Like most economic situations, there isn't any ONE thing you can point to and say "that's why radio is unprofitable today".
In fact, a lot of radio IS profitable, still...it's just not profitable enough. I suppose that segues nicely into the one thing, if you could say there is one thing, that is the "root cause" of radio's problems: publicly-traded companies owning the stations. As has been mentioned, Wall Street cares about one thing and one thing only: growth. If you ain't growing, your stock tanks. Worse, if your every move isn't targeted towards encouraging growth, your stock tanks. And if you don't always work towards making your stock be worth more, you actually can be sued because you're under a legal obligation to deliver the most value to your shareholders.
Of course, often you personally are a big shareholder, so anything to pump up that stock price is good because it makes you rich while you're at it.
This creates a mindset that led to several of the factors we can point to as "problems with radio":
- The TelComm Act's deregulation of ownership was the easiest path for these companies to achieve phenomenal growth.
- While acquiring these stations led to massive debt loads, it didn't matter because you could always get more credit to buy more stations because buying more stations meant your stock kept going up and up, thus serving as collateral for more credit.
- The consolidation allowed for national-level operations and thus more resources could be selectively targeted in high-value markets, thus increasing earnings even more.
These factors alone would inevitably lead to radio's collapse, because there is no such thing as a workable model for unlimited growth. Sooner or later there HAS to be a contraction...or a crash. What hastened things along spiritedly was mostly due to the rise of the internet. That led to a drastic reduction in operation costs as you could use computers to reduce staff dramatically, and increase productivity of the remaining staff. Of course, in their all-out sprint to maximize growth for Wall Street, most radio companies took that concept WAY too far...but I digress.
The internet also gave rise to the MP3 algorithm, and high-speed internet available in the home. Those suddenly stripped radio of its exclusiveness as purveyor of music to the masses. That took what would be a serious problem and made it into a full-blown crisis. Worse, radio's (and the music industry as a whole) remarkable lack of adaptation led to an entire generation of children growing up thinking radio barely existed...much less was a relevant force in their lives. The ramifications of that were due to be felt eventually...I think the pain of this recession will "mask" that generational impact; it's quite possible that as the rest of the economy recovers over the next few years, we'll see radio continue to stagnate as nobody bothers to "come back" to a dying medium. Certainly newspapers will face that reality nose-to-nose...who knows if they'll successfully adapt?
I have heard several whispers from people...nobody in a position to know for sure, but whispers nonetheless...that before the year is out we'll see some of the bigger companies pushing an Obama-run FCC to re-regulate the AM/FM market and put the ownership caps back to some degree. The reason why is that in exchange for it, companies that fragment themselves get their debt load forgiven. A lot of these places could still be perfectly profitable, even with the recession mauling ad revenue, if they didn't have a crushing debt load.
After all, it doesn't matter if you make millions of dollars in revenue when you've got billions in debt!
