iHeartMedia 2009 Annual Report Download - page 45

Sale of the Television Business
On March 14, 2008, we completed the sale of our television business to Newport Television, LLC for $1.0 billion, adjusted
for certain items including proration of expenses and adjustments for working capital. As a result, we recorded a gain of $662.9
million as a component of “Income (loss) from discontinued operations, net” in our consolidated statement of operations during 2008.
Additionally, net income and cash flows from the television business were classified as discontinued operations in the consolidated
statements of operations and the consolidated statements of cash flows, respectively, in 2008 through the date of sale and for all of
2007.
R
adio Broadcasting
Our radio business has been adversely impacted and may continue to be adversely impacted by the recession in the United
States. The weak economy in the United States has, among other things, adversely affected our clients’ need for advertising and
marketing services thereby reducing demand for, and prices for, our advertising spots. Continued weak demand for these services
could materially affect our business, financial condition and results of operations.
Our revenue is derived from selling advertising time, or spots, on our radio stations, with advertising contracts typically
less than one year in duration. The programming formats of our radio stations are designed to reach audiences with targeted
demographic characteristics that appeal to our advertisers. Management monitors average advertising rates, which are principally
based on the length of the spot and how many people in a targeted audience listen to our stations, as measured by an independent
ratings service. The size of the market influences rates as well, with larger markets typically receiving higher rates than smaller
markets. Also, our advertising rates are influenced by the time of day the advertisement airs, with morning and evening drive-time
hours typically highest priced. Management monitors yield per available minute in addition to average rates because yield allows
management to track revenue performance across our inventory. Yield is measured by management in a variety of ways, including
revenue earned divided by minutes of advertising sold.
Management monitors macro level indicators to assess our radio operations’ performance. Due to the geographic diversity
and autonomy of our markets, we have a multitude of market specific advertising rates and audience demographics. Therefore,
management reviews average unit rates across each of our stations.
Management looks at our radio operations’ overall revenue as well as the revenue from each type of advertising, including
local advertising, which is sold predominately in a station’s local market, and national advertising, which is sold across multiple
markets. Local advertising is sold by each radio station’s sales staff while national advertising is sold, for the most part, through our
national representation firm. Local advertising, which is our largest source of advertising revenue, and national advertising revenues
are tracked separately, because these revenue streams have different sales forces and respond differently to changes in the economic
environment. We periodically review and refine our selling structures in all markets in an effort to maximize the value of our offering
to advertisers and, therefore, our revenue.
Management also looks at radio revenue by market size. Typically, larger markets can reach larger audiences with wider
demographics than smaller markets. Additionally, management reviews our share of radio advertising revenues in markets where such
information is available, as well as our share of target demographics listening to the radio in an average quarter hour. This metric
gauges how well our formats are attracting and retaining listeners.
A portion of our radio segment’s expenses vary in connection with changes in revenue. These variable expenses primarily
relate to costs in our sales department, such as commissions and bad debt. Our programming and general and administrative
departments incur most of our fixed costs, such as talent costs, rights fees, utilities and office salaries. Lastly, we incur discretionary
costs in our marketing and promotions, which we primarily use in an effort to maintain and/or increase our audience share.
A
mericas and International Outdoor Advertising
Our outdoor advertising business has been, and may continue to be, adversely impacted by the difficult economic
conditions currently present in the United States and other countries in which we operate. The recession has, among other things,
adversely affected our clients’ need for advertising and marketing services, resulted in increased cancellations and non-renewals by
our clients, thereby reducing our occupancy levels, and could require us to lower our rates in order to remain competitive, thereby
reducing our yield, or affect our client’s solvency. Any one or more of these effects could materially affect our business, financial
condition and results of operations.
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