US Ad giant Clear Channel axes 1850 jobs; more cost cuts in offing

In a move that had been widely expected, the parent company of radio and advertising giant Clear Channel Communications, struggling in the advertising downturn, announced that it was eliminating 1,850 positions, or about nine per cent of its staff. The dismissals were effective immediately.

CC Media Holdings, which owns billboards and radio stations under the Clear Channel name, had been hit hard recently. In the third quarter, its revenue from radio broadcasting fell seven per cent. Outdoor advertising had a milder decline. Thanks to the popularity of digital billboards, it fell just one per cent.

The layoffs are part of a massive restructuring plan that was on the cards ever since CC Media - formed between Bain Capital Partners and Thomas H. Lee Partners - acquired Clear Channel in July. The plan reportedly seeks to cut $400 million in costs.

''Everyone in our investor group, on the board and in the executive leadership team remains bullish about the long-term growth prospects for Clear Channel,'' Mark P Mays, Clear Channel's chief executive, wrote in a memorandum to employees.

''Clear Channel Communications has more resources than any of our peers. The tools are here. The support is here," Mays added. He indicated that ''a significant portion'' of the eliminated jobs had come from sales, though all parts of the company had been affected.

Sales at Clear Channel radio have been on the decline, with both the number of prime advertising minutes sold and the rates paid for those minutes falling in the third quarter. And there was no bright spot.

''The company's radio revenue experienced declines across all different sized markets and advertising categories including automotive, retail and entertainment,'' Clear Channel wrote in its third-quarter earnings statement.

The same pattern is occurring throughout the industry. Radio advertising revenue fell 11 per cent in the third quarter compared with a year earlier, according to the Radio Advertising Bureau.

In October, Clear Channel introduced an  iPhone application, iheartradio, which allows iPhone users to listen to live radio. And it is helping to promote HD Radio, but that has not caught on as industry executives had hoped.

According to informed sources, the layoffs have hit the company's radio, outdoor advertising and international divisions. It is also implementing cuts in programming budgets and consolidating its back-office operations. Before the cuts, Clear Channel had about 30,000 employees worldwide.

The company is also likely to move toward a "national programming" model that would require less local-level staffing, despite being criticized in the past for a similar action using centralised disc jockeys while making it seem as though they were broadcasting from local stations.

The timing of the layoffs, coinciding with the swearing-in of President Barak Obama, was not an accident, the sources said. Channel managers hoped to slip in the layoffs while the press was preoccupied with Inauguration Day reportage, they said.

"Clear Channel was built through a series of acquisitions that generally weren't consolidated very well," said one source, alluding to the late '90s buying spree that put more than 1,000 stations under the Clear Channel umbrella, making it the nation's largest radio company.

Bain Capital Partners and Thomas H. Lee Partners took a hard look at Clear Channel's expense base in the due diligence phase of their $17.9 billion acquisition, and identified hundreds of millions of dollars of costs that could be taken out of the company. While they always planned to restructure the company, the soured economy forced them to expedite the timeframe for the cuts.

"Nothing about our plans has changed except the speed and timing of them," a senior employee is reported to have said . "There's no doubt we are in a horrible advertising environment, and we can't just sit there and take it."

The numbers bear out that argument. Radio ad spending fell almost nine per cent through the first three quarters of 2008, the second worst-performing category after newspapers, according to ad-spending tracker TNS Media Intelligence. Fourth-quarter ad-spending numbers have yet to be tabulated, but many are expecting a low- to mid-double-digit decline.