Clear Channel Turns the Dial

After years of bulking up, media players are rushing to slim down.
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Clear Channel (CCU) - Get Report became the second big media player to move toward a split-up Friday, sending its shares higher.

Clear Channel said it would

spin off its concert and sporting unit and sell part of its outdoor business to the public. This latest media conglomerate about-face amounts to a tacit admission that Clear Channel's attempts to blend the radio business and live concert promotion never worked for advertisers.

The news comes a month after

Viacom

(VIA) - Get Report

said it would explore splitting itself in two to unlock treasures that so far have been lost on investors.

In a statement that eerily echoed Viacom Chairman Sumner Redstone's remarks about his company earlier this month, Clear Channel CEO Mark Mays said, "We're seeking to unlock the considerable value in our company, and create a strong foundation for future growth, by improving the strategic, operational and financial flexibility in each of our leading business units. We expect these transactions to highlight the fundamental value of each of our leading businesses in a tax-efficient manner, so that current and future investors can more clearly evaluate the Company's overall inherent value."

The mammoth radio broadcaster said it would sell 10% of its Clear Channel Outdoor unit in an IPO and spin off its entire Clear Channel Entertainment unit to shareholders. The company also plans to pay a $3 special dividend that will cost it $1.7 billion and to boost its regular quarterly payout by 50%.

Clear Channel expects to complete these transactions by the end of 2005, it said in a morning conference call.

Clear Channel also posted first-quarter earnings that missed analyst estimates, but investors reacted positively as Clear Channel shares jumped 3%. Still, the company's shares have lost half their value over the last five years.

The San Antonio company had sought to benefit from synergies across its combined assets by driving ad rates using its billboards, concert venues and 1,200 radio stations to control pricing.

Clear Channel assumed it could drive ad sales across those platforms. But the approach never took flight -- in part because of opposition from the music community, which accused Clear Channel of price gouging and manipulation, and in part because the ad business doesn't really work quite that way.

"Most agencies are not set up to make a bundled buy," says Ray Warren, managing director at Omnicom's OMD. "It was one of those things that looked good on paper but implementing it is a different story." Warren says that while OMD is set up to facilitate cross-platform buys, many media buyers are not.

Clear Channel now believes its three businesses can grow faster through individual capital structures, aligning management and shareholders in each segment.

The company's outdoor unit was its best performer this past quarter. Radio revenue was off 7% to $773.6 million, while outdoor revenue rose 11% to $579 million. The concert unit posted a 17% sales drop to $424.5 million.

Investors have applauded the decision. Whether the move pays off in the longer term remains to be seen.