It’s not all that often that a Wall Street analyst offers his take on a radio studio complex but that’s exactly what B Riley Securities Senior Equity Research Analyst Dan Day has done in a new research report to clients. On Tuesday, his firm hosted a group of investors for a tour of iHeartMedia’s New York City headquarters (home to the famous tunnel of live radio) and a Q&A session with CFO/COO Rich Bressler. What were Day’s takeaways from the tour?
“The small and compact nature of a modern, tech-enabled recording studio, which has allowed the company to cut its real estate footprint by half over the last few years,” Day writes. He was also impressed by “the sleek feel of the office space, which stands in contrast to broader perceptions of broadcast radio companies.” And he called out the ability “to record and produce high-quality, professional content on a daily basis with a relatively lean headcount.”
Bressler and iHeart Chair and CEO Bob Pittman have talked about reducing their real estate footprint ever since the pandemic showed them (and the rest of the industry) that they no longer needed to be tethered to large, costly workplace set-ups.
Investors got an up-close and personal look at the compact studios used by CHR “Z100” WHTZ and classic rock “Q104.3” WAXQ, along with the larger studio and adjacent space used by the nationally syndicated “Elvis Duran and the Morning Show.” Other tour stops included an iHeart Podcast recording studio and the live music venue, complete with rows of bleachers, the company uses to entertain and pitch visiting brand and ad agency clients.
“What stood out most to us was the relatively small and compact nature of a modern recording studio—not much bigger than a typical corner office —as well as the sleek, modern feel of the recently-renovated office space, in stark contrast to general perceptions of broadcast radio as a stale medium catering to an older demographic,” Day writes in the report.
Here’s how that is significant to investors: Less space and more tech enabled a significant reduction in real estate and a reduced headcount, something Pittman and Bressler regularly call out on their quarterly earnings calls. “As modern recording studios have gotten smaller and more tech-enabled, IHRT has been able to reduce its real estate footprint by half from over 4M total square feet of office space a few years ago down to roughly 2M today, resulting in considerable rent reductions and other fixed cost savings,” Day says in the report.
In New York, the company has brought all of its radio stations and several nationally syndicated shows together at 125 West 55th St., instead of being scattered in different facilities around the city. The company has also successfully consolidated down to a single location in Chicago, Austin and other key markets. “We were also impressed by how few employees are needed to produce and record a professional radio show/podcast, a testament to the company’s lean operating philosophy and years of efforts to reduce fixed costs,” Day says.
During the group lunch and a Q&A with Bressler, the discussion centered around how iHeart’s reach has held steady even as network and cable TV struggle with audience erosion and cord cutting. Bressler emphasized how iHeart remains the most cost-effective means for marketers to reach broad swaths of the population with their branding efforts. And he talked up iHeart’s SmartAudio capabilities, which enable programmatic buying and targeting of audience cohorts across its 850 local radio stations and portfolio of national network shows. In tandem with its podcasting and streaming strengths, Day concludes that iHeart is “in a strong position to capitalize on an eventual rebound in national brand advertising budgets, which remain relatively soft against a backdrop of caution around the trajectory of the U.S. economy and consumer health.”