Clear Channel reported first-quarter earnings of $47.9 million, or 9 cents a share, down from $116.5 million from the year-earlier period. Revenue for the quarter fell 4.3%, to $1.9 billion, from $2 billion for the same period last year.
Concet revenue down, outdoor up
The company’s concert revenue dropped 17% due to sluggish ticket sales and its radio division, which makes up the largest share of Clear Channel’s total revenue, slipped 7% as the market adjusted to its commercial inventory-cutting strategy dubbed "Less Is More." (Clear Channel is trying to get marketers and their agencies to condense commercial length from the traditional 60 seconds to 30 seconds.) Clear Channels outdoor unit saw revenues gain 11%, mostly driven by pricing.
It might be for that reason the radio giant, which has 1,200 stations in the U.S., is looking to cut ties with the CC Entertainment unit and trade the CC Outdoor division as a separate stock with an initial public offering of a 10% stake. Clear Channel will still hold a majority interest in the outdoor unit.
The move comes on the heels of other media company deconstruction announcements. In March, Viacom announced plans to divide CBS, Infinity Broadcasting (a Clear Channel radio rival) and the outdoor advertising division into one company, and its cable assets, including MTV, Nickelodeon and VH1, into another. Liberty Media, meanwhile, has been looking to spin off its Discovery Networks cable assets.
Mark Mays remians CEO of the San Antonio-based company, and Randall Mays will remain chief financial officer in the separately traded outdoor company; Paul Meyer, who currently heads Clear Channel’s North and South America outdoor assets, will become global president and chief operating officer. Former entertainment head Brian Beckert has resigned, and Randall Mays will take over as head of the entertainment unit while the company searches for a new CEO.
“It’s clearly just a transitional [role],” Randall Mays told shareholders during a morning analyst call. “We have unbelievable strength and depth in the management of this buisness. We don’t think we’re going to miss a beat.” The company hopes to have the new CC Entertainment CEO in place before it sells the unit. The compnay gave no timetable for the impending sale and partial IPO.
Investing in outdoor technologies
The company has been devoting capital to new outdoor technologies, investing in digital networks in New York and Cleveland. Clear Channel’s international outdoor assets will also be part of the separately traded outdoor company.
At the earlier year-end earnings call, John Hogan, who heads Clear Channel Radio, had warned radio had been pacing down 5.6%; the first quarter finished down 7.1%. However, he said today he was encouraged by recent developments.
“To put some context around our continued improvement, this is not just about cutting commercials but about reinventing our business,” he said, citing February as the toughest month of the quarter. “The ratings we are beginning to get, we can’t make those go any faster. The winter book has begun to come this week and we’re encouraged by them. In our top three markets we saw very strong ratings performance and that was partly driven by Less Is More. ... In April we were running 35% to 40 % less commercial time than our competitors. Advertsiers will notice that.”
Embracing shorter spots
He cited automotive and telecom as two categories that have embraced the commercial pod-cutting strategy and Verizon and Home Depot as marketers that have shifted their ads from 60-second to 30-second commercials.
Mr. Hogan also addressed the effect of Howard Stern’s departing to satellite radio at the end of 2005.
“We dealt with that issue last year and we have moved past it,” he said, referring to last year’s decision to drop Mr. Stern from its stations. “I think it’ll present some real challenges for those companies that have them. But with every challenge there’s an opportunity as we have demonstrated. We’ve found new shows, new alternatives, and I think that will be the same for the companies that still have that.”