Penny Fractions: The Day the Radio Died

Hello, hello, I’m so excited for this week’s newsletter but a quick programming update: I’ll be taking next week off for the Fourth of July holiday in the United States, so my next newsletter will be on July 10th. I also wanted to say thank you so much to everyone for reading so far this year, this work is so much fun to do and I’m excited for the second half of 2019! Now, let’s talk about the history of American radio, government regulation, the Telecommunications Act of 1996, and contemporary concerns over music streaming legitimacy.

Over the last couple of years, there’s been raised attention around the potential fraud that could be happening in the streaming space. While there’s always been a bit of doubt around the legitimacy of record sales numbers, the fact that streaming doesn’t involve direct payment for a product has proven to be susceptible to questionable behavior over the years. This has ranged from accusations of Spotify putting “fake artists” on playlists, people intentionally playing tracks to get boosted payouts, and perhaps the most alarming of all, Tidal is still facing charges for inflating the number of plays for Beyoncé and Kanye West back in 2016. 

The number of loopholes in the system is pretty alarming for a business worth tens of billions of dollars, yet so far the industry’s response has been to raise a stink but shuffle it away in hopes of people simply forgetting. Earlier this year, I devoted a couple of newsletters towards this topic and shared my own frustration around the fact that simply re-adjusting the allocation of money isn’t enough to really tackle many of the issues that continue to arise from the music streaming model. That’s why this week I wanted to give a little history lesson on the Telecommunications Act of 1996, which helped establish modern regulation around media in the United States. 

Bill Clinton, who signed the bill on February 8th 1996, said on the day of signing: “This law is truly revolutionary legislation that will bring the future to our doorsteps,” and “In the world of the mass media, this Act seeks to remove unnecessary regulation and open the way for freer markets.” I wish, oh how I wish he wasn’t so right. Before I fully dive into the Act, I want to talk through the earlier days of media regulation on a medium closely connected to the hearts of music fans: radio.

The Clinton era of deregulation was the last betrayal of the early 20th-century radio regulation. The last major law passed in this space was the Communications Act of 1934, which was signed by Franklin Roosevelt to establish the Federal Communication Commission and solidified many of the regulatory ideas of the Radio Act of 1927. The basis of these acts dates back to the early days of radio in the United States where amateur broadcasters were competing over completely unregulated airwaves. This would mean that channels could overlap and the more power behind one’s signal, so too was their potential audience. However, much of this happened amongst youths with endless free time and adult hobbyists. The earliest real battle over the future of this emerging medium didn’t happen between private and public interests but rather between government sectors. The Navy commandeered the usage of radio during World War I and didn’t want to lose control over this powerful new mode of communication, but the Post Office and the Commerce Department also thought they had claims to the airwaves. Eventually, Warren Harding, then president, made a reluctant Herbert Hoover the Secretary of Commerce and placed the radio into his hands. 

By the early 1920s, there were millions of radios in the United States and commercial broadcasts started to find a way into American homes. In these earliest days, Herbert Hoover held a strong skepticism towards what advertisements might mean for radio. He said during this era: “The reader of the newspaper has an option whether he will read an ad or not, but if a speech of a President is to be used as the meat in a sandwich of two patent medicine advertisements, there will be no radio left.” Even if Hoover wasn’t able to protect radio from the market, the government’s close eye on radio helped establish its early direction of wanting to provide news, music, and educational material for listeners and not just for-profit entertainment. The Communications Act of 1934 codified the direction of radio as a medium that was open to markets but also one that wouldn’t become an unregulated space for deep-pocketed individuals to shape the message of what was received by the American people.

The passage of the Telecommunications Act of 1996 created Hoover’s nightmare. Almost immediately, consolidation began taking place across industries and within a couple of years even larger companies started swooping into these markets. The results were dire for established industries like cable and radio, which were already trending in this direction. Yet, the outcome was even worse in emerging industries like wireless internet and broadband, where as many as four companies could own up to 80% of the entire market. Clinton’s promise of increased competition within a decade was hard to see when observing the landscape. 

Drilling down on the 1996 Act, it allowed for cable and telephone companies to consolidate across markets, while at the same time eliminating the caps that existed on just how much one company could own. The idea was to allow these then-smaller companies to grow and prosper but, unsurprisingly, as companies rapidly grew rapidly there was nothing to reign in further consolidation. This created fresh oligopolies across multiple mediums. 

The effects on radio are probably most familiar to most readers. Clear Channel, now iHeartMedia, was able to go on a buying spree of radio stations in the late 90s and thus began to swell in size. Numerous issues started to arise: reportedly over 10,000 jobs were lost due to the elimination of radio staff jobs, there was a rise in the homogenization of radio programming, and an increased financial peril that was faced the company. The paper “The Impact of the Telecommunications Act of 1996 in the Broadband Age” written by Hanglong Fu, David J. Atkin, and Yi Mou discusses how the act helped push towards radio financial ruin in the 2000s:

The paper also helps contextualize why music streaming, and the internet, arose without such regulatory guidelines. While it took nearly a century for radio to become an unregulated wild west of corporate greed over the public’s interest, that’s where the internet started when it entered the mainstream in the late 90s. The number of internet providers always remained highly concentrated and even though Microsoft faced antitrust pushback in the late 90s, since the 2000s the reign of Facebook, Google, and Amazon has gone completely unchecked. The idea that platforms that reach billions of people could exist completely outside of the government’s close regulatory watch would’ve been unimaginable to Hoover’s activist government agency.

