There's no doubt that the battle over streaming music is getting heated. As the companies involved get more focused, it is inevitable that the industry will see ups and downs. At the end of 2017, we saw Microsoft exit the market after nearly a decade, shuttering their Groove Music service (previously Zune Music and Xbox Music) and transitioning the customers to the market leader, Spotify.
Bolstered by increased user growth and their newfound partnership with Microsoft, Spotify is riding the wave to an IPO (initial public offering). The company will offer their stock for public purchase on the NYSE, beginning on April 3, 2018. They expect to release around $1 billion worth of stock to the exchange, under the ticker symbol SPOT.
Unlike most IPOs, Spotify is listing directly, rather than having one or more banks involved to underwrite the process. This could mean more money for the company if the IPO is a success, but far less if it is not. The company is hoping that their position in the industry, commanding a full 42% of the market, will drive investors to want to get involved on day one.
On the other hand, we have terrestrial radio turned streaming service, iHeartMedia. This company is the result of a purchase of iHeartRadio by Clear Channel Communications, the owner of many of the country's AM and FM radio stations, as well as billboard company Clear Channel Outdoor. Almost exactly a year ago, the company released guidance that they might not survive 2017. Their timetable was a little off, and a tad more doomsday than reality, but the time has come. This week, iHeartMedia has filed for bankruptcy.
The company currently has about $20 billion in debt, and says that through bankruptcy they have made agreements with existing debt holders to restructure about half of it. They also believe that they have enough cash to survive the Chapter 11 procedures. CEO Bob Pittman said via statement,
The agreement we announced today is a significant accomplishment, as it allows us to definitively address the more than $20 billion in debt that has burdened our capital structure.
The question becomes, what happens if they don't have enough cash to survive the proceedings? Will they start to shed divisions, such as Clear Channel Outdoor, which doesn't quite match their other businesses? Will they sell or shutter radio stations in over-saturated markets? Will they abandon their Spotify competitor, and focus on the terrestrial radio, which is the business they know best?
No matter the outcome, it is likely that the landscape of terrestrial radio will change in some way, either by diversified ownership or possibly a smaller footprint. As more listeners shift their music listening habits away from radio and into streaming services, the need for 2 country stations in Tampa becomes questionable. And, as talk radio continues to shift from broadcast to podcast, the need for as many talk radio stations might be equally questionable.