iHeartMedia Warns It May Not Survive Year - The UpStream

iHeartMedia Warns It May Not Survive Year

posted Saturday Apr 22, 2017 by Scott Ertz

iHeartMedia Warns It May Not Survive Year

Bob Pittman is a force in the media world. After helping create MTV and eventually become president of the organization, he found himself taking over Clear Channel. In the years since he became the CEO, a lot of changes have happened. The company is the largest terrestrial radio operator in the country, and acquired iHeartRadio to get more directly into the online streaming world.

The company was so happy with its iHeartRadio purchase that it later changed its name from Clear Channel to iHeartMedia, emphasizing the commitment to a new, more modern approach to broadcast. Now, all 850 radio stations are available for listening across the country on a variety of platforms, and programs like the iHeartRadio Music Festival help to promote the overall brand, not just online streaming.

Unfortunately, these changes have not helped the company in the way that Pittman had hoped. The company has $350 million in debt that will come due within the next year, which is leftover from the Clear Channel purchase by Bain Capitol in 2008. That debt alone could sink the company, but that is not all that is hanging over iHeartMedia's head. As advertisers have moved to more targeted platforms, such as Pandora, in an attempt to get the most out of their advertising dollars, they have moved away from traditional broadcast. That means that, in addition to large debt payments, the company's revenue has been sliding, making those payments more difficult.

As a result of all of these problems, Pittman will inform investors and shareholders that there is a possibility that the company may not survive the next 12 months. Yes, you read that right - iHeartMedia and Clear Channel Outdoor advertising may not be able to continue operations for 12 months. The end game could mean the disbursement of radio stations away from a central authority and back to local management. The other possibility, assuming that there is difficulty in acquiring owners for stations, is a massive collapse in broadcast radio.

This situation is different from a retailer that is struggling. You can't just shut down under performing stations because, in most markets, all stations broadcast out of a single location, so that would actually drive up the per-station costs, making it undesirable. No matter what happens, the face of radio as we know it is about to change, and not in a small way. Perhaps there is a way for Pittman and crew to change their operations, or even shake up the business model entirely, so that the company can continue to operate as a whole, but at this point it seems unlikely.


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