So Far, Clear Channel\'s Digital Strategy Is Breaking Even

The digital future is coming to radio, eventually.

For now, Internet radio still represents a small portion of the radio listening audience. And, according to the latest earnings report from Clear Channel Communications, a radio giant that has been moving aggressively into the streaming world, its value is still unclear.

The Clear Channel all-purpose online music brand iHeartRadio attracted advertising in the latest quarter that helped offset losses from more traditional kinds of broadcasting. Yet the costs associated with streaming music weighed down what otherwise would have been savings on the terrestrial radio side.

In results reported Friday by CC Media Holdings, Clear Channel's parent company, the media and entertainment division, which includes radio, had $799 million in revenue for the third quarter, up 0.9 percent from the same period last year, and the division's earnings grew 2.6 percent to $310 million.

CC Media Holdings, which also inc ludes separate outdoor advertising divisions, had $1.59 billion in revenue over all, up only $4 million from last year, and its net loss narrowed to $39 million from $67 million. The holding company's operating income before depreciation, amortization and noncash compensation expenses, its preferred method of measuring earnings, was unchanged at $480 million.

In the radio division, small gains were partly canceled out by corresponding losses. Its radio revenue grew 3 percent from increased national advertising and from ads and sponsorship related to iHeartRadio; a two-day music festival in Las Vegas in September with Taylor Swift, Green Day and others drew an audience of 14 million across various platforms. But those gains were offset by losses from Clear Channel's newly acquired traffic reporting service.

Conversely, operating savings on the terrestrial side met rising costs related to streaming music. Clear Channel's media division had $12.9 million in operatin g cost savings for the quarter, including a $4.9 million reduction in music licensing fees as a result of new royalty agreements with the performing rights organizations Ascap and BMI. With all the iHeartRadio promotion, however, those savings were partly offset, the company said, by unspecified increases in streaming costs as a result of the growing online audience.

Only 5 percent of the listening to Clear Channel's various stations is done online. But that share is climbing fast, and the company has been preparing for a greater shift. It supports the Internet Radio Fairness Act, a bill in Congress that has been championed by Pandora, which could reduce royalty rates. (Music groups loudly oppose the bill.)

Along the same lines, Clear Channel has also begun making novel licensing deals with record companies. Only three of these deals have been made, with small independent labels, but for the music industry and Clear Channel they represent a potential breakthrough : the labels would for the first time make money when their songs were played on terrestrial radio as well as online, and Clear Channel would limit its growing royalty bills for online streaming.

Ben Sisario writes about the music industry. Follow @sisario on Twitter.