Christopher Dahl was no stranger to the radio industry. The Harvard Business School graduate
got his start in 1986 when he created a broadcast group made up of nineteen radio stations in
the midwest and Hawaii called Community Airwaves. After a few years learning the ins and outs
of the world of radio, Dahl had an idea. See, there was no shortage of specialty radio.
Were you into sports? Country music? Talk? Oldies? Whatever your cup of tea was, there
was likely a radio station out there to tune into. Yet up until that point children’s
programming for radio was more or less an afterthought. Some stations across the country
offered small blocks of children’s entertainment, but that was about it. Dahl saw a gap in the
market. So in 1990 Dahl rolled the dice and created the Children’s Broadcasting Corporation,
and with it he set out to prove that a dedicated children’s radio network was a viable business
idea. He would be proven right, and yet it would cost him everything.
Host: There’s one radio station in America where an oldie might be defined as anything
recorded before 1990, and that is because the oldest member of the management team is
only 14 years old. Watch this...
In 1992 the Children’s Broadcasting Corp, or CBC, formally launched Radio Aahs, the
first national network that was exclusively dedicated to radio programming for children
under the age of 12. Their flagship station, WWTC-AM in Minneapolis featured everything
from music, to news, to live shows. The airwaves were populated with a blend of children’s
music as well as family-friendly pop music. A listener might hear a duet by Kermit the
Frog and Miss Piggy one minute, only for it to be followed by Boyz II Men’s “Thank
You” the next. Short news segments aired seven times each weekday and four times on
weekends and aimed to present real current events in a way that children could understand.
DJs, sometimes children themselves, would run trivia contests focused on education rather
than pop culture throughout the day for small prizes.
When Radio Aahs was introduced to the world it wasn't a national phenomenon. It didn’t
blow everybody away. However from a content perspective it was considered fairly successful.
Kids and their parents were tuning in and it looked like there was a future for CBC to grow.
Host: What does Radio Aahs mean? A A H S right?
DJ: Well I kind of thought- I never really heard, but I always thought maybe it meant
like a sigh like “finally”, like “finally we have kids radio”
Host: Aaaah
DJ: Right
However financially things were a different story. The CBC went public that very same
year, but there was a lot of uncertainty surrounding the business model of the network. Radio,
as an industry, was mostly supported by advertising revenue. The common belief at the time was
that targeting advertising at kids wasn’t really effective, because as it turns out
kids under 12 usually don’t have a lot of money to spend. It was thought that targeting
the parents of those children was the better route to go. Beyond that, the money that was
spent on children’s advertising was focused on television, which was the much more popular
medium. Arbitron, the company at the time that was used for collecting demographic data
on listeners for advertising didn’t even bother collecting data for listeners under
12. They were deemed unimportant, and so there was literally no information for the entire
market that Radio Aahs was trying to monetize, and that made selling ad space on their network
especially difficult. To add to those complications, CBC understood that they had a responsibility
to maintain an ethical ad policy, considering their primary listeners were impressionable
kids. That meant capping ads at ten minutes every hour, turning down ads that were deemed
too violent or mature, and limiting ads such as fast food or soda commercials. It created
a persistent question as to whether the market was worth going after at all.
Yet, Radio Aahs kept growing. Like many new companies, they had no expectations of being
profitable right away. They believed that by committing years towards polishing and
expanding their programming, the advertisers would eventually follow and in the long term
children’s radio would prove to be a viable market. CBC would eventually introduce a live
musical event called Kidstock, which would take place four times a year and attract crowds
of up to 10,000. They would also introduce a publication called Radio Aahs Magazine,
which ran about 80 pages and featured interviews, music and movie reviews, and a CD or cassette
with that month’s top songs from the station. In 1994 Radio Aahs introduced two new weekly
live shows that seemed like the perfect partnership, considering their target audience. Every Saturday
listeners would get to tune into Disneyland Live, and every Sunday listeners would get
to hear radio personality Jammin’ Jo Jo report live from Walt Disney World.
By 1995, Radio Aahs had grown, and was broadcasting to enough affiliate stations across the country
to reach 30% of America. Yet they were still operating in the red, but there was hope that
1996 would be their first profitable year, and it would be thanks to a promising new partnership.
That December CBC began negotiating a partnership with ABC Radio. At that point ABC Radio’s
network consisted of over 1,000 radio stations, and their advertising sales division accounted
for nearly 40% of all radio ad spend in the country. This was exactly the kind of partner
that the CBC was looking for. They’d have the resources to help Radio Aahs grow, and
they’d have the industry experience to make it profitable. Under the partnership, CBC
would pay ABC Radio $25,000 dollars a month
and in return ABC Radio would assist with research, marketing, and promotional
support. Additionally, they’d serve as Radio Aahs’ national ad sales representative,
which would be a key factor in turning things around financially. And to top it all off,
ABC Radio was in the process of being acquired, through their parent company ABC, by The Walt
Disney Company. The Children’s Broadcasting Corporation was about to start working with
an industry titan, and that titan was about to be purchased by another kid-friendly company.
