FOR WILLIAM SAUNDERS, DEREGULATION OF THE AIRWAVES HAS BEEN A DISASTER. The 68-year-old entrepreneur toiled in the radio business for more than 30 years. He had been part owner of Charleston, South Carolina-based WPAL-AM since 1971 and, by 1985, had taken control of the entire station. Earning a modest profit over the years, he bought an FM sister station in 1994 to add a younger demographic to his listener base. That's when his troubles began.
Saunders needed to upgrade his new acquisition in order to make the AM/FM combo work profitably, but he could only borrow $125,000 of the $200,000 needed to improve the transmitter and other equipment. To make matters worse, he got the money under horrendous terms. "If I paid them for the rest of my life, I would never have paid off the note with the way the interest rate was structured," he says, "but it was the only capital that I had access to."
As his debt service ate into his profits, the 1996 Telecommunications Act was passed and things got even worse. The legislation eliminated the 40-station nationwide ownership limit, and permitted broadcasters to purchase up to eight radio stations in large markets and five in small markets. Large radio broadcasting conglomerates began acquiring independent stations in dusters, setting off a wave of consolidation that is still going on today. As a result, the radio advertising market is controlled by a small cadre of mega-broadcasters, which offer advertisers packages that include millions of listeners across several radio stations at discounted rates. The effect on independent station operators is devastating. "[Before 1996] I would make up to $500,000 per year in revenue on the AM station alone," Saunders says. "After 1996, even though I had two radio stations, I could barely sell $400,000 [in advertising] per year. Every place where we had solid advertising commitments before was gone."
Unable to pay his loans, he was forced to sell his AM station in 1998 to Clear Channel Communications, the nation's largest broadcaster. In 2001, he met Judith Aidoo, a Harvard-trained investment banker who listened to WPAL as a child. She agreed to pay some of the debt on the remaining FM station in return for part ownership. But when the transmitter building burned a week after signing the agreement, she assumed flail control of the station because Saunders could no longer fulfill his financial obligations. Looking back, he concedes: "It was clear [when I initially got help] that I wasn't going to be able to come up with the money needed [to keep control of the station]."
GET BIG OR GET OUT
Since the passage of the 1996 Telecom Act, bigger has become better in the radio industry. In 1996, Clear Channel was the largest U.S. radio broadcaster but owned only 86 stations. Today, it's a 1,200-station behemoth with 6.3% of its stations (76 stations) targeting black and urban audiences. The next three largest conglomerates are Cumulus Broadcasting, with 280 stations; Citadel Communications Corp., with 206 stations; and Infinity Broadcasting, with 180 stations. Collectively, these companies reach a majority of black and urban listeners with their programming.
While large broadcast companies have benefited, deregulation has been a nightmare for black-owned broadcasters, creating an ultra-competitive environment that has forced many out of business. According to Kofi Ofori in his report, Badio LocalMarket Consolidation and Minority Ownership, in 1991 there were 173 minorityowned broadcasters. By 1997, however, that number dropped to 169, and by 2001 was down to 149. Simply put, the day of the single-station owner is over. Aidoo reinforces this sentiment by stating: "If black people continue to lose those properties [minority-owned stations], the likelihood of us ever regaining them is next to none."
What does all this mean for you? The trend impacts African Americans on a number of fronts. First, it has undercut black entrepreneurship in radio broadcasting--an area that gave rise to a segment of BE 100s companies over the past three decades. Today, the largest black-controlled radio broadcaster is Radio One, a former BE 100s company and 2000 Company of the Year. In order to grow and stay competitive, Radio One eventually reduced its ownership stake below 51% in a series of public stock offerings. It also...