Clear Channel to Spin off Concert Unit, Reports First-Quarter Profit Drop

[NNN0LHI]

http://ap.tbo.com/ap/breaking/MGB3UZQH48E.html

SAN ANTONIO (AP) - Clear Channel Communications Inc. on Friday unveiled plans to split up its media empire by spinning off its entertainment business. The nation's top radio broadcaster also said profit fell by more than half in the first quarter.

The company also plans to sell 10 percent of its outdoor-advertising unit in an initial public offering, and said it will pay out a special dividend of $3 per share to investors and raise its quarterly distribution by 50 percent, beginning July 15.

Following the breakup, Clear Channel Entertainment - which puts on concerts and sporting events - will have more flexibility as a separate and "largely unregulated" public company, Clear Channel said.

[Moderator]

1. kick to combine

[Up2Late]

2. Clear Channel Sets Spinoff, IPO of Two Units (Reuters)

:woohoo:(WooHoo! It looks like the un-official Clear Channel boycott IS working!) (or is it official?) :applause:

Clear Channel Sets Spinoff, IPO of Two Units

Fri Apr 29, 2005 05:31 PM ET

NEW YORK (Reuters) - Clear Channel Communications Inc., the largest U.S. radio station chain that has been facing falling audiences, on Friday said it will spin off its unit that produces live entertainment and sell about 10 percent of its outdoor advertising business in an Initial Public Offering. Clear Channel will also make a $1.7 billion special payout, or $3 a share, and raised its quarterly dividend by 50 percent. "They're jettisoning their worst-performing business -- concerts -- which is a marginal contributor to profit, and they're issuing a dividend," said analyst David Bank at RBC Capital Markets. "It's hard to see any downside..."

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...Clear Channel's debt ratings moved a step closer to junk status on Friday as Moody's Investors Service and Fitch Ratings both said they were considering cutting Clear Channel after it announced its plans to dismantle its media empire. Shares of Clear Channel have fallen by about 26 percent over the last year, as it has lost advertising dollars to the Internet and lost listeners to satellite radio services and digital music players such as the iPod. EARNINGS DISAPPOINT...

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...Clear Channel said it continues to see more pain in the second quarter, with ad sales pacings -- an indication of radio station sales trends -- down 5.5 percent, including noncash trades. The company said it has little sense of when the advertising business would resume growth...

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..."Revenue, cash flow and earnings all clearly missed already impaired growth expectations," said Stanford Financial Group analyst Frederick Moran. "Management is doing the best job they can to offset the poor fundamentals but first-quarter growth and second-quarter outlook are below expectations and represents a real overhang on the stock." Radio advertising sales fell by 7 percent to $773.6 million, while outdoor advertising sales rose by 11 percent to $579 million. Sales of the live entertainment unit, which produces arena shows like Bette Midler and Britney Spears, fell 17 percent to $424.5 million...

[warrens]

7. This is great news for artists

Clear Channel was on its way to dominating the live music industry, and it was able to pressure top acts to play its venues by threatening airplay.

Once the spin-off is complete, we should pressure the new business to get rid of anyone from the Clear Channel days. I'm willing to bet that they plant to retain a large stake so they can pull strings to keep the benefits of monopoly while avoiding the downside.

[AP]

3. IMO, Clear Channel should be textbook lesson in how monopolies don't work

especially with industries where consumer fickleness means that people just won't buy your product if it bores them.

CC's business plan basically revolved around the idea that there was too much diversity in the music industry. If you reduced by 20% the choices, and if you kept hammering home the music you chose to succeed, you'd make more money with guaranteed success of the chosen few, then the hit and miss of having a wide selection. (In other words, CC wanted to cut out R&D and force feed people the stuff they chose.)

But what happened? The lack of diversity bored people right out of spending money on music and spending time listening to the radio. The lesson: diversity at the margins is great for the middle. If you let other radio stations, concert promoters, concert venues, and record labels win every once in a while, you keep your entire industry strong and increase the market for your own wares.

[Up2Late]

4. I can't believe so few are checking out this post

Must be the boring headline.

Let me ask you, I know you post a lot of stuff in LBN.

Do you, or have you ever, reposted something later that you thought didn't get enough attention in LBN, In a different forum, with a "Better" or more attention getting headline?

[LifeDuringWartime]

5. ha

awwww too bad for clear channel. all they have to do to get their customers back is to charge reasonable prices for concerts. it's really that simple.

[NewJeffCT]

6. wow, on top of their $4 billion loss last year

things are not good these days for them.

[DearAbby]

8. Awwwww My Heart is soaring like an Eagle!

This is great news!

[cascadiance]

9. With profits down, they probably needed to get more cash...

... to be able to buy up XM as part 3 of the global plan to shut down Sirius and then for them to own satellite radio as well to finalize their monopoly of the radio business. The concert business was too much of a distraction from this goal.

Note this quote from one of the articles above:

"Clear Channel said the spin-offs will result in greater fiscal muscle for future acquisitions, because the separately listed stocks will provide clear valuations of the two units."


Step 1 was floating the trial baloon rumor earlier that had XM merging with Sirius, which was denied by Sirius, which failed to get that to happen.

Step 2 was to alienate "Clear Channel rejecting" liberal users from Sirius by getting XM to get a monopoly on Air America radio a few weeks ago.

Step 3 is to have this extra money to be prepared to buy up XM when Sirius goes in the tank or reconsiders merging with XM.

Without the extra money and losing money the way they are doing now, it might be harder for them to do a hostile (or non-hostile, depending on the circumstances) takeover of Satellite Radio business.

[Up2Late]

10. Who REALLY controls XM? also, check this out from Forbes.com

Sirius Satellite Set For 'Stellar 2005'

04.29.05, 2:33 PM ET

<http://charts.prophet.net/servlet/ChartServer?symbol=SIRI&width=200&height=140&price.display=1&duration=1d&interval=5&frequency=0&scheme=blugray&barsofar=1&price.display=1&service=Forbes>

Bear Stearns maintained a "peer perform" rating on shares of Sirius Satellite Radio (nasdaq: SIRI - news - people ) after the company reported favorable results for the first quarter. Sirius reported yesterday morning net subscriber additions of 305,000, compared with Bear Stearns' forecast of 262,000. "Sirius' first-quarter results exceeded our expectations on all key metrics, which we think sets the stage for a stellar 2005," said Bear Stearns. "Given that Sirius' supply issues are behind us, the automobile manufacturers are accelerating deployment, and the launch of new products based on the upcoming 3G chipset with enhanced functionality and features and lower prices, we are confident that Sirius would continue to increase its subscriber base at a fair clip." The research firm lowered its year-end price target, however, to $6.50 from $7.50. "We underscore that the change to our target is merely a reflection of the adjustment in our DCF parameters and not a reflection of our thoughts on the company's reported quarter, guidance, or prospects." Bear Stearns said "key upcoming potential catalysts" for Sirius will be the expansion of rollouts by DaimlerChrysler (nyse: DCX - news - people ) and Ford Motor (nyse: F - news - people ), the release of a new 3G chipset and Howard Stern's debut in January 2006. The firm said it continues to remain positive on the satellite radio segment despite shares of both Sirius and rival XM Satellite Radio Holdings (nasdaq: XMSR - news - people ) pricing in significant growth. Bear Stearns rates XM at "outperform" with a $39 target price.