4Q: Clear Channel's Outdoor Division Passes Radio

Clear Channel Communications' revenues rose 4% in the fourth quarter of 2007 compared to 2006, to $1.84 billion--largely because of the continuing strong performance of the company's outdoor division, which rose 13% to $936.7 million. This marks the first time that Clear Channel Outdoor has earned more total revenue than Clear Channel Radio, where revenues slipped 3% to $874.6 million.

For the full year, the radio business was still slightly larger than outdoor. In 2007, the outdoor division's revenues were up 13% to $3.38 billion, while radio was basically flat at $3.49 billion. Total annual revenues rose 6% to $6.81 billion, including a small amount of extraneous income.

The fourth quarter switch-up at Clear Channel reflects broader trends in media spending, where out-of-home is booming, while radio is stagnant or even declining. After coasting during the first two quarters, according to the Radio Advertising Bureau, total radio revenues dropped 5% in the third quarter and roughly 4.3% in the fourth (calculated by averaging 2% in October, 6% in November, and 5% in December).



At the same time, out-of-home maintained 6% revenue growth in the third quarter and probably grew 6% to 7% for the full year 2007. Fourth-quarter results are not yet available for the industry--but it appears to be defying gravity amid signs of a slowing economy.

The fourth-quarter decline in radio revenues at Clear Channel raised concern among Wall Street analysts that weak financial performance could derail the planned sale of the company to private equity. The secular downturn in radio comes at a particularly bad time, accompanied by a worldwide credit crunch that could make borrowing more expensive for Thomas H. Lee Partners and Bain Capital Partners, the companies leading the buyout.

Analysts say the private equity firms, spooked by the weak radio results and low stock price, could still cancel the deal. By the same token, they may feel that the strong performance of the company's Outdoor division offsets the bad news from radio.

It should be noted that Clear Channel Outdoor, with a lot of foreign business, got a big boost from the weak dollar in currency exchanges.

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