Part of why people left AM for FM in the 70s was that a lot of the big AM stations were rigidly top-40. Trying to figure out how to successfully do a traditional top-40 format in the 70s the way music tastes were splintering was difficult. You had FM stations with jocks that could play whatever they wanted and a lot of rock groups got a lot of airplay on FM sticks that hadn't on AM because they didn't have a top-40 single (Led Zeppelin, for example).
There was not problem for Top 40 in the 70's. Lots of stations did very, very well in that decade, ranging from WABC, 13-Q, KLIF, KFRC, KHJ and WLS and many, any other AMs at the beginning of the decade to the new crop of FM's like WPGC (which transformed from AM in the very late 60's), Y-100, WMYQ, WDRQ, KSLQ and lots of others.
In fact, some markets were overburdened with Top 40 FMs and there was a fallout in the later 70's. But, while the monolithic AM top 40 format of the later 50's and 60's generated spin-offs into AC and Album Rock, the format was still quite solid with plenty of stations in the top 5 of their markets.
And the "play whatever you want and light up a joint" formats died with Lee Abrams technified Superstars variant starting to roll out in the '73-'74 period
I've talked to a ton of people who made the transition from AM to FM in the 70s and I don't really ever hear anything about sound quality. It was usually because that's where the music they wanted to hear (rock) was being played.
No, it was not.
The first decade or so of FM growth was the 1967-1977 period following the requirement by the FCC to cease most simulcasts. But all those "new" stations competing for the same quantity of dollars meant that the FMs had more limited revenue. So many made a point of doing just 8 minutes of ads an hour to try to pull AM dollars.
The biggest FM format in the 70's was Beautiful Music. It was based on four 2-minute stopsets an hour or a total of 8 minutes. Nearly all FMs in that period did the same in some form or another.
If you go back and look at ratings, while rock stations that were well done did well, the format was neither dominant nor a majority choice.
And then the AMs flipped to talk formats because the top-40 thing didn't go well. A lot of young FM stations came in and wiped the proverbial floor with the "old guard" who were mostly AM.
The AM flips to talk were not part of a mad rush away from music. Ones like KABC and WGN were generally progressions from the death of MOR. It was not, somewhat, until the 80's that talk grew, enhanced later by the removal or relxation of the equal time / fairness FCC restrictions.
In many cases, AMs that "went talk" were former MOR or Top 40 stations that saw their formats either fade away or move to lower commercial load FMs.
Take Pittsburgh. KQV was THE place for music from the late-50s until the early 70s. In '73, one of the other AMs in town flipped to top-40 and did it better than KQV did at that point. KQV was struggling to adapt to changing music trends in the early 70s. Much better. And KQV had ABC behind it. Within two years they were a full-time news station.
And 13-Q had Cecil Heftel and Bill Tanner and an incredible air staff and a much better signal. Heck, even that upstart Top 40 FM with Bob Pittman as PD could not deal with 13-Q.
Signals made all the difference in Pittsburgh, which really only has one full AM signal. Normbob tried a Wixy clone on 1360, and due to signal it failed. In fact, they original WIXY in Cleveland, also "blessed" with a horrible signal, pretty much died by the early 70s when Top 40 FM hit the Mistake on the Lake.
So I don't think it's just the fact that it's AM. The real problem is that programming young people would be interested in hasn't been on AM in half a century. Even in the late-70s, teenage guys wanted rock. And that wasn't getting played on the top-40 AMs.
You are giving vastly too much importance to rock.
On FM, album rock began in the late 60's as combo owners had to create separate programming but did not want to eat the audience of their AM stations. Rock and Beautiful Music were the easy answers, but not the only ones. Top 40 migrated to FM, as did country and R&B (Urban) and by the later years of the decade several Spanish language formats appeared as did transitory ones like disco.
And, except in a few markets, those free-form rockers were replaced or marginalized by Superstars (or imitations) tight playlist rock hits formats.