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iHeart’s Bob Pittman Says Podcasting’s New Ad Mix Is Helping The Industry Grow.

With ad rates that resemble what buyers pay for digital video and a move beyond the limited pool of direct response advertisers to big brands like Procter & Gamble and T-Mobile, iHeartMedia CEO Bob Pittman says the podcast industry is poised to continue seeing its revenue grow in the coming years with some forecasts estimating it could reach $5 billion.

“The reason why we want the big advertisers there is they pay a higher CPM than the direct response folks. So we're getting a better return on the same inventory by just putting different advertisers there in addition to the other growth factors,” Pittman said Tuesday at Deutsche Bank’s 30th annual Media, Internet & Telecom Conference, the investment bank’s first face-to-face conference in three years.

Rich Bressler, iHeart’s President and CFO, said that big advertisers are bringing a bigger share of their ad budgets and putting it into podcasting, paying CPMs akin to online video. “That makes a lot of sense because of the consumer engagement numbers, and therefore the effectiveness to the advertisers,” Bressler told investors.

Podcasting is one of the ways that iHeart is targeting the $160 billion spent each year on digital advertising. It is also why Pittman says they devised an ad sales system that allows its 1,500-person sales rep workforce to sell everything from a local market radio spot to a national digital campaign. “So when we bring podcast to market, we have 1500 sellers, the biggest sales force in audio that's behind podcasting. No wonder we're doing so much better than everyone else,” he said.

For all of last year, iHeart says its podcast revenue totaled $252.6 million. That was a 148% increase over the $101 million podcast revenue it booked in 2020. “I think that has to do with our scale, how we've structured the business, and with the monetization machine and promotion machine we have, that no one else really has,” Pittman said.

According to Podtrac, iHeart had 601 active shows during February and executives said that not only helps spread out the fixed costs of the business, but continues to help the company promote its series. “We have so many hit shows that we can get a hit show to promote the other hit show,” Pittman said. “We also use our broadcast radio stations that will often run podcasts as specials on the radio.” He thinks that is why the latest Podtrac numbers showed iHeart had more downloads than the next four publishers combined. “The luxury of being number one, which means we get first look on most stuff, is we're not going to do a show where we can't make money. And by the way, if we can't model out how we can make money on a show, I can't imagine anyone else can, since we have such a size and monetization advantage,” he said.

Pittman thinks there is not yet a proven marketplace of subscription podcasts, but said if one does develop, iHeart’s large library of shows will put it in a strong position. He also said despite the company’s sizable salesforce, iHeart is unlikely to strike sales rep deals for other podcasters explaining they are “not very profitable” for the seller. “We want to be the publisher, because that's where the money is,” he said.

While the company’s Digital Audio Group, which includes podcasting, streaming, websites, and other digital assets, is growing at a faster clip than the Multiplatform Group that houses its 850+ radio stations, the iHeart executives say they expect radio to continue to grow revenue above pre-pandemic levels. “What on earth would keep radio from continuing to grow past 2019 levels?” Pittman asked rhetorically. Radio has a large, engaged audience and delivers the same results as TV – when bought at the same weight levels – at one-fourth the price of TV, a medium whose reach declines are well documented, he argued. “As you see pressure on advertisers to get more efficient and to find efficiencies in costs, we're going to benefit from that,” Pittman predicted. “I think radio is in a pretty good spot.

That said, Pittman noted the Digital Audio Group is growing faster and suggested one day it would eclipse the currently larger Multiplatform Group in revenue. “Over time, we do expect the relationship of Digital and our Multiplatform group, which is radio and events, primarily, to change positions,” he predicted. “But that's only because of the differential and growth rate, not because one's going down.”

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