ABSTRACT
Some people doubted there was any way to make listeners pay. In 1922, Herbert Hoover, then Secretary of Commerce, declared: “Nor do I believe there is any practical method of payment from the listeners.”1 Others assumed that radio transmissions would eventually be funded by paying subscribers, but no one could devise a method for limiting broadcasts to subscribers’ receivers. Consequently, some believed the government would have to provide the service. In 1922, Popular Radio magazine claimed that radio was “essentially a public utility” and discussed using city telephone wires to sell broadcasts to subscribers-in other words, providing radio service over the phone:2
So what happened? Did private businessmen throw up their hands and invite the government to run the industry? Was society denied the benefi t of radio because no one could solve the free-riding problem? Of course not. The problem was eventually resolved in 1922 when AT&T discovered it could make money by selling radio advertising airtime. In hindsight, it’s hard to believe that private radio almost died in its infancy because people couldn’t fi gure out how it could make money. And it’s a good thing that the government decided not to turn radio into a subsidized enterprise, since it is highly unlikely that the state would have distributed payments as effi ciently as advertisers do.
