Radio’s largest company delivered slow sequential revenue improvements this year (-3.8% in Q1, -3.6% in Q2 and Q3). And despite recent global geopolitical events, iHeartMedia said Thursday it expects that to continue through the fourth quarter before returning to growth mode in 2024.
The company’s Digital Audio Group, which houses its high growth podcast network and the iHeartRadio streaming service, has posted growth throughout the year, including a 5.5% lift in the third quarter. And senior management expects fourth quarter growth in the high-single digits for the business unit.
The Multiplatform Group, which includes 850 radio stations, a portfolio of networks, and an events business, continues to be impacted by the advertising uncertainty that has plagued media companies all year long. After a 5.1% revenue decline in the third quarter, the Multiplatform Group is forecast to decline by high-single digits in Q4. But when the impact of last year’s boost in political revenue is factored out, the Multiplatform Group revenues are on track to decrease by mid-single digits in Q4.
“We have seen gradual improvement from quarter to quarter throughout the year, and we remain confident that the Multiplatform Group will be an additional growth engine for the company in the advertising marketplace recovery,” Chairman and CEO Bob Pittman told analysts Thursday.
Fourth Quarter Outlook
Pittman has said in previous earnings calls this year that the fourth quarter will be the strongest of 2023 for the company. “Although it is still on track for that, it will be weaker than we originally anticipated, due to some dampening of advertising demand, which coincided with the uncertainty caused by the recent geopolitical events,” Pittman said. During the past two years, iHeart has experienced what he called “significant last-minute advertising spend” during late November and December. But because that is impossible to predict, it isn’t baked into the company’s fourth quarter guidance, which calls for total revenue to decline by high-single digits.
As noted by President and CFO Rich Bressler, the fourth quarter of 2022 “was the biggest quarter in the company's history, and was the largest political quarter of the year, with $66 million of political revenue.” Excluding the impact of political, Bressler said total Q4 revenues are on track to decline low single digits.
Advertisers ‘Back In Growth Mode’
Pittman said iHeart “remain(s) confident that both the advertising marketplace and our company will be back in growth mode in 2024.”
During the Q&A portion of the call, Wells Fargo Securities Senior Analyst Steven Cahall asked Pittman what he bases that outlook on. Many advertisers are already examining 2024, Pittman said, and from where he sits, they appear to be “back in growth mode” in terms of spending.
During an ad market recovery, “you generally see digital recovery first,” Pittman said. “Behind that, historically you see TV recover next, and then radio.” But given dramatic declines in linear TV viewership and their impact on revenues, he sees an opportunity for radio to jump ahead of TV in the recovery queue. “From an objective standpoint, we're seeing the pieces falling in place, so that gives us confidence,” he said.
Pittman also pointed to anecdotal indicators of a recovery. “We were talking to advertisers and looking at their plans for next year and having those discussions. And the general sense we get for most of them is that they're looking at 24 being back into growth mode for them and spending to support that. So I think we are, again, the beneficiary of that.”
Podcasting ‘Nowhere Near Maturity’
While the exact timing and magnitude of a recovery isn’t known, Pittman made the case that podcasting is the best performing segment of the ad marketplace. Podcast revenue at iHeart was up 13% during the third quarter from a year ago, with total sales of $102.7 million.
“We don't think we're anywhere near maturity on podcasting,” Pittman said. He also dismissed the idea that podcasting may be hitting a ceiling, pointing out that iHeart continues to see more people become podcast listeners, while those that do listen are spending more time with the medium.
“What's also encouraging is that it's a relatively young audience for podcasting,” Pittman said. “There are now more people using podcasting than use the biggest streaming music services, and it continues to grow.”
On a bigger scale, Bressler added that media forecasters see no signs of a slowing opportunity for the podcast industry with estimates that it could achieve $5 billion in total revenue in the coming years.