New pandemic business restrictions in California and elsewhere this week have not had an impact on advertising the way the lockdowns did last spring. That is according to iHeartMedia CEO Bob Pittman, who told an investor conference Wednesday that he is feeling “pretty bullish” about the ad market, despite all that is going on in the economy overall, in part because he believes there is less fear about the virus than there was in March and April.
“It seems like consumer demand is there no matter what goes on with the virus now, and the only thing that tamps down businesses is government controls on what people can do,” said Pittman. “Advertisers have also figured out that if they don’t advertise that when we come out of this, they will begin to lose the consumer.” He told the UBS Global TMT Virtual Conference that those signs point to a “snap back” as the rollout of the COVID-19 vaccine expands.
The company has not released any estimates for the current quarter, but it has said the positive trends of third quarter – when revenue grew 53% compared to Q2 – have continued in the final stretch of 2020. “Even excluding political, we have seen some real strength in the overall business the last few months,” said COO/CFO Rich Bressler.
Pittman thinks radio is well-positioned for a rebound, in part because of what happened during the past year. “Every business in America today is focused on efficiency,” he said. That review of how to make marketing dollars stretch further has come at a time when there was already renewed interest in audio. “Things that have turned out to be rather inefficient are under a lot of scrutiny and media like ours, which is very efficient, get another look,” said Pittman. He said Procter & Gamble’s embrace of radio also helped make other brand managers sit up and take notice.
The expansion of iHeart’s podcasting, streaming radio and now-virtual events has also helped the company position itself as not just a reach medium but also a marketing partner to brands. “We want all of these new exciting revenue streams like podcasting to be additive revenue streams,” said Pittman. “We want to build out radio.”
That has allowed iHeart to take on a new relationship with some of the biggest brand advertisers. With them, Pittman said the marketing relationship is at the “heart” of the partnership. “They want fewer media partners – they’re going to big players and consolidating and given our size that puts us in a very good position,” he said.
Yet COVID-19’s damage to the ad market will take time to repair. “We have no reason at all to believe that the company won’t return to pre-pandemic levels,” said Bressler. But he told investors that even with expected “significant” progress toward that goal in 2021, it likely won’t be until 2022 when there is a full recovery to 2019 revenue levels.
It is one reason iHeartMedia has been focused on its cost structure, targeting $200 million in cuts this year that followed a modernization initiative that began pre-pandemic. It has been achieved though more reliance on things like artificial intelligence and cloud computing while also trimming the payroll, executive pay and bonuses, employee travel, and real estate holdings. “We’ll still keep offices in every location, but we are going to be much more efficient as we look at what the work environment will be post-vaccines,” said Bressler.
Tougher Look At Live Events
The pandemic has meant radio’s largest event – the iHeartRadio Music Festival – needed to go virtual this year like most other national and local market events and concerts, or else simply be scrapped. Pittman told the UBS conference that his company learned a lot about the potential of virtual events this year. In the case of the iHeartRadio Music Festival’s virtual reincarnation, social media impressions rose 20% over the prior year’s live event. And the live streams were double.
Pittman said going virtual does mean no ticket revenue and fewer sponsorship dollars, but costs are significantly lower. “Virtual events turn out to be a much better margin business,” he said, telling investors that post-pandemic a combination of live and virtual events – some newly created this year – is likely.“We’re going to be a little pickier [about live shows] because we realize we can get a lot of the benefit on a virtual basis,” said Pittman.