iHM's Financials Impacted By Digital Services

iHeartMedia’s bankruptcy comes just over three months after Cumulus Media Inc., the nation’s No. 2 radio broadcaster, filed for bankruptcy. The reach of traditional radio stations remains massive, though advertising revenues have stagnated in the face of challenges from technology titans such as Facebook Inc. and Alphabet Inc.’s Google.

The Wall Street Journal reports traditional radio stations also face competition from on-demand streaming services such as Spotify AB and Apple Inc.’s Apple Music. That leaves iHeartMedia and other radio broadcasters as the place audiences go to for costlier programming such as news, talk and sports.

Still, iHM says its broadcast radio stations alone reaches 271 million people in the U.S. each month, more than any other media and tech company including Facebook and Google.

In 2016 the company, which has offered free streaming of thousands of its radio stations since 2011, rolled out a pair of on-demand subscription music-streaming services to compete with Spotify and Apple Music. The move, however, isn’t expected to add much—if anything—to the company’s bottom line and is viewed internally as an attempt to keep listeners from migrating to rival platforms.

John Malone’s Liberty Media Corp., which owns satellite-radio leader Sirius XM, has also been circling iHeartMedia, offering to pump $1.16 billion into the broadcaster in return for a 40% stake in the reorganized company. Liberty has built a position in iHeart’s debt in an effort to have a say in the company’s restructuring.

While a deal is still possible, missing from today's bankruptcy filing was a cash infusion of $1.16 billion offered by Liberty Media and its partially owned SiriusXM division. Under the offer, SiriusXM and Liberty would each own 20% of a court reorganized iHeartMedia. Many analysts were surprised by the fire-sale valuation.

Among the music companies listed as creditors on the iHeart docket are Nielsen (owed $20 million); SoundExchange ($6.4 million); Warner Music Group ($3.9 million); Universal Music Group ($1.3 million); and Spotify ($2.1 million). Performance rights organizations ASCAP and BMI are each owed slightly over $1.4 million while Global Music Rights is looking at a $2 million debt.

IHeartMedia traces its roots to the 1972 purchase of KEEZ-FM in San Antonio, Texas, where it is currently headquartered. It also produces syndicated radio programs that feature “American Idol” host Ryan Seacrest and political personalities Rush Limbaugh and Sean Hannity.

The company had 14,300 employees at the end of 2016, according to its most recent annual report.