With so many mobile apps focused on streaming music, curated playlists, and podcasts, it may seem like radio is a dying industry in the U.S. This actually couldn’t be further from the truth. According to some reports, radio has the largest reach out of any platform in the U.S. with 244 million monthly users. For comparison, Facebook, which is widely regarded as the most popular social media platform, has 255 million monthly users spread between the U.S. and Canada.
You know what that means: The more eyes, the greater the ad money, and that’s not limited to terrestrial or satellite radio broadcasting. Even better, the internet has made launching a radio station easier than ever. As it stands, internet broadcast stations (or terrestrial and satellite radio stations with streaming options) have watched their revenue soar thanks to the web. You don’t even have to be one of the big guys to cash in. In 2020, local radio stations saw their digital ad revenue grow 25%, the fastest growth in eight years.
So, how do you start a radio station? It depends on the kind of radio station you want to make. All stations are highly regulated by the FCC and require specific licensing. This guide can help you get started.
Like stand-alone podcasts, radio stations make most of their money from advertisers. In other words, they’re notably more lucrative in times where ad spending is soaring, but they’re often met with financial struggles during recessions and other economic downturns. Digital radio is currently having a moment, and digital radio advertising is a market that’s only expected to grow.
Even without the ad money, radio is important for both leisure and information purposes. The types of podcasters and broadcasters who choose radio as a career do so because it’s personally fulfilling. It’s their passion, but content largely determines revenue. In 2018, the Pew Research Center found that the average station revenue for all-news radio stations in the U.S. was more than $18 million.
Before you get started launching your own radio station, you need to decide a type of radio station. There are three:
- Terrestrial radio, what you typically think of when you listen to AM or FM radio stations in your car
- Satellite radio
- Internet radio stations
Keep in mind that the market for the former pair has shrunk by about 4% over the last five years, while the market for web radio has grown.
Beyond that, launching a radio station isn’t particularly expensive in the grand scheme of startups, but it does take some specialized licenses, equipment, and know-how. This checklist can help you tick those boxes prior to your launch.
1. Create a Business Plan
The first step of starting any business, including a radio station, is crafting a solid business plan. Business plans don’t just attract investors or help you secure loans, they can help put entrepreneurs on a path to financial stability. When you create your radio station business plan, you may want to:
- Think about your overall business idea. What kind of radio shows will you have? Are you launching a small online radio station with a couple local podcasters or a local FM station, or are you planning to compete with major commercial radio stations?
- Define your target audience. Who is your listener and what kind of radio content will interest them? Are they into politics, music, news, or sports? You may want to run a market analysis to get a better hold on potential consumers.
- Choose a location, particularly if you’re broadcasting via the air waves.
- Identify potential problems (Can I cover startup costs? How do I take on part-time employees? etc.) and ways to solve them.
- Create a plan to attract advertisers and build relationships because this is how your station will likely make money.
- Search for tax breaks and local grants.
If you want more in-depth guidance about building a winning business plan, consult our complete business plan guide.
2. Choose Your Radio Station Business Structure
All businesses need to have a business structure, both for operating and tax purposes. It’s the main way the IRS decides how to handle your tax returns, and it’s often a prerequisite to obtain the necessary licenses.
Most small or startup radio stations opt for LLCs or sole proprietorships, while larger radio stations like iHeartMedia and other Fortune 500 companies, choose to incorporate. For these purposes, we’ll give you a rundown of the two former structures. In most states, it’s simple to convert your LLC to a corporation as your business grows.
LLCs are one of the most popular small business structures in the U.S. because they allow business owners to avoid the so-called double taxation of corporations by passing through income to their personal return. They also offer a limited amount of liability protection, are relatively quick to file for online, and have minimal fees and paperwork compared to other structures with the same protection.
Sole proprietorships are taxed similarly to LLCs, but they don’t have the same liability protection, which means business owners can run into trouble in the event of a bankruptcy or lawsuit. Whatever you choose, you may want to consult an accountant or lawyer for advice before you file.
3. Determine Your Business Costs
The cost of launching a radio station largely depends on the type of radio station. The largest startup expenses come from engineering fees (which can range from $500 to $3,000 to get on air), studio equipment (which can range from $5,000 to more than $100,000), and transmitting equipment. This can include an Emergency Alert System (EAS) and an FFC-accepted LPFM transmitter. Both generally cost around $3,000 and $3,500, respectively.
