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Boyle bullish on clutter cutting

Back when Clear Channel Radio announced its "less is more" initiative to reduce advertising clutter, Wachovia Securities analyst Jim Boyle said he would have to study the plan before deciding whether he concurred with management's claim that it would be able to keep growing revenues while selling fewer minutes (7/27/04 RBR Daily Epaper #145). Well, Boyle is now a believer, although he's warning investors that there could be a tough patch in Q1 of next year.

"We believe that the inventory cuts that should likely occur in Q1 2005 will have an adverse effect on most of the radio groups' growth and margins, as well as on the industry," Boyle said in his latest commentary. "Keep in mind that Q1 is historically the lightest revenue of the quarter of the year with the lowest inventory sell-out, so it should truly be the best possible time to go on an 'inventory crash diet.' But Boyle sees the inventory cuts by Clear Channel - - which he expects to be matched by other groups - - will take a toll on Q1 revenues and trickle into Q2 as well. So, he's reduced his 2005 revenue predictions for the radio companies that he covers.

As Boyle sees it, the "cracked" radio model should be fixed by cleaning up clutter, but it won't happen overnight. "Repairing the self-inflicted ad rate cutting and inventory-loading, more often committed by the giant platforms than not, should take at least 3-6 months, beginning in Q4 '04," he said.

The analyst gave clients a wide-ranging study of 32 radio groups with stations in the top 20 markets. He concludes that the 14 public radio groups run a bit over one unit per hour more in drive times than their 18 privately owned competitors - - 14 units for the public companies, vs. 12.5 for the private groups. The two giants are right up there - - 13.8 units at Clear Channel and 13.7 at Infinity - - although the heaviest load was at Beasley, 15.9. The lightest, by the way, was Cox at 11.9. Boyle says lighter inventory groups, such as Cox, Entercom, Radio One and Univision should face less revenue disruption.