Thursday, February 21, 2013

Rushing Clear Channel

I recently read that Clear Channel(specifically CC Media Holding) reported a Q4 loss of $191.3 million for 2013. Compare that to their Q4 loss in 2012 of $43 million. In that same period, Clear Channel Outdoor reported a loss of $148.4 million. The rest of the year as not kind to them. For all of 2012, the company posted a loss of $424 million, compared to a $302 million loss in 2011.  [Source here] Liberal blogs jumped all over this with some dubious math blaming Rush Limbaugh. I'm no fan of his program but the link is dubious.

The connection they use is his salary. In 2008 Rush signed an 8 year contract for about $400 million. That's not his annual salary, that's his total gross revenue under the deal. He's not earning 50 million per year. He received a signing bonus of 100 million. So (300 ÷ 8 =37.5). His prior deal signed in 2001 was worth $285 million. So Rush landed a 35% raise with his renewal. But in the interval Clear Channel had some problems. Thomas H. Lee Partners and Bain Capital took Clear Channel private in 2008 and in the process racked up 200 million in debt. 

Clear Channel CEO Bob Pittman was quoted as saying “We are very pleased with our Company's progress in strengthening our businesses over the past year, and we look forward to continuing our momentum into 2013...”  I would not be nearly as optimistic after losing 700 million dollars. Moody's estimates that they will be in the hole 16 billion by 2016. Currently they are proposing selling their debt as notes for a total of $500 million that would be due in 2021. Ouch. Their problem is not overpaid talent, it's compound interest on debt.

It's just not accurate to suggest that dropping Limbaugh is a solution to this problem. His ad revenue is probably down, but he's not a money-loser. Despite the efforts of some activist groups such as StopRush, his program rolls on. The focus on his advertisers is savvy, but it doesn't hurt Rush personally. It hurts Premier radio Networks and the radio networks that carry his program such as Clear Channel and Cumulus. But none of those companies release quarterly numbers on ad revenue tied to his program and it's certainly not to their benefit to do so.

I was in Amish country recently and I found that at 2:00 PM I could hear Rush at 5 different spots on my radio dial: 910 WSBA-AM, 580 WHP-AM, 790 WAEB-AM, 830 WEEU-AM , and 1390 WLAN-AM. Those originate in York, Harrisburg, Allentown, Reading and Lancaster respectively. Those were just the ones that came in clearly on a car radio. A total of 600 affiliates still carry his show, nationally. So despite the price tag, those ad revenues are probably well into the black. I would expect that in 2016 when his contract runs out that Rush will have to take a haircut. But in the interim I don't expect any changes.