The impact from the COVID-19 pandemic was like “a tale of two cities,” according to iHeartMedia Chairman and CEO Bob Pittman. Listening held up but there was a “significant fall-off in revenue.” Speaking at the BofA Securities Media, Communications & Entertainment Conference, Pittman said broadcast radio was hit the hardest, which he chalked up to the fact that the medium relies so much on short-term contracts, compared to TV which writes more long-term deals and didn’t take as big of a hit.
That’s also why iHeart’s networks division fared better, Pittman explained. Digital was less impacted, thanks to unabated advertiser interest in podcasting, which “continues to grow like a weed” in both usage and revenue,” Pittman said.
He and President and COO Rich Bressler appeared at the virtual conference one day after SiriusXM CEO Jim Meyer said he wants to make advertising a bigger part of his company’s bottom line by attracting more broadcast radio listeners to its free, ad-supported Pandora platform. Jessica Reif Ehrlich, the Managing Director of BofA Securities who led the discussions with both companies, referenced that without naming SiriusXM. “What are you doing to defend yourselves,” she asked, as competitors target the radio pool of ad dollars. “The first thing you do to defend yourselves is make sure the listeners are with you,” Pittman responded. And while iHeart is the largest audio entity in terms of listenership, Pittman said it’s incumbent on the company to sell advertising “in the way the marketplace wants to buy it.”
That is increasingly through data-infused electronic buying platforms, he said. In addition, “moving upstream” to talk about “big ideas” directly with brand marketers has enabled the company to become more of a marketing partner, as opposed to a vendor. That’s helping to generate higher CPM business, he explained. “We’ve got some nice advantages. We just have to make sure we make it easy for advertisers to use it and we play on the platform they’re playing on,” Pittman added.
The trend of advertisers shifting from siloed media buying toward purchasing all media side by side will work in radio’s favor, Pittman told the conference. That’s because radio, when bought at the same weight as TV, delivers the same impact at a significantly lower price.
Providing more color on the ongoing ad market recovery, Pittman said it is occurring at different rates from category to category and city to city. But with Election Day fast approaching, political advertising “appears unaffected by the downturn,” he said.
Advertisers Roll The Dice
Historically during recessions, advertisers roll the dice and try something new and this time it’s podcasting. “It’s the darling right now. It’s the thing people are looking to try,” Pittman said. With 225 million downloads for its podcasts in July, a year-over-year increase of 60%, Pittman flagged podcasting as “a tremendous growth area” that is attracting premium pricing. “It’s something advertisers want and come to us looking for,” he offered.
This week the company used the backdrop of the IAB’s Podcast Up Front to announce new podcast ventures with former President Bill Clinton and rising New York-based radio personality Charlamagne Tha God. The company’s consistent ranking as the top commercial podcaster, per Podtrac, and the promotional power of 850 radio stations has given it a “first look” advantage with content providers looking to enter the space, he added.
Billings are keeping pace. Bressler told the virtual conference that iHeart’s podcast revenues are up 100% through second quarter. “That shows no signs of slowing down,” Bressler said.
In February iHeart announced “modernization” efforts that will save the company $50 million this year. Another $200 million in savings from pay cuts, furloughs and other measures taken to mitigate the impact of the pandemic will reduce overhead by another $200 million. Bressler said a “sizable piece” of that $200 million will become permanent, by pivoting to a smaller real estate footprint and making a “significant” reduction in T&E expenses and what the company pays consultants. “We’re going to become more efficient in moving forward,” Bressler said.
The pandemic caused the company to speed up its use of technology for support and administrative work, saving money and improving quality while also allowing it to operate without regard to geography, Pittman noted. Technology, he added, will be “an important component of our new cost basis in the new normal.”