Market power in radio markets: An empirical analysis of local and nationalconcentration

The Telecommunications Act of 1996 contains provisions that allow increasin g levels of concentration in local radio markets. Debate has focused on whe ther allowing greater concentration of broadcast media resources into fewer hands is a sound public policy. One fear of regulators is the effect of in creased concentration on the market power of radio stations. Concentrating on intraindustry variations, this paper systematically assesses the link be tween radio station profitability and market concentration. The underlying assumption of the empirical analysis is that sale price (or present value) of the radio station includes the present value of future profits. The resu lts do not support a strong relationship between increases in concentration and the profitability of radio stations, although we find group ownership to increase efficiency.