‘Difficult’ Year For CCC

Clear Channel Communications has filed its 10-K annual report with the Securities and Exchange Commission, and while the company can boast strong performances in its radio and outdoor divisions, it concludes the live entertainment sector suffered a “difficult” year in 2004.

A change in accounting practices and net tax combined for a writedown of almost $4.9 billion. But gross income before the writedown still lagged behind that of 2003, dropping from a gain that year of $1.15 billion to $845.8 million – a difference of about $300 million.

Operating income dropped a whopping 27 percent, from 2003’s $130.2 million to just shy of $95 million in 2004. Operating revenue was up 4 percent, $2.75 billion against 2003’s $2.65 billion. Operating expenses were up 6 percent – $2.59 billion from $2.46 billion.

Clear Channel attributes much of its 2004 downturn in live entertainment to artists.

“We saw a significant amount of concert cancellations and pressure from artist guarantees,” the company said in its report, adding that consumer dissatisfaction likely added to its woes.

“We believe some of these cancellations were a result of the culmination of consumer discontent with escalating ticket prices. This, coupled with the increased costs associated with artist guarantees, compressed the overall profit margin of this segment.”

The report also cites a sensitive market, with Clear Channel’s ability to generate revenue tied to the whims of “rapidly changing public tastes” and dependence “on the availability of popular performers and events.”

“Since we rely on unrelated parties to create and perform live entertainment content, any lack of availability of popular music artists, touring Broadway shows, specialized motor sports talent and other performers could limit our ability to generate revenues.”

The report also pointed to a “general deterioration in economic conditions” and fear of terrorist attacks as risk factors associated with the live entertainment sector.

It seems Clear Channel Entertainment has learned some lessons from the 2004 season, based on CCE Global Music President Michael Rapino’s comments at the recent Concert Industry Consortium. He indicted that the company is already trying to make changes that will bolster the bottom line rather than the market share.