Ted,Rolley James is an 80-something-year-old woman who lives in Globe, Arizona. She owns and operates two radio stations from there: a commercial FM country station and an AM outlet, KJAA, at 1240 kHz that is really her own personal oldies jukebox. I've never heard any commercials on it (it's streamed online as well as the FM) and she certainly doesn't have any live and local personalities on it, just her own automated voice after every two or three songs identifying what the listener is listening to.
She also hosts an Internet only radio station called "The Rolley (or is it eye?) James Show," which is mostly her talking with guests, many from the broadcasting industry. A few years ago, I was listening to one of her shows on that internet-only station and I heard her relate the following story:
She was traveling by car in North Dakota. The weather was getting bad so she tried to find a radio station that might say how bad it was going to be (she thought that a tornado may have been coming). She couldn't find one so she drove on to the hotel as the weather was worsening. When she got to the hotel, she commented to the front desk clerk how she couldn't find out anything about the weather on her car radio when she was coming in. The clerk reached into his pocket, pulled out his cell phone, and explained this was how he kept track of the weather now. Any emergency weather statements were texted to him and an alarm went off on his phone when he received them.
The point of this story is that a lot of younger people believe they don't need radio anymore to get the information that you and I used to depend on it for. And that leaves nothing for radio but to provide a jukebox of sorts (or controversial talk programming) just to try to gain an audience. But, as has been noted by others, more niche-oriented (and sometimes customizeable) jukeboxes are available online that radio cannot hope to do over the air.
Where I think the youngsters have it wrong (and I say this as a 62-year-old totally blind person) is the belief that the Internet and cell phone service will always be there and available when needed. As noted on this and other threads, cell phone and Internet service are not available in some sparsely populated areas; in addition, it may be easier when under attack to stop Internet and cell phone service than to stop an over-the-air broadcaster. Finally, there is the raging battle between broadcasters, webcasters and the recording industry about the rates the former should pay the latter. It is possible that the rates could go so high as to make the possibility of niche formats on the Internet nonexistent.
Your story reminds me of a conversation I had with a friend yesterday, and one that comes up when talking to this particular friend every once in a while. She lives in Oswego, New York and talks frequently about the ice storm they got in April 2003. At the time, as is the case today, the Oswego stations, once locally focused, were simulcasting stations from Syracuse, some 40 miles away. Since the storm didn't affect that area, there was no mention at all of it on local radio. She has even interned at one of the stations supposedly serving Oswego, but when she confronts management about not serving the community, she is repeatedly told that if it doesn't affect Syracuse, we shouldn't talk about it. I have a hard time getting my mind around such a situation, as when we get bad weather, it generally affects the entire listening area, but if weather can be that drastically different in one part of your market from another, there should be some local coverage.
She knows there are a few local businesses that want to advertise on local radio but don't want to pay Syracuse rates. Whether those local clients would be enough to sustain a radio station, I have no idea, as I have no idea how many businesses there are or what they are in fact willing to pay. She believes a station could be viable, but then again this is the same person who would buy a 3 W day 2 W night station on 1240 Khz licensed to Wilkeson, WA. I can tell you right now that about the only viable path for such a station would be travelers information for those visiting Mt. Rainier National Park. People going there or taking their child to summer camp are the only ones who would go through Wilkeson, whose permanent population is about 500.