Monday, April 15, 2019

Skeptics Weigh-In On iHeartMedia's IPO Plans

Bob Pittman, the chairman/CEO of iHeartMedia, likes to compare his broadcast-radio empire -- which reaches 275 million listeners each month and is saddled with nearly $6 billion in debt -- to a house. "It's still worth a million dollars, even if you mortgage 99.9% of it," he recently stated according to Billboard.

In a bid to reduce that debt, iHM, which owns 848 radio stations, filed paperwork earlier in April for a potential initial public offering. The company cut its debt -- which, at one point, was nearly $21 billion -- by more than one-third last year after a court agreed to its bankruptcy plan; a successful IPO could raise money to pay off the remaining debt, allowing the once-mighty company -- formerly known as Clear Channel Communications -- to make acquisitions and develop technology.

Bob Pittman
"It's a cash raise, of course," Skip Bishop, a longtime Sony radio-promotions executive and a Nashville consultant for developing artists, says of the IPO. "I would bet on the company. They haven't put all their eggs just in old-fashioned transmitters and antennas -- they've been aggressive in every other arena of the entertainment business and been successful at it."

But, reports Billboard,  for all the numbers that Pittman reels off in interviews to demonstrate the broadcast industry's continuing strength, other studies suggest radio may decline in the not-so-distant future. Advertising hasn't grown for several years, thanks to competition from YouTube, Spotify, Pandora and others, and a 2017 study from New York University's Steinhardt Music Business program suggests listeners in their teens and 20s have largely switched to on-demand streaming -- AM/FM listening among this group has declined by nearly 50% from 2005 to 2016. (Broadcasting officials have denounced this study and refuted its findings.)

Jerry Del Colliano
Jerry Del Colliano, a Steinhardt professor, disputes Pittman's view that iHeartMedia's debt issues are separate from its operational strength. "It's more fairy dust -- there's not enough revenue in the radio business to support a business like theirs with debt that high," says Del Colliano, who is critical of iHM and the broadcast industry in his blog Inside Music Media. "If you can get away from all the public relations releases, radio's probably the coldest industry you could ever want to be in right now.

Although iHM reportedly laid off several employees in recent weeks, iHM's day-to-day business actually hasn't changed much. Many analysts view the potential IPO -- to which iHeart has not yet attached an opening stock price or given any specific details like banks or numbers of shares -- as a way to allow the company to make more strategic purchases, like its acquisition last year of podcaster Stuff Media.

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