Tech Mediums

In light of the inability to close the buyout of Clear Channel by Thomas H Lee Partners and Bain Capital, I thought to finally talk about Clear Channel as a fascinating company and how much it reminds me Standard Oil, John D Rockefeller’s oil monopoly.

First things, first.  Standard Oil had a ridiculously enormous command over the oil market.  That’s why it was forced to break up into the BIGGEST names in oil you’ll have ever heard of.  I’ll list them, and note that some were merged with each other.

·        Exxon

·        Mobile (merged in 1999 from the union of Exxon)

·        Chevron (merged with Texaco in 2001)

·        Amoco (merged with British Petroleum in 1998)

Clear Channel isn’t quite the monopoly that Standard was (in some markets it didn’t own as many as 7 radio stations as in others :-D), but it’s got some of the same memorable names in the market place (btw – you could make the same case about GE, but GE is in such different industries that GE is more like a mutual fund).

·        Radio – where CCU had its origins; included in this are real estate holdings of radio towers: properties include the Steve Harvey Morning Show, Power 105.1 in NYC and Rush Limbaugh.

·        Live Nation (fka SFX) – one of the largest outdoor concert promoters.  Live Nation was spun out as a separate company and just did a deal w/ Jay-Z

·        Outdoor advertising (billboards) – through a purchase of Eller Media circa 1997

·        TV (local TV stations) which CCU announced it would sell in 2006 and completed in 2008

The Telecommunications Act of 1996 enhanced Clear Channel’s ability to acquire so many properties. 

 Nonetheless, radio is having a HARD time, since advertising is moving more and more online.  Clear Channel, Radio-One, Cumulus Media, all of them…revenues from radio have either not had meaning growth or are considerably down.  That’s why companies like Radio-One are figuring out their online strategy.

So the news of Clear Channel going private is probably one of the best decisions it can make given current trends – it can always reverse the decision and go public again, like a vasectomy J.  

We’ve written about 360 deals before.  The much rumored deal between Jay-Z (aka Shawn Carter) and Live Nation is expected to finalize this week along those lines. 

The NY Times reported that the deal is valued at $150 million.  The short of it is that Jay-Z gets what amounts to an investor in Live Nation for future ventures that he creates.  These would include record distribution, merchandising, concert ticket sales and merchandising.  Live Nation will annually fund Jay-Z’s umbrella company (that will partake in the venture) and share in the profits thereof.

The deal reflects the kinds of 360 deals that we’ve talked about, where more and more mergers and acquisitions will happen along the vertical: record labels, distribution, artist management, merchandising, advertisers, promoters, etc. 

The inevitable ‘why’ comes to mind.  Because CD sales are down, more music is becoming free or low cost, but demand appears to remain strong. 

So the best business models will seek to diversify and capture different streams of revenue, presuming that core demand is still there. 

 What’s more interesting is that LiveNation is positioning itself as the ‘GE’ of music. 

Live Nation could have its hand in just about every aspect of music (rather entertainment).  Investing in Live Nation could be like investing in a mutual fund for entertainment.  Distribution, concert tix sales, merchandising, promotions, the whole nine. 

 Logical Next Step

What would be interesting is to see Live Nation partnering/acquiring a company in the web 2.0 space, like a distributive media company (e.g., widgets), a virtual world like Doppelganger’s vSide or the next FaceBook kind of social media company. 

It would make sense when looking at the mega trends of more people spending time online, TONS of dollars going in online advertising, online services, etc.

Live Nation appears to be building such a model.  It acquired Music Today, a one stop shop for merchadising, fan club building and more for artists.  Live Nation has been partnering with several companies to develop its online presence, like Last.FM.  Full acquisition might be the next step.

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Further, it is marking its territory to become the better record label model.  It already wooed Madonna from Warner.  Now, Jay-Z is leaving Def Jam.  This is particularly interesting since Live Nation has historically focused on rock and country.  

I asked a couple of record labels about possible acquisitions as a revenue strategy, but maybe it could be basic business strategy to ward off companies like Live Nation.  Most said they really hadn’t thought it through.  But a few are realizing the game is changing and it’s not really about entertainment, but a basic business policy that creates allies everywhere to further the mission of the company.  I’ll write more on this later. 

Fascinating!!!