Is Rush Limbaugh Worth Clear Channel's Record Breaking Contract?

Jul. 3.08 | About: Clear Channel (CCU-OLD)

The terrestrial radio industry is struggling to compete with a whole new range of mediums as well as a decline in ad revenue. But radio industry giant Clear Channel (CCU-OLD) just inked the biggest deal ever in the industry with its Premiere Radio Networks division renewing Rush Limbaugh's contract.

The details haven't been announced but Drudge is reporting that the deal goes through 2016 and is worth more than $400 million dollars. I've spoken to a number of record industry insiders, and though no one would confirm those exact numbers, they all said that the high figure make sense.

Especially in this advertising market, Clear Channel wants to nail down a sure-thing brand name. And in Limbaugh's nearly 20 years in the business (he hits that milestone in August) he's proven a reliable draw through a range of political climates. While Howard Stern's $500 million, 5-year contract with Sirius Satellite (NASDAQ:SIRI) radio broke records across the radio industry, when it comes to traditional terrestrial radio, Limbaugh's deal looks like its own record breaker.

Is Limbaugh worth it? Probably. Also, we have to remember with these numbers, that they're nearly always contingent on the talent delivering certain ratings. Anything can happen. Now that Sirius and XM (XMSR) are about to merge, they're expected to cut programming costs and Howard Stern could get burned.

With the rate of change in the media industry, who knows what else will come along to replace terrestrial radio. So while Limbaugh's take here is impressive, a lot of things could happen to change the contract before its supposed end date of 2016.