Clear Channel Sets Outdoor IPO, Gets More For Less Radio Ad Time
Clear Channel's U.S. outdoor ad sales jumped 11.2 percent during the quarter due largely to higher advertising rates for its bulletin boards. Clear Channel said occupancy rates were increasing for its boards and that the strongest markets included Phoenix, Cleveland, Seattle, Jacksonville and San Antonio. Strong advertising categories were automotive, entertainment, financial services, retail and telecommunications. The company also announced plans to file an IPO plan for Clear Channel Outdoor Holdings on Wednesday, which should provide more details about the outdoor sector's performance.
The outdoor play is occurring as Clear Channel is attempting to reengineer the radio marketplace, pushing for a reduction in radio advertising clutter, and simultaneously inflating radio advertising costs as part of its so-called "Less Is More" initiative. That initiative, which began in December 2004, reduced the amount of ad clutter on Clear Channel stations by converting 60-second radio spots into :30s. On Monday, Clear Channel released findings of an Arbitron report indicating that time spent listening to those Clear Channel stations has been on the rise.
However, Mark Mays, president-CEO of Clear Channel, indicated the move has had a negative impact on near-term advertising sales.
"Our second quarter results reflect the short-term impact of our decision to reduce the commercial loads on our radio stations, combined with a less than ideal advertising environment," he said in the company's second quarter earnings release. "With just two complete quarters of 'Less is More' behind us we are seeing positive trends."
Mays indicated those trends included a growing acceptance among advertisers to embrace 30-second radio ad formats, but the company's financial show it has not been without a struggle. Radio ad sales fell 6.5 percent during the quarter to $931.9 million.
While total radio ad sales were down due to the reduction of ad inventory, the company indicated it has successfully been raising ad rates for shorter formats: "While commercial minutes were down, this was partially offset by an increase in average unit rates." Despite the inventory cutbacks, Clear Channel said its "yield, or revenue divided by total minutes of available inventory" has been rising throughout 2005.