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RADIO DAYS ALL OVER AGAIN?Today's wannabe Web stars can learn from the past -- 75 years, to be exact
How should small fry best divine their place in this digital future? They might look for clues in the analog past, where seven decades ago a covey of technology-minded entrepreneurs scuffled with giant enterprises for control of the first mass medium: radio. Guess who won? There are dozens of parallels between radio's toddler years and these early, head-spinning days of the Internet. Both media were born of government experimentation, both quickly became the obsession of young gearheads turned entrepreneurs, and both went on to enthrall the public (as much for their promise of business riches as for their consciousness-altering powers). Most amazing, perhaps, is the perseverance of the earliest and most powerful radio titans -- AT&T (T), GE (GE), Westinghouse (WAB), CBS (CBS), and later, ABC. Today the descendants of these behemoths, along with other huge media concerns, are scooping up stakes in portals, the most valuable Web publishing properties. If the history of radio is any indication, this should be a warning to starry-eyed entrepreneurs. For it was the ability of the giants to construct strongly branded, advertising-supported radio networks -- radio portals, if you will -- that eventually pushed out hundreds of small and innovative (if sometimes kooky) broadcasters. DAIRY HOUR. To best understand the days of radio, you have to look back to 1919, when United Fruit (now Chiquita (CQB)), General Electric, and Westinghouse pooled their radio patents to form Radio Corporation of America, which manufactured radio transmitting and receiving equipment. By the early '20s, RCA was the dominant force in the new medium, controlling the major patents for the vital vacuum tube. To further drum up demand, the company operated a New York broadcasting station, though it had yet to form a nationwide network. Even while RCA's power spread over the radio industry, an eclectic stream of small-time broadcasters laid their claim on the local radio waves. By the end of 1922, some 576 stations crowded the ether. And with minimal government regulation, their owners displayed a hodgepodge of expertise and motivations. Some aired educational programs from universities, others put on religious talks, while still others carried out their mission from dairies, funeral homes, and newspaper offices. Because unabashed advertising was still socially taboo, most stations ran at a deficit. But many operators believed that whether profitable or not, they were securing a stake in a new future. If nothing else, a well-run station might eventually lock in a general audience and find a way of supporting itself through voluntary audience subscriptions. Is this starting to sound familiar? No surprise, given that '90s Web geeks and '20s "wireless" tinkerers share a similar profile. Just as some Web techies have a good Internet inspiration but lack the business acumen to make it fly, so did some of radio's pioneers air commercially stagnant programming. Those who think the Web is full of junk might take solace in the opinions of one 1920s observer who called radio the work of "parlor boobs, hopeless pupils of honorless music teachers, [and] quack health doctors." In late 1926, RCA upped the ante with the formation of the first wide-scale advertising-supported network, National Broadcasting Co. By linking via affiliates with the most powerful transmitters, the company was able to guarantee advertisers huge domestic audiences. NBC even offered advertisers a choice -- breaking its network into two separate operations, the general-audience Red and the more upscale Blue Network (which later, under antitrust rules, was sold off and became ABC). With the formation of NBC, many of the conditions that helped foster the emergence of the smallest entrepreneurial broadcasters began to change. Broadcasting, which until then had rarely been a profitable, budget-conscious endeavor, suddenly moved to an advertising-supported model that favored size and brand loyalty. With ad dollars in hand, NBC, and soon CBS, were able to increase their offerings of big-name talent and build the public-relations structures that promoted those performances. Combined with the powerful transmitters of affiliated stations, the networks overran small fry with well-financed, high-service programming. Of the $60 million in radio advertising spent from 1926 to 1930, about 80% went directly to the networks. MIND GAME. Fast-forward to 1998, where the top 25 Web sites control 75% of the Net's advertising dollars, according to the Internet Advertising Bureau. While the costs of maintaining a Web site are undoubtedly less than those for erecting a radio-transmission tower, that doesn't mean it's a cheap proposition. Just as early radio-network outfits vied for the valuable but scarce resource of radio spectrum, so do today's Net outfits struggle for "mindshare" -- a commodity that's won almost exclusively with the old reliables of cash, staying power, and brand name. "People say there are no limits to channels on the Internet," says Alfred Balk, a Syracuse (N.Y.) journalist who is writing a book about radio. "But that's not the limiting factor here. The real limits are how to get through to people and get their attention." As barriers to commercial entry rise, the Internet begins to resemble a traditional medium, says Peter Petrusky, director of the Entertainment & Media Group at Price Waterhouse Coopers. Petrusky likes to compare the fate of the Internet to that of the "narrowcasting" of cable television. Even under that model, things don't bode well for cash-starved entrepreneurs. It took ESPN six years, and USA Network eight, to reach profitability. And those outfits were funded by a deep-pocketed cast that included Time (TWX), Paramount, MCA, and ABC. "If you look at the early stages of any ad-supported media, most of the revenues will always follow the largest-reach vehicles and the best brands. There's only so much ad revenue out there," says Petrusky. Perhaps, then, it's no accident that the very veterans of the radio wars -- ABC (now part of Disney (DIS), which has a stake in Infoseek (SEEK)), NBC (via its partnership with Microsoft (MSFT) and its stake in Snap!), and Westinghouse (with its CBS Sportsline and Moneywatch sites) -- are beginning to understand the power that brand recognition and market share can bring to their Web operations. 'NEW FORTUNES.' It was these same companies who virtually dominated radio in the 1930s. From 1928 to 1932, network advertising outlays increased an average of 67%. And by the end of 1935, the networks were firmly entrenched, with 700 of the 850 stations that existed having become network affiliates. For the most part, independent broadcasters -- who pursued their individual visions of on-air education, public service, or offbeat entertainment -- began to fade away. The demise of these tiny stations was tied, in part, to government overhauls of the broadcast spectrum. But those deliberations were influenced largely by the growing political weight of the networks. "The Internet is obviously creating some new fortunes," observes Robert W. McChesney, a University of Wisconsin communications professor who studies media history. "But heading on the current trajectory, the Internet is not going to replace existing media. It's going to be incorporated into existing media empires." No doubt, the current wave of Net entrepreneurs will bring plenty of fresh ideas to the marketplace. But the rules of the game are already beginning to favor companies with the biggest names, the deepest pockets, and the most swagger. Look at the "portals" of the past, and you may see a blueprint for the future.
By Dennis Berman in New York RELATED ITEMS
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Updated Aug. 27, 1998 by bwwebmaster
Copyright 1998, by The McGraw-Hill Companies Inc. All rights reserved.
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