It was perfect.
As planned, the two organizations worked together to do more market research into ways to improve
Radio Aahs. That information, under the normal terms of the agreement, was considered confidential.
More importantly, that information was contractually only supposed to be used for the purposes
of the agreement, in other words helping Radio Aahs. It made sense too. Radio Aahs was paying
ABC Radio a lot of money for that kind of exclusivity. It would throw off the value
of the deal completely if ABC Radio could just turn around and sell that data to a competitor.
As it turned out, however, selling the data to a competitor would be the least of their
worries. On July 25th, ABC Radio reached out to CBC and informed them that they were exercising
their right to terminate their partnership. ABC Radio was their hopeful meal ticket to
profitability, so investors were naturally worried. The announcement of the end of the
deal hit CBC hard, knocking their stock price down from $7 a share to nearly $5. Just a
few weeks later ABC Radio and Disney announced that starting that fall, they’d be testing
a new project in four markets across the country. It was a 24-hour radio network dedicated to
children’s programming called Radio Disney.
Radio Disney, we’re all ears!
[Radio Disney song]
Narrator: Hey Minneapolis-St. Paul! Radio Disneys on the air! The cool new station on
AM 1440.
Radio Disney, we’re all ears. Radio Disney!
Radio Disney first hit the airwaves on November 18th, 1996. Their primary studio was located
in Dallas, Texas but they were broadcasting to test markets in Salt Lake City, Atlanta,
Birmingham, and Minneapolis, which was also the home city of Radio Aahs. The airwaves
were populated with a blend of children’s music as well as family-friendly pop music.
A listener might hear A Whole New World one minute, only for it to be followed by the
Macarena the next. Short news segments such as ABC News for Kids and ESPN Sports for Kids
aimed to present real current events in a way that children could understand. At night,
the station would switch over into what they described as an “audio night light”, and
would play lullabies and other soft sounds to help kids who might have trouble sleeping.
The Children’s Broadcasting Corporation, understandably unhappy, sued Disney.
The initial lawsuit, filed at the US District Court in Minneapolis, alleged that ABC Radio,
serving as CBC’s national ad rep and partner, used confidential information gained during
their partnership to develop Radio Disney in an effort to take over the children’s
radio market. Members of CBC claimed that ABC and Disney executives who visited and
partook in meetings after the acquisition, did so solely to gather as much information
as they could before backing out of the partnership to work on Radio Disney. While the details
weren’t public at the time, which is common for a lawsuit, it was estimated that CBC was
seeking upwards of $25 million in compensation. They were also seeking an injunction that
would bar Disney from launching Radio Disney, but were unsuccessful.
Overnight, Radio Aahs was in trouble. Not only had the partner that was supposed to
finally bring them financial stability abandoned them, but they started their own competing
children’s radio station. To top it all off, that partner had just been purchased
by The Walt Disney Company, an absolute unstoppable powerhouse when it came to children’s entertainment.
It was terrible.
Radio Aahs was backed into a corner. Sure, they sued, but lawsuits could take years and
cost millions. In the meantime, there was nothing else they could do but try to compete
with Disney. Radio Aahs, quickly pulled their two Disney park-based shows off the air, and
struck up a deal with Universal Studios that would allow them to air the same program from
Universal Studios Hollywood and Universal Studios Orlando. CBC still struggled financially,
but with Radio Disney just competing in four test markets, they were able to continue running
Radio Aahs into 1997.
By that May, Disney announced that they were pleased with the response of their Radio Disney
test, and that they would be moving forward with a national network. ABC Radio Networks
accounted for over 2,800 radio stations nation-wide by that point. And in some cases, local radio
companies who owned ABC affiliates also owned Radio Aahs affiliates. If push came to shove,
who would they support? The relatively new startup that hadn’t found a financial footing
yet? Or the industry titan that now had the backing of Disney? Furthermore, if you were
a potential advertiser looking to spend money on children’s content, where would you go?
Radio Aahs, or the brand tied to Mickey Mouse?
In June of 1997 CBC announced that they were planning to sell their thirteen owned and
operated radio stations. Radio Aahs would still be produced and broadcast out to their
20 remaining affiliate stations, but they could no longer shoulder the financial burden
of running their own. As expected, CBC blamed Disney’s entry into the market for the situation.
