How Do Radio Stations Make Money?

By Sam Williams ; Updated September 15, 2017
Radio has been shaping society since the 1920s.

Radio stations have evolved since the invention of the wireless. In radio's early days, families gathered around the radio to listen to sports, to dramatic stories re-created for the ear instead of the eyes and to music that you could only otherwise hear at a concert hall. Since then, the formats of radio stations have become as diverse as the listening audience. The one thing that remains constant is radio stations' ability to re-invent themselves and continue to generate income.

Commercials

Corporations pay radio stations to air their commercials. The first recorded payment for airtime was a 10-minute commercial by real estate company Hawthorne Court in 1922. Radio is a medium of choice for corporations because it appeals to everyone. In the book "The Radio Station: Broadcast, Satellite and Internet," Michael C. Keith says that radio "reaches 95% of the African American and Hispanic community each week. Working women account for nearly 60% of radio listeners. Radio is still a huge draw for men for sports news"

Subscriptions

Satellite radio stations charge their listeners a subscription fee. The fee can be paid annually or monthly. Listeners pay for premium content with few or no commercials. Howard Stern is the most famous Satellite Radio celebrity, and some media observers speculated that his movement to satellite would forever change radio. It didn't pan out the way analysts predicted. Internet radio stations often follow the paid-subscription model, but some merge it with donations.

Donations

The first 20 channels of the FM dial are generally reserved for colleges and noncommercial radio. Author Keith writes that 60 percent of their funding is by member donations. Listeners and community businesses donate money to keep these stations on the air. To generate donations from listeners, radio stations and programs have to provide the listeners with quality content they can't get anywhere else.

Grants

Grants are also available for public broadcast stations such as National Public Radio through the Corporation for Public Broadcast (CPB). The CPB was created by Congress in 1967 to promote public broadcasting. In the "Guide to Government Grants Writing," Harriet Grayson writes that the National Endowment for the Arts may offer radio stations grants if stations can prove that they provide "humanistic content and employ humanistic methods as well as contribute to the study of humanity as it reflects on our diverse heritage, traditions and history."

Sponsors

Sponsorship is a method of advertising without selling. At the end or beginning of a radio show, an announcer will tell listeners that, "This show is sponsored by ABC Corporation." This announcement is less than 15 seconds and doesn't go into detail about product or service offerings that the corporation may have. This style of advertising links the sponsor with the content of the show or the host; therefore, companies that sponsor radio programs must be aware of branding or image complications. Same goes for the radio station.

About the Author

Sam Williams has been a marketing specialist and ad writer since 1995. He has been published in magazines such as "Reaching Out" and "Spa Search." He served in various sales and marketing positions with major corporations such as American Express, Home Depot and Wells Fargo. Williams studied English at Morehouse College.