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June 16, 2005
We won't say we told you so
Businessweek has an interesting update/overview on Clear Channel Communications, and the current effort of the media and entertainment mega-company to disassemble itself. The company has proposed spinning off its live entertainment division (which owns theaters, productions, agents, and such) into a separate corporation. Says the article:
From the beginning, Wall Street never much liked the live-entertainment business, for which Clear Channel paid a hefty $4.4 billion in 2000 in a deal for Robert Sillerman's SFX Entertainment Inc. Promoting concerts and owning venues was supposed to be a good fit with radio: Shows could be promoted with on-air ads, and radio stations could woo listeners at concerts. But the payoff never materialized. The entertainment business accounts for about 29% of Clear Channel's revenue but only 6% of cash flow, with margins in single digits, vs. upwards of 40% for radio.
It turns out that live productions and performances have high fixed costs, low marginal returns, and can be a pain to profitably produce as compared to other forms of entertainment. I'm sure there are many in the nonprofit presenting industry that could have told them that a long time ago.
Don't expect Clear Channel's live entertainment efforts to fade away, even if the split goes through. You'll likely just see a separate company with lower revenue expectations, but holding a wonking big share of the national performing arts and entertainment world.
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