When Radio Disney was preparing to launch a station in LA, they promoted the event by
sending 10,000 Mickey Mouse shaped pencils, each with Radio Disney branding, to 18 different
elementary schools in the area. They also went on to sponsor educational events across
the country. Radio Disney was able to sway affiliates and win over new listeners while
Radio Aahs struggled to find a buyer for their stations that they were selling just to stay
afloat. It was a battle they felt they had to fight, but it was ultimately one they simply
couldn’t win.
In November of that year, CBC threw in the towel and announced that they would be ending
Radio Aahs. The program would formally end on January 30th, 1998. Though their story
as a company doesn’t end there. They planned to use the money from the station sales to
pay off their debts before acquiring a company called Harmony Holdings Inc, which was a TV
commercial production company that they already owned 42% of. In a somewhat poetic twist,
they were exiting the world of radio to move into the world of producing advertising, the
one thing they constantly struggled to get.
In the Fall of 1998, after Radio Aahs had been defunct for nine months, Children’s
Broadcasting Corporation finally got their day in court with Disney. In actuality, it
was about 4.5 weeks in court, and after over four days of juror deliberation, the jury
found that ABC Radio failed to perform under the strategic alliance they joined into, and
improperly used confidential information to develop and launch Radio Disney. As it turned
out, the estimated $25 million that CBC was rumored to be demanding was closer to $177
million, but the jury ultimately just awarded them $20 million.
That following January, a federal court judge in St Paul overturned the ruling, claiming
that there ultimately wasn’t enough evidence to prove that ABC Radio damaged CBC, and pointed
out that CBC was already in financial trouble before the partnership had even begun. CBC
now partially counting on that payout to help move forward as a company, committed to appealing
the ruling. By that spring, after over a year of failed attempts, CBC managed to sell their
13 owned and operated radio stations. As planned, they paid off their debts and used the remainder
of the 66+ million dollars to buy out Harmony Holdings Inc. In an effort to kick off the
year 2000 with a fresh outlook, they renamed the merged company from the Children’s Broadcasting
Corporation to Intelefilm, reflecting their shift away from Children’s Radio and into
commercial production.
Radio Disney, on the other hand, was flourishing. The national network had grown to 50 affiliate
stations across the county, more than Radio Aahs ever had. More importantly, their ratings
those previous few years were boosted by the resurgence in the popularity of teen pop music.
Groups like the Backstreet Boys and N’Sync, as well as singers like Britney Spears and
Christina Aguilera meant that kids across the country were tuning into the station.
And with many of those pop sensations getting their start at Disney with the Mickey Mouse
Club, it made it even easier for Disney to work with them, hosting concerts at Disney’s
theme parks, and arranging contests for listeners.
In April of 2001 the 8th Circuit Court of Appeals finally looked at Intelefilm’s lawsuit
against Disney, and decided to set aside the initial verdict. They decided to set a
new trial that would focus solely on the monetary damages of the claims. Over a year later,
the court once again sided with Intelefilm, but this time lowered the amount awarded to
them from $20 million down to $9.5 million. Disney, without any hesitation, filed motions
to have that $9.5 million further reduced, arguing that they didn’t cause that much
damage to the company. Just as quickly as Intelefilm had won for a second time, they
found themselves having to fight for their winnings.
That fight ended up costing them, and in June of 2002 Intelefilm began to cut their workforce
to help finance their continued lawsuit against Disney. SEC filings revealed that the company
only had 11 employees at this point, so it was assumed by the public that the significant
cut in workforce meant that Intelefilm was reduced to nothing more than a shell company
that was left around to finish the lawsuit. Luckily for Intelefilm, that following fall
would bring closure. They not only won the money they were awarded in the trial, but
were also awarded an additional $2.5 million in prejudgement interest. Yet that same fall
would bring more closure, as that would be when they would finally file for bankruptcy.
Over the following two years they would use their winnings to pay off debts and liquidate,
paying shareholders 32 cents per share. After an eight year long battle, Intelefilm had
finally won, and yet there was nothing left.
Today, Radio Disney is still around and has moved on from the AM airwaves to become a
multi-platform radio network. The station reaches over three million listeners every
month through their app, website, and satellite radio. They’ve even started a second station
dedicated to country music called Radio Disney Country. Entering their 24th year, Radio Disney
has proven that there was indeed a market for dedicated children’s programming. It
was a point that the Children’s Broadcasting Corporation set out to prove before being
pulled into battle. Ultimately Radio Aahs won that battle against Disney, but it was
a Pyrrhic victory that cost them the war. Then again, many might argue that it was a
war they never stood a chance of winning to begin with. And really, that’s the brutal
nature of the world of business. Sometimes fights aren't fair and sometimes foes play
dirty. Radio Disney’s legacy was built upon such a battle, and like many battles before
it, it might find itself lost to history.