Clear Channel joins media breakup trend

Disappointing earnings spur plans to spin off live entertainment unit

April 30, 2005|By Mike Hughlett | Mike Hughlett,CHICAGO TRIBUNE

Clear Channel Communications Inc. joined the growing ranks of big media companies electing to break themselves up yesterday, posing the question of whether being so big was such a good idea after all.

The answer is not clear, but the hype that drove media conglomeration in the 1990s has not lived up to its promise.

San Antonio-based Clear Channel, the world's largest radio broadcaster, plans to spin off its live entertainment business and sell 10 percent of its outdoor advertising segment in a stock offering. Live entertainment - concerts and sporting events - accounted for 29 percent of Clear Channel's $9.4 billion in sales last year.

Clear Channel's revelation came about six weeks after New York-based Viacom Inc. said it is considering separating its cable television networks - which include MTV and Showtime - from its broadcast properties, including CBS Television and Infinity radio.

Just a day before that announcement, Englewood, Colo.-based Liberty Media Corp. said it planned to sell its 50 percent stake in the Discovery cable network and Ascent Media, which offers media services such as video and film post-production work.

A weak performance on Wall Street is the underlying reason behind the breakup frenzy.

Media shares have trailed the broader market for 18 months, said Laura Martin, a Los Angeles-based analyst for Soleil/Media Metrics. For instance, Clear Channel's stock has sunk 23 percent over the past year while the S&P 500 has risen 4.5 percent during the same time.

Clear Channel, Viacom and Liberty all believe they can unlock the value in their shares through sales or spinoffs of some businesses.

Indeed, Clear Channel's stock jumped about $2 yesterday morning on news of the break-up, though it wandered south the rest of the day and closed at $31.94, down 6 cents.

The descent stemmed from the rest of Clear Channel's announcement yesterday: "horrible" first-quarter earnings, as Martin put it. First-quarter profit was down 59 percent compared with 2004's first quarter.

Clear Channel built a media colossus in the 1990s when capital was flowing freely into media mergers and acquisitions. It cobbled together 1,200 radio stations and snapped up several regional concert promoters.

"We go through these fads in the capital markets," said Gigi Johnson at UCLA's Entertainment and Media Management Institute. At the time, "the capital markets were believing that bigger is better."

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