Lessons Learned From 2020 Will Mitigate Advertising Downturn, Pittman Says.
- Inside Audio Marketing
- Nov 4, 2022
- 3 min read

“It's clear that our digital business is now significant enough to meaningfully impact our overall financial performance.” That’s CEO Bob Pittman reflecting on iHeartMedia’s third quarter financial results. During a period marked by economic uncertainty, sky high inflation and rising interest rates, the company’s digital revenue spiked up 23.4%, allowing total revenue to gain 6.6% even as ad sales at the audio giant’s 850 radio stations were essentially flat.
Digital now accounts for one of every four revenue dollars booked by the company. But its radio station group, which combined with various networks and events comprise the Multiplatform Group, held up during an economic downturn to produce two thirds of total company revenue. “Our Multiplatform Group has again demonstrated its resiliency during this economic period, generating adjusted EBITA margins in the low 30s, which we expect to expand as revenue recovers over the long haul,” Pittman said.
Soft Ad Environment
As the year winds down, Pittman noted that “advertising has certainly softened since the robust performance we saw at the beginning of the year.” But he doesn’t believe it’s been hit as hard this time as during previous economic downturns. That’s because the advertising execs calling the shots today are the same ones who made decisions during the dark days of 2020. Citing findings from Analytic Partners, which provides measurement and forecasting services, advertisers who cut their ad budgets during the last recession experienced an 18% sales decline. Those who maintained or increased their ad spend saw their sales increase 17%. “We think advertisers learned a stark lesson, which we suspect is causing many of them to moderate advertising cutbacks,” Pittman said.
Another trend working in its favor: internal data cited by Pittman shows its largest advertisers “substantially outperformed” the company’s smaller advertisers because “a large advertiser has the ability to spend, even in slower economic times.”
Back to the subject of digital’s outperformance: The Digital Audio Group, grew revenue 23.4% to $254.0 million. Within that, podcast billings shot up 42.1% to $91.3 million.
“We believe the strong positions of our digital audio and multi-platform groups with both consumers and advertisers give us the ability to navigate through this period of economic uncertainty and position us for continued growth through the recovery and beyond,” Pittman said.
October Up 8%
President, Chief Operating Officer and Chief Financial Officer Rich Bressler reminded analysts on the call that in 2020, “the worst year we have ever seen,” the company still generated positive free cash flow. “We expect those strong free cash flow generating characteristics to persist,” he said.
Bressler offered some color behind the numbers. While the Multiplatform Group, which houses iHeart’s 850 radio stations, had a fractional revenue increase to $660.0 million, revenues would have been down without the benefit of political ad sales. Just over half of political dollars flow to the company in the fourth quarter which is a major reason iHeart is calling for Q4 revenues to be up between 2% and 6%. Preliminary October billings, which included a large amount of political spending, are up 8% year over year.
“We expect political advertising to be a record for a midterm political year,” Bressler said. The call is for full year political advertising to finish midway between the 2018 midterm year ($110 million) and the 2020 presidential election ($160 million).
Lessons From 2020
Analysts pressed the two execs for their take on advertiser sentiment post-election. Pittman acknowledged 2022 was not the year they expected. But even if the economy plunges into a recession, it won’t look like the one triggered by the pandemic. “I can't imagine things getting much worse than what we saw in 2020. Businesses just shut down and consumers were locked in their houses,” he reminded. “Those people who made advertising decisions in 2020 and realized how much they had lost and how much more expensive it was to restart will remember that. And I think it will moderate any effect on an advertising downturn.”
The other major takeaway from iHeart’s Q3 was a 10% year-over-year gain in adjusted earnings, which was at the top end of its guidance. The company is on track to generate fourth quarter adjusted earnings in the $305 to $325 million range. That implies full year adjusted earnings in the $940 to $960 million ballpark, which Bressler said would be the second highest in company history.
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