iHeartMedia 2004 Annual Report Download - page 35

ITEM 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition
E
xecutive Summary
Our financial results for 2004 were led by our outdoor advertising business. We saw strong local and national advertising demand for our
domestic bulletin inventory across substantially all markets. Our international street furniture and transit businesses performed well as signs of
an economic recovery materialized in some of our markets, such as the United Kingdom, Italy, Belgium and Australia. Our television business
had a strong year as well, benefiting from advertising dollars generated by the Olympics and local and national elections.
Our radio business reported increases in revenue of 2% for 2004 as compared to 2003, with local advertising being stronger than national
advertising. About 20% of our business is derived from national advertisers, many of which remained cautious with their radio advertising
spending throughout the year. During the fourth quarter, we instituted an initiative to improve the value of radio for listeners and advertisers.
The initiative included a reduction in commercial minutes by an average of 20% across our stations and transitioned to selling more 30-second
advertisements instead of the traditional 60-second advertisements. We also expanded our commitment to the Spanish language format. We
rolled out various Spanish language programming on nine stations in 2004 and expect to roll-out 15-20 more stations over the next 12-
18 months. Internet initiatives and digital broadcasting are other areas of focus for our radio operations. During 2004, we committed to digital
broadcasts of our radio signals and we expect to roll this out across our top 100 markets over the next three years.
Finally, it was a difficult year for our live entertainment business, as we saw a significant amount of concert cancellations and pressure from
artist guarantees. 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.
Format of Presentation
Management’s discussion and analysis of our results of operations and financial condition should be read in conjunction with the
consolidated financial statements and related footnotes. Our discussion is presented on both a consolidated and segment basis. Our reportable
operating segments are Radio Broadcasting, which includes our national syndication business, Outdoor Advertising and Live Entertainment.
Included in the “other” segment are television broadcasting, sports representation and our media representation business, Katz Media.
We manage our operating segments primarily on their operating income, which is the focus of our discussion of the results of operations of
our operating segments. Corporate expenses, Interest expense, Gain (loss) on sale of marketable securities, Equity in earnings of
nonconsolidated affiliates, Other income (expense) – net, and Income tax benefit (expense) are managed on a total company basis and are,
therefore, included only in our discussion of consolidated results.
R
adio Broadcasting
Our local radio markets are run predominantly by local management teams who control the formats selected for their programming. The
formats are designed to reach audiences with targeted demographic characteristics that appeal to our advertisers. Our advertising rates are
principally based on how many people in a targeted audience are listening 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 the highest. We sell a certain
number of radio advertising spots per hour to our advertisers. Radio advertising contracts are typically less than one year.
Beginning December 2004, in an effort to improve the listening experience for our audience and enhance the value of radio advertising, we
began a new initiative called Less is More. Research showed that our listeners and advertisers were concerned about the amount of non-
entertainment content on the radio. So, the Less is More initiative lowers the amount of commercial minutes played per hour by approximately
15% — 20% across our stations. Less is More also limits the length of commercials in a spot break to approximately 4 minutes or less as well
as reducing the amount of promotional interruption on all of our radio stations. The strategy is being implemented at the market level, based on
the competition within each market, the format of the station and the time of day.
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