Reorientation of the US Radio Market - An empirical analysis of ownership and concentration changes after the 1996 radio market deregulation

Abstract

In this paper I theoretically and empirically study the effects of radio ownership structure on revenue and station distribution across radio markets after the 1996 deregulation of the radio market in the US. I find that market expansion by radio owners has been more significant in large markets compared to small markets with respect to revenue between 1997 and 2000, and in rich markets compared to poor markets between the two time periods, also with respect to revenue. Moreover I find significant concentration in the market nationally both with respect to revenue and stations. However, I find no statistically significant change in local concentration between the two time periods. When regressing relative C1-C3 market shares on the number of stations in local markets, I find that the largest firms decrease their market shares relative to the rest of the owners in the markets. Finally, I find that incumbents have been more successful at product differentiation than entrants. This may be due to the nature of the radio market, which is characterized primarily by large fixed costs, close to zero marginal costs, and great economies of scale and its product, which is characterized by repeated sales. These market features enable incumbents to pre-empt entry and expand into new markets more effectively compared to in a normal goods industry.