Clear Channel to Spin Off Units

Clear Channel Communications is the nation's largest broadcaster. It's also the world's biggest live concert promoter and the world's largest owner of billboards. But Clear Channel reported a 21 percent drop in earnings last quarter and the company has announced it will spin off its billboards and live entertainment businesses.

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Our business report clarifies the trouble at Clear Channel. Clear Channel Communications is the nation's largest broadcaster. It's also the world's biggest live concert promoter and the world's largest owner of billboards. But Clear Channel reported a 21 percent drop in earnings last quarter, and the company has announced it will spin off its billboards and live entertainment businesses. It is also tinkering with the sound of its radio stations, which are criticized as too corporate. NPR's Neda Ulaby reports.

Unidentified Man #1: Free, free radio, free...

NEDA ULABY reporting:

Clear Channel's critics are legion, and they're not shy about taking to the streets.

Unidentified Man #1: ...from rent control.

ULABY: At a recent demonstration against Clear Channel in San Francisco, protesters criticized the company for shutting out local voices and programming its Bay area stations with only corporate interests in mind.

Unidentified Man #1: Free, free radio...

ULABY: Free radio means old-fashioned radio. It's free to anyone who tunes in. The future of free radio concerns not just critics, but the president and CEO of Clear Channel, whose stock has been lagging for more than a year. Mark Mays spoke to policy wonks and Hill staffers last month in Washington, DC.

Mr. MARK MAYS (Clear Channel): I'm here to let you know that free radio, as we know it today, is at risk, and I'm here to say, in the strongest possible terms, that free radio needs the government to step up and step back.

ULABY: The subtext was satellite radio. Right now, it's a relatively minor threat with only about nine million subscribers, compared to free radio's 230 million listeners. Still, many in the broadcast world are worried, and industry analyst Sean Ross says free radio has been leaking listeners for years.

Mr. SEAN ROSS (Analyst): Not bleeding them, leaking listeners long before satellite got here.

ULABY: And people increasingly hear broadcasts by Clear Channel and other big companies are boring, says analyst Chris Stern.

Mr. CHRIS STERN (Analyst): I do an experiment when I go to new cities. I just go slowly from station to station to station and I count how many '60s and '70s songs I hear as I go across the dial.

(Soundbite of radio being tuned; music)

Group: (Singing) ...I can't get no...

Mr. STERN: And it's always four or five, and that tells you how stagnant programming is in radio where just everybody's playing the same stuff in every city, in every state in the country.

(Soundbite of music)

Unidentified Singer: I've got a love so deep...

ULABY: Stern says listeners are turned off not just by predictable music, but not enough music.

(Soundbite of music)

Unidentified Man #2: Let me try your shake.

Unidentified Man #3: Sure.

(Soundbite of slurping noise)

Unidentified Man #3: What do you think?

ULABY: Clear Channel has acknowledged broadcasting an average of 16 ad minutes per hour in the past. As of late last year, the company claims to have scaled them back by 20 percent on average on all of its stations. But fewer commercials mean less money. Clear Channel claims that cutting commercials has cut into profits. It reported significant drops in earnings every quarter this year, so Clear Channel wants to bring in more money by buying more stations, but it's prohibited by law from doing so, says analyst Chris Stern.

Mr. STERN: They're sort of tapped out there. They're at the top of the ownership caps set by the federal government.

ULABY: But the company's president, Mark Mays, wants that to change.

Mr. MAYS: We'd love to be, you know, unshackled from all sorts of regulations, public interest obligations, all those things.

Ms. LISA FAGER (Industry Ears): What do you mean, get rid of the public interest obligation?

ULABY: Lisa Fager is a media activist with the watchdog group Industry Ears. She says government regulates the free airwaves as a public trust, and she disagrees with Clear Channel and other big companies that contend an explosion of media has made radio ownership restrictions obsolete.

Ms. FAGER: This is not up for argument.

ULABY: Fager was there when Mays asked Washington policy-makers to consider relaxing ownership rules, a goal many observers deem unlikely. And Fager took issue with his claim that Clear Channel reflects the local markets in which it operates.

Ms. FAGER: And he kept using this one example that the KISS in Boston play list is totally different from the KISS in Los Angeles, but yet and still, I pulled both of those play lists, and they are identical.

ULABY: In fact, a comparison this week of a random hour found the two stations' play lists to be very similar, but not identical. A spokeswoman for Clear Channel says the company has 900 local program directors and 50 different formats, including classic rock, nostalgia, oldies and jamming oldies. Clear Channel has widened its reach to Hispanic listeners with such formats as Hurban and Latin oldies.

(Soundbite of music)

Unidentified Woman: (Foreign language spoken)

ULABY: The modern Clear Channel came into being five years ago when the company bought a concert promotions business called SFX that had consolidated the industry. By further combining radio stations with billboards and promoting everything from rock concerts to Broadway shows to demolition derbies, Clear Channel hoped to create perfect synergy.

Mr. STERN: It didn't quite work out that way.

ULABY: Analyst Chris Stern.

Mr. STERN: Advertising your radio station on your billboard and then taking that billboard and advertising the venue didn't necessarily create the kind of revenues that they were hoping to, that these were all actually kind of separate businesses, and they all had their own lives and that you had to treat them that way.

ULABY: But Clear Channel still sells more tickets than any other company in the world. Gary Bongiovanni is editor in chief of Pollstar, a magazine that tracks the concert industry.

Mr. GARY BONGIOVANNI (Pollstar): In the first nine months of this year, they reported selling over 21 million tickets worldwide. The number two player is at five million tickets.

ULABY: All those tickets don't necessarily translate to profit. Bongiovanni says the company's problems came from its desire to dominate the market, by outbidding competitors for acts, rather than focusing on the profitability of individual shows.

Mr. BONGIOVANNI: Oftentimes, that resulted in, at the end of the day, not selling enough tickets to make money.

ULABY: A Clear Channel spokeswoman said that's not true. The company is keenly aware of profitability. Still, this month, Clear Channel sold 10 percent of its outdoor advertising business, and it announced last April it plans to unload the rest, along with its live entertainment business. Late last week, Clear Channel got a little extra encouragement to do so. Senator Russ Feingold of Wisconsin introduced legislation that will limit a company's ability to own a radio station and an events promoter in the same market. The bill will also take on payola, something Congress has tried and failed to address in the past few years, and it's an issue Clear Channel has faced before.

The company has cut ties to independent record promoters and fired two station employees after an industrywide investigation by New York state Attorney General Eliot Spitzer. That investigation is ongoing, and observers expect Spitzer to release more findings within weeks.

Neda Ulaby, NPR News.

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