iHeartMedia's Debt Interest -- Over a Half a Billion In First Quarter -- Drags Earnings
Indeed, while traditional radio companies have maintained steady ratings during the past 20 years -- in the face of fierce competition from online music services and next-gen radio companies like Pandora and SiriusXM -- those numbers recently have declined. Today, listeners spend roughly 14 hours a week listening to old-school radio, according to the Radio Advertising Bureau; in 2007, it was nearly 20. Even more sobering: 21 percent of the U.S. population does not own a radio, up from 4 percent in 2008, reports Edison Research.
Like many in the music business, Caparro argues big radio companies have become too bland and homogenized to thrive in an era when listeners can tailor playlists to their tastes and personalities. Since the 1996 Telecommunications Act allowed broadcasters to own numerous stations in individual markets, companies like Clear Channel have drifted away from regional, Wolfman Jack-style personalities and moved to syndicated talent such as Ryan Seacrest and Z100's Elvis Duran. "Deregulation could've worked had we included one rule, and that was resist some of the greed," says John Gorman, former PD for Cleveland rock station WMMS, who left the business to form online station oWOW. "Now you have a budget you've had to slash and you're running a national playlist instead of local programming. You're not the same platform that you once were."
But iHeartMedia chairman/CEO Bob Pittman tells a dramatically different story. "Our business is doing extraordinarily well," says Pittman, 62, who has been with the company since 2011. "Last year, our broadcast audience was up 10 percent. The reach of radio has remained rock solid."
Others aren’t so sure. "This is iHeart trying to spin a story to Wall Street," says one label insider, who notes there’s no denying "they're burdened by these horrific debts."
Pittman says the issues are independent of iHeartMedia's strengths. The company's revenue increased by $123 million in 2015, according to its yearly report, thanks in part to sponsorship-heavy events such as its televised music awards and Jingle Ball concerts. In January, the iHeartRadio app hit 80 million users. And according to Nielsen, radio continues to reach 93 percent of adult consumers -- some 240 million people per week. "It's the No. 1 source of exposure for our artists." Says Daniel Glass, founder of indie label Glassnote Records. "Everything else is cool and nice, but radio really makes a difference with multiple impressions, and radio presented right can really lead to hit records."
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Still, iHeartMedia is dealing with $20.6 billion in debt from a 2006 leveraged buyout worth $26 billion, in which Bain Capital and Thomas H. Lee Partners took the company private. In April, iHeartMedia tried to transfer shares from its billboard division within the company; several smaller lenders, who hold $3 billion in iHeartMedia's debt, said the transfer violated their terms. Lawsuits ensued; a trial began May 16, and while bankruptcy is one outcome, a settlement is more likely. "They've gotten very highly leveraged in a slow-growth or no-growth industry,”says Elliot Evers of investment bank MVP Capital. "They're doing everything they can to grow, but there's a lot of headwind against them."
A broader concern than iHeartMedia’s debt is broadcast radio’s future itself. "One issue is current debt service, and the other is the gradual decline of listeners," says Tommy Boy Records founder Tom Silverman. "People in their 50s aren’t going to stop listening to radio -- but teens who haven’t listened to radio never will."
A version of this article was originally published in the May 28 issue of Billboard.