40 [sic] radio, hut that already had a known market for itself. The
groups were pulling enormous crowds, their albums were selling with no
help from radio exposure, and the music was therefore underground as far
as radio was concerned-it wasn't getting played. ("Special report," 1971,
p.48)
It
The musicians (Creators) were satisfying their immediate audiences
and were communicating through the wide-spread underground press
17.f
I TANKEL AND WILLIAMS
and by word of mouth. The major record labels (Producer) began to
emphasize aud expand the progressive rock aspects of their catalogues
simultaneou . to the Summer of Love in San Francisco (1967), the success
of the Beatie's Sgt. Pepper's Lonely Hearts Club Band (1967) and the
appearance of Underground FM (1966-7).
The influence of the underground FM programming strategy, and its
forma tted successors (such as album-oriented rock [AORJ) on the re­
cording ind.istry was profound. The need for programming on the part
of radio stations (Exhibitors) that would attract specific demographic
groups contributed to the homogenization of major record label re­
leases. While Producers do not REQUIRE the services of FM radio
stations as Exhibitors, the relationship exists nonetheless, as each one
attempts to rationalize its economic environment. The sonic attraction
(stereo) and social practice (listening to the music programmed) are
intertwined, and the initial success of rock FM is a rare example of
audience determining program content.
CONCLUSIONS
The shift in radio audience from AM to FM is clearly a complex scenario
that began when the sonically superior of two competing radio technol­
ogies (I'M) was suppressed by FCC (Authority) action prompted in part
by AM-based radio industry (dominant Exhibitor) economic and political
power. A change in the mood of the national polity (Public) influenced
FCC (Authority) to act to create a more diverse radio environment for
the audience (specific subgroups of the Public).
The policies of the FCC (Authority) altered the technical (sound
quality) and administrative (market structure) aspects of the radio
industry, allowing trends in popular culture to empower those FM
broadcasters (formerly weak Exhibitors) who recognized the capacity of
the newer technology to exploit those trends by attracting new audi­
ences to be sold to advertisers (Patron). The recording artists (Creator)
and their record companies (Producer/Distributor), empowered by the
audience segment that bought the new records (Public), offered the
resource (music) needed by the FM broadcasters (Exhibitor) to attract
new radio audiences in addition to those already listening to, but
underserved by, AM music radio stations. In return, the stations pro­
vided access to more audiences for the record companies and their
artists. The competition within the radio industry between technologies
could not .ichieve the desired equilibrium when one technology (FM)
was superior in transmitting (exhibiting) the primary program material.
Although this study was organized according to the concept of resource
dependence originally proposed by Gerbner (1969, 1973) and adapted
7.
RESOURU II\TERDEPENDENCE
I
175
by Turow (1984), the nonlinear nature of the economic dependencies
created suggests the concept of interdependence rather than simple
dependence.
A resource interdependence approach permits the examination of the
parts of an event in a framework that informs an economic analysis. The
ability of the resource interdependence approach to describe media
economics results from its inclusiveness and flexibility. The original
power roles identified by Gerbncr were enhanced and enlarged by
Turow; this study adds to the basic concept by demonstrating the need
to identify economic power roles and relationships within given histor­
ical and cultural contexts. The descriptions of how various participants
behaved when the Authority altered the programming environment
reinforces the concept of resource interdependence. There is no evi­
dence that FM would not have developed as it did without nonduplica­
tion. Anti-duopoly rules would eventually have separated the AM and
FM bands financially, possibly leading to the same result, or maybe the
sonic superiority of FM would simply have attracted larger audiences
through better promotional efforts. But, as described, the unique se­
quence of events that coalesced in the shift of audience from AM to FM
involved multiple interactions that together defined the economic
practice. The relationship between progressive (later, album-oriented)
rock music and underground (later, AOR formatted) FM radio stations
was a symbiotic relationship: The unequal nature of the relationship
(stations need records, while record companies have alternative forms
of exhibition) does not diminish its interdependence (stations need
records, to create exposure for records and audiences for advertisers).
Whatever the future of radio, this resource interdependence analysis
demonstrates the efficacy of using an analytical framework of some
complexity in order to illuminate the different relationships that consti­
tute mass media economics. Resource interdependence, by requiring an
accounting of all possible power relationships at a specific point in time,
illuminates the economic leverage all participants. The importance of
resource interdependence resides in its capacity to account for the role
of media consumption in economic analysis of media industries. For this
reason, the concept of resource interdependence can be useful in
describing the process of economic change in the mass media by
highlighting the interplay of technology, consumer preference and
economic power.
FOR FURTHER READING
Barnouw , E. (1978). The sponsor: Notes on a modern potentate. New York: Oxford
University Press.
1"76
I
TANKEL AND WILLIAMS
7.
Dcnisoff, R. S. (197"). Solid Rold: The jJOjmlar music industry. New Brunswick, NJ:
Transact ion !looks.
Frith, S. (19f "'). The Induxr rializatlon of popular music. In]. Lull (Ed.), Popular music in
comrn u nir ation (Pl'. ')3-77). Newbury Park, CA: Sage.
Inglis, A. F. (1990). Behind the tube: A history of broadcasting technology and business.
Boston, Focal Press.
Rothcnhuhkr , E. (19iJ7). Commcrc!al radio and popular music: Processes and factors of
tuflucncr. In]. Lull (Ecl.), Popular music in comrnnn icatitm (pp. 7iJ-9"). Newbury
Park, CA Sage.
Turow, J. (! ')iJ4). Media irutustries. The production of netos and entertainment. New
York: Lo 'gm:lI1.
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Duncan. J ! I. (19R9). American radio: Spring 1989 report. Indianapolis, IN: Duncan's
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Sterling, C. (1971). Decade of development: I'M radio in the 1960s.journalism Quarterly,
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17R
I
TANKEL A NO WILLIAMS
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NOTE: In addition to the specific references listed here, articles from the trade press,
particularly Broadcasting and Billboard, provided information about fM radio
II
1ustries and
actices