The Giant Tightens Its Belt: Clear Channel Cuts Costs

Clear Channel Radio, the largest radio group in the United States, is feeling the 2008 economic pinch. While it has fared better than most of its competitors, management is clearly concerned. An internal memo from CEO John Hogan ordered some fairly drastic measures. These include a freeze on new hires and cutting out research and ad spending entirely for the remainder of the first quarter, effective Feb.1.

Like the rest of the radio industry, Clear Channel is contending with drops in advertising revenue due to a slowing economy--and, some analysts fear, a long-term secular downturn similar to that affecting newspapers. According to Hogan: "No one anticipated how challenging Q1 would be for us, and while the plans we put in place last fall made sense then, clearly we are operating in a different environment and thus need an adjustment to our plan."

The hiring freeze comes on top of a limited round of layoffs by the company in the fourth quarter of 2007. Observers speculate that the belt-tightening is an effort to keep the company's financials attractive to its new private-equity owners, Thomas H. Lee Partners and Bain Capital; their $20 billion acquisition of the company undergoes final review by the Justice Department.

The company is also proceeding with the sale of about 450 radio stations in small and mid-sized markets. Last year, it sold its TV division of 52 stations to Providence Equity Management.

While revenue figures for the fourth quarter of 2007 are not yet available, Clear Channel Radio saw revenue up 3%, 1% in the second quarter, and down 1% in the third quarter. That compares favorably with the radio industry overall, where revenues were up 1%, then down 1% and 5% in the same time periods, respectively.

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