Radio revenues slipped at industry giant Clear Channel Communications in the second quarter as ad sales remained soft, but the company managed to meet profit targets and offer bullish guidance for the quarter to come.
The radio, live-event and outdoor-advertising behemoth posted net income of $251 million, up almost 6% from the same period a year ago. But that increase came mainly from one-time gains from early retirement of debt; excluding the gains, profits came in flat with the 2002 quarter.
Clear Channel’s flagship 1,200-station radio network saw revenues decline by 2.6% on a pro-forma basis (excluding any acquisitions and divestitures over the year) to $970 million, and cash flow fell by just under 2% for the period.
Spot sales cited
Company blamed the downturn on weakness in local spot-market ad sales, as well as revenue softness at Clear Channel’s small-market stations and in the syndication business.
Also hurting the bottom line was the termination of contracts with independent radio promoters — middlemen who are paid by record labels to get music on the air and, in turn, pay radio stations millions in retainer fees for the right to promote to them.
The “indies,” as they are called, have come under increasing scrutiny in Washington of late, with several lawmakers and regulators accusing them of operating a thinly veiled new take on the old pay-for-play system of the 1950s and ’60s.
Live-event arm strong
The company’s live-event arm, Clear Channel Entertainment, staged a mild comeback in the second quarter after suffering from slowing growth earlier in the year. CCE boosted pro-forma revenues by 3.4% and cash flow by 4.4%, thanks in part to a weak dollar.
On the outdoor-ad side, pro-forma sales rose by almost 4%, but cash flow slipped by 1.6%. Bottom line was hurt by increased operating expenses, due partly to restructuring efforts in France and production, bonus and commission costs in the U.S.
On a conference call, Clear Channel founder and chief exec Lowry Mays said he was hopeful the clouds would part in the persistently sluggish ad market during the third quarter, offering cause for optimism for CC’s ad-supported businesses.
Investors gave the prognosis a mixed reaction, boosting Clear Channel shares by as much as 2% before it closed down 0.5% at $40.25. Conglom’s stock has gained significant ground since lows in the $20s last year, but slowed over the past several months.