The last fifty years shows the record industry also isn’t too unfamiliar with such consolidation. The results of record label mergers and acquisitions by multinational firms now leaves standing only Universal, Sony, and Warner with the conglomeration of indie record labels under Merlin. Yet the oligopoly that is far less considered is between Apple Music, Spotify, YouTube, and to an increasing degree, Amazon. The 1996 Act set the foundation for new media to rapidly devolve into only a few powerful firms. 

The effect of there being two oligopolies that control the distribution and production of an entire medium often makes the issues that do arise feel inevitable. The artists and workers within these ecosystems are such afterthoughts that it can be easy to forget what it might look like for music (record labels, streaming services, radio stations, live music, etc.) to not be owned by only a few select groups. It honestly surprises me that the contemporary music streaming business model, which pays out propositionally with only a few companies in the game, hasn’t led to more issues thus far. Yet, reviewing this history shows that solutions might exist. 

My preference is what I wrote earlier this winter: completely pulling music streaming off the market, let the government subsidize music streaming and allow local communities to establish norms for other modes of music consumption such as physical music and live shows. Still, as I continue to research and learn more, I want to offer a few more incremental steps that could address these fairly important existential issues around the future of music streaming. 

1st: Establish government audits of music streaming services. When Rolling Stone is printing headlines that say “Fake Streams Could Be Costing Artists $300 Million a Year” part of me wants to be sure there is no chance of ignoring such a potential threat to how music workers are being compensated. The reason is that even if that headline number is inflated, there is still the very real issue that music streaming’s way of collecting royalties means that if a few percentage points were altered in a pay period, it could harm all those paid through the platform (from musicians, songwriters, producers, and all the way down). That’s a pretty long list of potential people harmed that are effectively trusting two pairs of multinational, billion-dollar companies to play fair. 

2nd: This idea borrows a bit from 2020 Democratic nominee Elizabeth Warren by breaking up music streaming platforms away from its parent companies. A report claimed that Apple Music might potentially be worth $15 to $20 billion, but similar to YouTube and Amazon, these are massive businesses that could, if one could look at their finances, be money pits that exist on the largess of their respective parent companies. This could force many of these streaming services to actually provide truly unique products without endlessly playing copycat. The insanely high barrier to entry established by each oligopoly (major labels and tech platforms) limits the number of companies that could ever dream to step into this space. If the record industry wasn’t able to squeeze millions out of tech companies and the venture capitalists backers, then is the music industry in a strong enough place to support itself?

Tim Ingham at Music Business Worldwide offered a number of potential ways to address concerns over streaming fraud but most fell into the categories of corporate self-regulation, which would only help this issue on the margins. There is very little debate about ways of radically or even moderately fixing these potentially major issues found within music streaming. Artists and music industry workers should start to consider more deeply whether it is best for an entire industry to exist under a few companies which can cause an infraction that trickles down to hurt everyone connected on the platform. American, and certainly European, history shows that workers within these industries don’t need to be completely at the mercy of corporate giants. If there are million dollar problems at the core of the industry, then maybe it’s worth thinking of solutions to match the scale of the problem.

Right now, the members of the Baltimore Symphony Orchestra are locked out from their jobs by management in an effort to get them to sign a terrible contract to cut their salaries by as much as 20%. The lockout appears to be ongoing at the moment, so if anyone is looking to offer any support to these workers, check out their Twitter account. American orchestras offer rare opportunities for musicians, which though competitive, can provide stable work. The last decade has remained constantly under threat across the country and Baltimore, and this is just the latest example of this trend of whittling away at these cultural institutions.

That Glitchy Music Video on YouTube? It’s Getting an Upgrade - The New York Times 

I wish record labels invested some money into digital music video archival work that didn’t just involve uploading music to YouTube, but this is still nice to see. 

Spotify Says It ‘Overpaid Most Publishers’ Last Year, Taking CRB Discount for Family Plans - Billboard 

Just in case you’re ever wondering how much Spotify loves music in 2019, the answer is certainly less than how much they’re trying to recoup from songwriters right now.  

Should Spotify pay songwriters and publishers the same amount as it pays artists and record labels? - Music Business Worldwide 

To answer the headline: yes. Songwriters need more money and the pockets being picked should be the middleman tech platform and not fellow artists. 

Facebook’s plan to break the global financial system - The Guardian 

Daniel Ek, a very important man prone to saying wonderfully stupid things, recently spoke about Facebook’s Libra, of which Spotify is an early backer. He posited that it could be used as a way for fans to pay artists directly. Now, unless Ek’s never experiences music outside of Spotify, this would certainly be one of the most under-thought comments I’ve read in a minute. However, if you’d like to see a far more likely outcome of Libra, please read Evgeny Morozov, who dives into how this new shift for the company is used both to drum xenophobic fears of China and to evade concerns over advertising profits. Two birds with one stone, as they say. 

The BS-Industrial Complex of Phony A.I. - Gen (Medium)

Most stories about “artificial intelligence” are hogwash meant to inspire either fear in workers or dreams of future profit for venture capitalists. This piece does a great job of breaking down just how quickly this largely marketing-driven story took over the tech press. 

Lil Keed - Long Live Mexico / Lil Nas X - 7 (Reviews) - Pitchfork 

I wrote a lot today but don’t sleep on the fact if you, yes, you want to know anything about how deeply the internet is shaping rap culture, you must read Alphonse Pierre.

The Penny Fractions newsletter arrives every Wednesday morning (EST). If you’d like to support it, check out the Patreon page or follow it on Twitter. The artwork is by graphic designer Kurt Woerpel whose work can at his website. The newsletter is copy edited by Mariana Carvalho, with additional support from Taylor Curry. My personal website is davidturner.work. My current job is Curation Analyst at SoundCloud, so all thoughts here represent me, not my employer. Any comments or concerns can be sent to pennyfractions@gmail.com.