Radio One Analysis

Radio One Inc. is a company that was founded in 1980 by Catherine Hughes who had learned the radio business while teaching at Howard University. Catherine and her husband purchased WOL-AM in Washington, D.C. for just under one million dollars. Hughes changed the format from R&B music and public affairs to talk radio. To cut back on expenses the Hughes became radio personalities.

Expansion for Radio One began in 1987 when the Hughes' purchased WMMJ-FM in Washington for about $7.5 million and began broadcasting a new musical format targeting African-Americans. In 1992 and 1993, Hughes acquired four stations in Baltimore, Maryland, for $6.4 million and in 1995 purchased WKYS-FM in Washington for $34 million. Also, in 1995 Alfred Liggins lll, CEO and president of Radio One Inc., saw an opportunity to expand into the Atlanta, Georgia market. Liggins believed that the African-American population was growing and it presented a profitable opportunity. Hughes and the rest of the Radio One's board thought that the company should concentrate on the newly acquired stations. Liggins formed a separate company to purchase the Atlanta station for $5 million, and in June 1995 Radio One of Atlanta was introduced, WHAT-FM.

At the end of 1996 the Baltimore station WERQ-FM had attained a number one ranking, and the Washington station, WKYS, was ranked number two. By 1998 Liggin's Atlanta station was ranked number 4 and WHAT-FM affiliate and its sister station WAMJ-FM were later purchased by Radio One and became wholly owned subsidiaries of the company in 1999.

One of the reasons that the radio stations were doing so well was because of the corporate strategy that Radio One had adopted. Radio One targeted primarily African-American audiences in as many major markets as possible with urban-oriented music, entertainment, and information geared toward the African-American population. This was made possible by the FCC relaxing the existing regulations in 1992, which allowed one company to own two FM stations in one market or 36 stations nationwide(18 FM & 18 AM).

Why radio? Radio One found that the African-American population listened to the radio on average 24% longer than the general population. With the new relaxed regulations Radio One pursued a clustering strategy within each market by acquiring two or more stations that targeted different demographic segments within the African-American population. In my estimation this was a genius move on Radio One's part. This allowed Radio One to secure different segments all within the same area. For example, in Detroit, Radio One owns WDTJ-FM, which targets the 18-34 demographic, WDMK-FM which segments the 25-54 demographic, and WCHB-AM, a talk radio station targeting the 35-64 demographic. To build clusters throughout the country Radio One acquired under-performing stations in the top 50 African-American markets. Radio One now worked to cut costs and create efficiencies by centralizing certain functions. They centralized finance, accounting, the legal department, human resources management, information systems, & overall programming.

Radio One next worked to convert audience share ratings into advertising revenue. Historically African-American urban listeners targeted advertising dollars fell well below those of the general population. Radio One was able to use its multiple stations to sell more advertising by singling out the African-American market. Advertisers were not willing to pay as much to advertise their products and services to the largely African-American urban listeners because their income was not consistent with the general populations. Radio One was able to show advertisers that African-Americans did purchase more of certain goods & services than the general population despite their lower incomes. Radio One was also able to show advertisers that the African-American population was expected to grow 60% more than the general population and their income growth was expected to grow 150% faster than other races between 1980 and 1995.

Radio One is now looking at the possible acquisition of the 21 Radio stations that are for sale by Clear Channel, Davis Broadcasting, Shirk, Inc., and IBL, LLC.

Performing a S.W.O.T. analysis on Radio One, we found they have several strengths that would enable them to leverage their expertise to make this purchase successful in terms of profits and revenue. The executive team at Radio One is able to control costs associated with Radio Stations, by controlling most of the business from one location; finance, accounting, legal, human resources, and others. The programming is left to the local managers, but with oversight from the Vice President of Programming.

S.W.O.T. Analysis

Strengths

* Radio One, Inc executives are experts. They know the demographics of the African-American market and are able to use this knowledge to increase advertising income and ratings.

* Clustering strategy helped them to be effective with multiple stations in same region.