Overall, internet radio stations often have the lowest cost, whereas you can launch a low power FM (LPFM) radio station for under $15,000 upfront. Month-to-month, you may be able to swing by with just under $1,000 of expenses. It all depends on the type you choose.
Commercial radio stations are the costliest, but most radio stations have the same recurring fees as any industry: rent, utilities, and wages.
To determine your business costs, add up your one-time expenses and your recurring costs. Don’t forget to factor in things like taxes and license fees, though a LPFM license application is free.
How do you fund your startup costs?
Depending on the business model, launching a radio station may be cheap enough that business owners can forgo a loan. In this case, a low or no-APR business credit card is an option. If your costs exceed a few thousand dollars, you may also want to look into a small business loan, which you can obtain through a bank or the Small Business Administration (SBA). Remember that these carry interest.
You can also search for a grant. The SBA can help you find qualifying grants, which can provide a helpful injection of cash. If all else fails, you can reach out to friends and family for financial backing, but that can put tension on relationships down the line.
Need more information about figuring out startup costs? This helpful guide will walk you through business cost calculation and more.
4. Create a Name for Your Radio Station
The name of your radio station is how people will know your business, so it should encompass your brand. The right name does wonders for brand recognition and word of mouth. The wrong name can get in the way of success.
Think of a radio station name that can easily be recognized on social media and is available for domain registration. Before you choose, make sure your name isn’t taken by another business or you may face legal repercussions. You can check with your local business registration services just to be sure. Want a simple radio station business name and a flashy name for the actual station? Look into setting up a DBA name.
5. Register Your Business and Open Financial Accounts
After you’ve raised the funds and have your idea completely nailed down, you’re going to have to do the paperwork. This includes:
- Registering your business structure
- Obtaining an employer identification number (EIN) from the IRS
- Getting the proper insurances (including general liability insurance and worker’s compensation if you have employees)
- Opening a business bank account
- Obtaining the proper licenses.
In addition to a business license, which you can get through your local municipality, you’ll probably need some specialized licenses from the FCC. At the time of this writing, they’re not accepting paper applications and only take applications during a licensing window. You can keep checking back on the FCC’s website to find out when the window is open, but it varies year-to-year. During the window, you can file an application online.
Internet radio stations don’t need an FCC license, but all stations that play copyrighted music do need to obtain a license from a performance rights organization (PRO) such as BMI, ASCAP, and SESAC. Many PROs offer specific licenses based on the type of station (i.e. Internet radio vs. LPFM), but most stations opt for a blanket license that isn’t limited to one PRO.
6. Purchase Radio Station Equipment
Starting an online radio station requires little more than basic recording and editing equipment including broadcasting software and condenser microphones, but broadcast radio requires some extra tools. This includes a fully compliant EAS and radio transmitter that’s approved by the FCC. Depending on the scale of your operation, you may also need to construct a tower. To get a better idea of the type of equipment required, you can visit the Prometheus Radio Project website.
7. Market Your Radio Station
Marketing is a crucial step for any business, but particularly a radio business. You may want to develop a comprehensive social media plan that includes your radio show hosts and guests for extra reach. If you’re running an online radio station that requires members to subscribe, you may want to offer a trial membership. Some radio stations choose to enact a solid SEO campaign that includes publishing blogs about breaking political or celebrity news if they’re covering current events.
All radio stations have to choose the method that their broadcasts are delivered — whether it’s through terrestrial airwaves, satellite, or the internet, but the content has an unlimited number of options. Some stations cover local news and politics, others play different genres of music like rock, pop, classical, or jazz. Some radio stations offer educational content. The sky’s the limit.
The radio business is a relatively low-risk endeavor because of the low startup costs. You may want to first test the waters with your own podcast or radio show, but expanding to create a full-on radio station isn’t a pipe dream. It just takes a modest budget, some paperwork, and a bit of ad sales know-how.
1 All prices and services presented above were reviewed and verified as of 11/2/19.
2 The Starter plan is $49/year the first year and increases to $119/year after that
3 This chart does not include state fees because those will vary in each state.
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