Checking the Less is More math


RBR/TVBR Exclusive –

Critics say Less is More has been a failure for Clear Channel Radio – that it dug a revenue hole the company will never crawl out of. But Clear Channel management continues to insist that LIM is a success.

"In late 2004, we launched the Less is More initiative to position the Company for long-term radio growth. The implementation of the Less is More initiative reduced advertising clutter, enhanced listener experience and improved radio’s attractiveness as a medium for advertisers. On average, we reduced ad inventory by 20% and promotion time by 50%, which has led to more time for listeners to enjoy our compelling content. In addition, we changed our available advertising spots from 60 second ads to a combination of 60, 30, 15 and five second ads in order to give advertisers more flexibility. As anticipated, our reduction in ad inventory led to a decline in Radio Broadcasting revenue in 2005. Revenue growth of 6% followed in 2006, outperforming an index of other radio broadcasters. We continued to outperform the radio industry in 2007. Our Less is More strategy has separated us from our competitors and we believe it positions us to continue to outperform the radio industry," the company said in describing the future prospects of Clear Channel Radio under the new CC Media Holdings.

So, which is it – success or failure? We decided to check the math. The results surprised us. Will they surprise you?

Suppose LIM had never been implemented in December 2004. Instead of taking a deliberate revenue hit in 2005 and then trying to rebuild, Clear Channel Radio would likely have tracked along with the industry average. So, we compared CC Radio’s annual revenues since 2004 to what those revenues would have been, in theory, if CC Radio’s revenues had grown by the radio industry percentage reported by the RAB.

Less Is More vs. radio industry results ($ in thousands)

  CC Radio CC Radio Radio Indstry Theoretical
  % change actual % change CC Radio
2004 $3,754,381 $3,754,381
2005 -6% $3,534,121 0% $3,754,381
2006 6% $3,697,190 1% $3,791,925
2007 0% $3,439,247 -2% $3,716,086
  Adjusted: $3,425,424

© 2008 Radio Business Report. All rights reserved.

The raw numbers indicate that CC Radio would have been about $276 million ahead last year if it had never implemented LIM. But that’s too simplistic. If you look at the actual results reported by CC Radio, you’ll notice that the dollars don’t line up correctly with the percentage changes. That’s because the company adjusted along the way for radio station divestitures.

RBR/TVBR went back to Clear Channel’s earnings reports and calculated that the revenue adjustment to the comps since LIM began totaled $290,662,000. If you subtract that from our theoretical industry-matching number for 2007, Clear Channel’s actual results are about $14 million ahead. That’s essentially a dead heat.

So, we can conclude that after all of the effort put into LIM, Clear Channel is now right back where it would have been without LIM.

RBR/TVBR observation: 2008 will be a watershed year. Will CC Radio outperform the industry with LIM and make the guys at Bain Capital and Thomas H. Lee Partners look pretty smart for placing their bets on Mark and Randall Mays and John Hogan? On the other hand, if CC Radio only matches the industry’s performance – or, worse yet, underperforms – will LIM be discarded? And what about its three advocates?

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