iHeartMedia 2007 Annual Report Download - page 40

and contains customary closing conditions. There have been no allegations that we have breached any of the terms or conditions of the
definitive agreement or that there is a failure of a condition to closing the acquisition. On November 29, 2007, the FCC issued its initial consent
order approving the assignment of our television station licenses to the buyer.
Our television business is reported as discontinued operations in our consolidated financial statements as of and for the periods ended
December 31, 2007.
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, or radio, which includes our national syndication business, Americas Outdoor Advertising, or
Americas, and International Outdoor Advertising, or International. Included in the “other” segment are our media representation business, Katz
Media, as well as other general support services and initiatives.
We manage our operating segments primarily focusing on their operating income, while Corporate expenses, Merger expenses, Gain on
disposition of assets - net, Interest expense, Gain (loss) on marketable securities, Equity in earnings of nonconsolidated affiliates, Other income
(expense) - net, Income tax expense and Minority interest expense - net of tax are managed on a total company basis and are, therefore,
included only in our discussion of consolidated results.
R
adio Broadcasting
Our revenue is derived from selling advertising time, or spots, on our radio stations, with advertising contracts typically less than one year.
The formats 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 the highest. Management monitors yield per available minute in addition to average rates because yield
allows management to track revenue performance across our inventory. Yield is defined by management as revenue earned divided by
commercial capacity available.
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 all of our stations.
Management looks at our radio operations’ overall revenue as well as 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 staffs 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.
Management also looks at radio revenue by market size, as defined by Arbitron. Typically, larger markets can reach larger audiences with
wider demographics than smaller markets. Additionally, management reviews 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 salaries, 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, our highly discretionary costs are in our marketing and
promotions department, which we primarily incur to maintain and/or increase our audience share.
A
mericas and International Outdoor Advertising
Our revenue is derived from selling advertising space on the displays we own or operate in key markets worldwide consisting primarily of
billboards, street furniture and transit displays. We own the majority of our advertising displays, which typically are located on sites that we
either lease or own or for which we have acquired permanent easements. Our advertising contracts typically outline the number of displays
reserved, the duration of the advertising campaign and the unit price per display.
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