Does Public Radio Compete with Commercial Radio?

"...public broadcasting does crowd out commercial broadcasting in the larger markets when it comes to classical music. There is much less competitive impact with jazz."

The radio holds a fond position in contemporary American culture. According to NBER Research Associate Steven Berry and Faculty Research Fellow Joel Waldfogel: "Radio signals are pure public goods whose total value to society is the sum of their value to advertisers and listeners." In Public Radio In The United States: Does It Correct For Market Failure Or Cannibalize Commercial Stations? (NBER Working Paper No. 6057), they note that since broadcasters can capture only part of their product as revenue, there are reasons to doubt that the market will provide the right amount of radio broadcasting. Hence, radio is a rich context for revisiting the classic economic problem of under provision.

The radio business in the United States clearly is dominated by commercial broadcasters. But the private sector competes with government-supported public radio in a limited number of programming formats: news, jazz, and classical music. In this study, the authors ask: Do public and commercial classical stations compete for listening share and revenue? And, is public radio filling an unmet need, or is it crowding out commercial providers?

Berry and Waldfogel find that public broadcasting does crowd out commercial broadcasting in the larger markets when it comes to classical music. There is much less competitive impact with jazz. Nor do public and commercial news programming seem to be substitutes for one another. "Although the bulk of government support for broadcasting goes to public stations in markets without commercial competition, a third of public funding of stations airing jazz and classical music programming is allocated to public stations in the markets which would be served by similar commercial programming in the absence of public broadcasting," the authors conclude.

The authors have gathered information on entry, programming, and listening for stations in 165 major U.S. markets. Their data on commercial stations primarily comes from the Arbitron Company and Duncan's American Radio. Their information on public radio comes from five sources, including the Radio Research Consortium, the Corporation for Public Broadcasting, and National Public Radio. They divide the market into population quintiles, with the smallest markets below 245,500 and the largest over 1,197,2000. Only in the larger markets does the issue of potentially duplicative public support exist.

Berry and Waldfogel take great care to emphasize that their research doesn't address whether public funding of radio is wasteful or whether the government should allocate less money toward public broadcasting. Answering these questions, they say, would require more research into the degree of similarity between public and commercial programming. It would also mean developing a better sense of the value listeners in different markets place on public broadcasting.