iHeartMedia 2003 Annual Report Download - page 32

Outdoor Advertising
Our outdoor advertising revenues are generated from selling advertisements on our display faces, which consist of bulletins, posters and
transit displays as well as street furniture panels. Our advertising rates are based on a particular display’s impressions in relation to the
demographics of a particular market and its location within a market. Our outdoor advertising contracts are typically based on the number of
months the advertisement is displayed on our inventory.
To monitor the health of our outdoor business, management reviews average rates, average occupancy and inventory levels of each of our
display faces by market. In addition, because a significant portion of our outdoor advertising is conducted in foreign markets, principally
Europe, management looks at revenues from our foreign operations on a constant dollar basis. A constant dollar basis allows for comparison of
operations independent of foreign exchange movements. Our outdoor advertising revenue and divisional operating expenses increased in 2003
as compared to 2002 approximately $169.9 million and $145.2 million, respectively, as a result of increases in foreign exchange.
Our significant outdoor expenses include production expenses, revenue sharing or minimum guarantees on our transit and street furniture
contracts and site lease expenses, primarily for land surrounding our advertising displays. Our site lease terms vary from monthly to yearly, can
be for terms of 10 years or longer, and typically provide for renewal options. Our street furniture contracts are usually won in a competitive bid
and generally last between 10 and 20 years.
L
ive Entertainment
We derive live entertainment revenues primarily from promoting or producing music and theater events. Revenues from these events are
mainly from ticket sales, rental income, corporate sponsorships, concessions and merchandise. We typically receive, for each event we host, all
the ticket sales, or just a fixed fee. We also receive fees representing a percentage of total concession sales from vendors and total merchandise
sales from the performer or tour producer.
We generally receive higher music profits when an event is at a venue we own rather than a rented venue. The higher music profits are due
to our ability to share in a percentage of the revenues received from concession and merchandise sales as well as the opportunity to sell
sponsorships for venue naming rights and signage.
To judge the health of our music business, management monitors the number of shows, average paid attendance, talent cost as a percent of
revenue, sponsorship dollars and ticket revenues. In addition, because a significant portion of our live entertainment business is conducted in
foreign markets, management looks at revenues from our foreign operations on a constant dollar basis. A constant dollar basis allows for
comparison of operations independent of foreign exchange movements. Our live entertainment revenue and divisional operating expenses
increased approximately $88.9 million and $81.3 million in 2003, respectively, as a result of foreign exchange.
The primary expense driver for live entertainment is talent cost. Talent cost is the amount we pay to a musical artist or theatrical production
to perform at an event. This is a negotiated amount primarily driven by what the artist or production requires to cover their direct costs and
value of their time. These fees are typically agreed to at a set minimum amount with a potential additional sharing if the event exceeds set
revenue targets.
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