MPLS [heart] Clear Channel

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MPLS [heart] Clear Channel: The semantics of ownership

The most striking thing about Tuesday's debate over the future of the Hennepin theaters was that a majority of the Minneapolis City Council has no qualms about getting in bed with Clear Channel Entertainment. The second most striking thing was that a few ward leaders even believe the media behemoth to be a benevolent presence.

This, of course, is a stunning display of either naiveté or willful ignorance. Nevertheless, the idea of letting the world?s largest radio station owner and pervasive media empire manage the State, Orpheum and Pantages theaters for at least the next 30 years has been treated like so much manna from heaven by a number of the city?s ward leaders.

Read a history of the theaters and the deal here.

 

Back in November, when city leaders were first considering a theater agreement, council members like Gary Schiff (9th Ward) and Scott Benson (11th Ward) were effusive in their praise of productions CCE had bought to the profitable district. A handful of council members, most notably Paul Zerby (2nd Ward) and Paul Ostrow (1st Ward) expressed several reservations about allowing Clear Channel to run the show, and wondered if any deal would allow the San Antonio-based company to one day own the theaters outright. Lisa Goodman, who represents the 7th Ward where the theaters are and lives near the district, was dismissive of any dissent, at one point calling the ownership question ?silly.?

 

Tuesday?s meeting wasn?t much different, except that this time even the voices of dissent carried an air of concession. (Taking a contrarian stand on the council, after all, is to engage in a war of attrition.)

 

The staff recommendation, months in the making, was presented before a joint meeting of the council?s Ways and Means/Budget and Community Development committees. The proposal, presented by Lee Sheehy, the city?s new planning and economic development czar, contained a number of clauses that made it clear that the ?local non-profit,? Hennepin Theatre Trust, would assume ownership after 30 years.

 

HTT, it was reasoned, was not susceptible to a corporate takeover, and would be run by a board that would ultimately have control over the events at the theaters. (In other words, Clear Channel couldn?t swallow the non-profit and own the theaters.)

 

But the ?local for-profit?--the Historic Theatre Group--and Clear Channel would be responsible for the day-to-day operations and reap the revenue from the gate. (For this, Clear Channel would back the bonds on the $22 million debt.) But some were surprised to learn that, as Sheehy put it, a relationship between HTG and CCE would be ?consummated? should the council approve the agreement: That is, Clear Channel will assume majority ownership of HTG in a matter of weeks.

 

Fred Krohn, who has been involved with some incarnation of HTG since the 1970s, when it had a stake in Bob Dylan?s purchase of the Orpheum, explains that he?ll ?be more involved than ever.? (It's true: The masked and anonymous troubador saved the theater from the bulldozers, once upon a time.)

 

 ?Clear Channel will have a 51-49 ownership for five years,? Krohn says, and then the arrangement will be reviewed. ?Say what you will about Clear Channel, but they?ve been very good at capital improvements, putting some $40 million in the Boston opera house. We?ve had a relationship with Clear Channel for nine or 10 years.?

 

Advocates for the Clear Channel deal repeatedly referred to clauses in the ?term sheet? detailing parts of the proposal that specify that HTG maintain an ?open calendar? policy, meaning that the booking of the theaters won?t be dominated by Clear Channel. The conglomerate will be responsible for booking and promoting the ?Broadway season,? or about 50 percent of what events run at the theaters. More than that, the clause only guarantees ?right of first refusal? to Clear Channel. If CCE declines to promote a show, HTT, the local non-profit, will be free, theoretically, to produce and promote events without the company?s influence.

 

Even so, it?s doubtful that CCE, which has been a money-losing endeavor for Clear Channel, will beg off of much: The company has dominated theater productions in other towns like New York and Chicago. And judging from the glee from the city council and some HTT board members at Tuesday's meeting, no one is likely to stand in Clear Channel?s way. When someone or something has taken some $22 million in debt off your shoulders (and another $300,000 in annual operations), you don?t ask too many questions.

 

One factor all backers might want to consider, though, is the $4.7 billion in losses Clear Channel posted in the last quarter of 2004. They might also want to consider a number of lawsuits filed against the conglomerate for anti-competitive practices, most notably one where a Chicago jury recently awarded a sports events promoter some $90 million because of Clear Channel business practices. (The decision is on appeal.)

 

So, even if Clear Channel guarantees the bonds, there's no guarantee that the company will have the cash flow--or will even be in existence--10 years down the road, let alone 30 years from now.

 

Finally, the advocates might want to consider that Clear Channel didn?t get to be the world?s eighth-largest company by having respect for local community, a lack of benevolence noted on Tuesday by Zerby and Ostrow.

 

In the end, the two council committees had different votes on the matter. The Community Development Committee voted to forward the recommendation to the full council with approval. (Barret Lane of the 13th Ward did not vote, because, as he said, he hadn?t enough time to review the term sheet.) The Ways and Means/Budget committee, however, voted to forward without recommendation.

 

But either way, the dissenters only number three or four on a 13-member body. The final vote goes before the full council on April 15, and it?s a guarantee that Clear Channel is here to run the theaters for as long as it sees fit.


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