As radio slowly digs out of the advertising downturn, the industry’s largest company shared encouraging news with investors Tuesday. Revenues at iHeartMedia have improved 120% from the pandemic low point in April, when advertisers cancelled or suspended campaigns in vast numbers. President and Chief Operating Officer Rich Bressler called it a “pretty profound” trend while Chairman & CEO Bob Pittman said “the revenue signs are very encouraging,” describing the progress from Q2 to Q4 as a “steady climb back.”
The execs provided the update during an interview at the Wells Fargo TMT Summit 2020, held online Tuesday.
Advertisers typically look for more efficient advertising vehicles during downturns, which Pittman said will work in radio’s favor this time around since the medium delivers a comparable impact to television for about one-fourth the cost.
He also predicted the pandemic will have a long-term effect on how radio programming is accessed. The lockdowns caused consumers to seek out radio on digital devices like smart TVs, smart speakers and video game consoles. “They will not forget that. That will expand our listening,” Pittman said, filling in the gaps where people don’t have an AM/FM radio, such as in the home, and giving them more opportunities to listen. “The average listener listens to us seven times through the day,” he said. “They’re always checking in and out.” The acceleration of consumers listening to radio on digital devices caused by the pandemic “will have a long lasting positive impact for us.”
Bressler provided an update on the company's cost cutting and modernization efforts, which began in early 2020 with $50 million in cost savings, followed by deeper cuts of $200 million after the pandemic began. Heading into 2021, Bressler said iHeart has committed to making “a substantial piece” of this year’s cost savings permanent by applying lessons learned from operating during the crisis, along with technology, to operate more efficiently. “We’ve taken 10 years of advancement in the future of technology and brought it forward,” Bressler said, adding that this new way of operating is becoming “a way of life” for the company, which has had several rounds of layoffs this year.
Bressler says that on average, in Q3, markets whose offices have physically reopened are performing about 600 basis points [6%] better than markets that are not.
‘Putting Our Studios In The Cloud’
The company’s new operating model includes what it has called Centers Of Excellence, centralized hubs that that consolidate key resources for the entire company into one location. So far these include a digital content center in Nashville and a digital sales support center in another location. “This allows us to deliver better quality, more consistently, around the clock and save money,” said Pittman.
The company is also looking at “putting our studios in the cloud,” presumably through Zetta Cloud technology developed by subsidiary RCS, which allows broadcasters to “dematerialize” their air studio and place all of a station’s music, spots, IDs, voicetracks and other audio ingredients in the cloud, where they can be easily assembled, mixed and sent to the transmitter from a tablet or laptop. Pittman said this would allow the company to operate without racks and racks of physical equipment and technical support in all of its 160 markets. “It is things like that we’re doing that we think make the company better and save us money,” he said.
Like others in its peer group, iHeart has not provided financial guidance for the rest of the year or 2021. But Bressler pointed to improving EBITDA margins as an example of how the company is benefitting from a leaner operation. Last year iHeart generated about $1 billion-plus in EBITDA (earnings before interest, taxes, depreciation and amortization, a measure of cash flow). “We don’t need to get to 2019 revenue to get back to that type of EBITDA level,” Bressler said. “We feel very good about that.”