Clear Channel's Future Looks Murky

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Posted by on October 07, 2009 at 21:57:13:

In Reply to: Clear Channel getting close to defaulting on loans posted by on October 07, 2009 at 21:55:32:

Clear Channel's Future Looks Murky

Oct 7 2009, 10:47 am by Daniel Indiviglio | Atlantic Monthly

The New York Post is reporting that Clear Channel Communications is having trouble getting loans from banks to help pay the interest on its current loans. Clear Channel is by far the largest radio station owner in the U.S. If these problems persist, it's rather difficult to imagine what would happen to radio.

Clear Channel has been having cash flow difficulties for some time. But here's the latest news, from the NY Post:

After failing twice to restructure the company's debt, the private-equity firms that own the radio and billboard giant are asking some big banks to help them keep the company from defaulting on its loans.

But after a bruising fight two years ago to force the banks to live up to their commitment to fund the ill-fated buyout, those same banks now are telling the PE firms to take a hike, two sources close to the situation said.

That means Clear Channel may now default by year-end or early next year, one of the sources said.

For starters, I find it bizarre that Clear Channel can't get its business model right to return to profitability. I know that radio isn't what it used to be, but Clear Channel has such a dominating presence that it should find a way to cut costs and take advantage of its overwhelming market share. How huge is it? Here's a chart from's State of the Media report from this year:

As you can see in the graphic above, nobody is even in the ballpark of Clear Channel's market saturation. Naturally, that raises a question: what if it goes bankrupt? Its channels carry some pretty major talk radio personalities including Rush Limbaugh, Glenn Beck, Sean Hannity and Michael Savage. It also has a slew of major market popular music stations with personalities like Ryan Seacrest (Los Angeles KIIS), Elvis Duran (New York City Z100) and others. I wonder if bankruptcy would force Clear Channel to try to restructure some of their contracts with such personalities, or if that talent would ultimately end up with competing stations. I know that was one of the fears for big banks going bankrupt.

I also wonder how this plays out politically. I wouldn't expect Clear Channel to get a bailout. First off, it likely lacks "systemic risk." Of course, so did GM and Chrysler. Yet, unlike those companies it probably doesn't have as many friends in Washington. Indeed, its stations carry many hosts who are passionately hated by the ruling political party. As a result, I wouldn't expect any help there. But if a mammoth like Clear Channel did manage to go under, it would certainly send shockwaves throughout radio.

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