Triple-Digit Revenue Gain For iHeart Podcast Business; CEO Bob Pittman Questions Subscription Model.
Podcast ad revenue soared 142% during the first three months of the year at iHeartMedia, which reports its first quarter podcast revenue totaled $38.4 million. And the gains could be even larger in the current quarter as iHeart reports its April podcast revenue was up 170% compared to a year ago. “Our digital business, including podcasting, continues its strong growth trajectory,” said iHeart CEO Bob Pittman. “Audio is hot – everything in audio is growing.”
During the company’s quarterly earnings call with analysts Thursday, iHeart executives said their combination of broadcast radio and podcasting is having a growing impact on its digital business. “We’ve got this secret weapon called broadcast radio and we’re able to build hit podcasts by promoting them on broadcast radio,” said Pittman. “That kind of firepower with the reach and frequency we have to promote it we see show up in terms of downloads almost immediately.”
Podtrac earlier reported that iHeartMedia topped its ranker for March with a unique U.S. audience of more than 30 million listeners, the first time any publisher has crossed that threshold, and iHeart had downloads and streams that topped 257 million.
“Our broadcast radio reach acts as a megaphone to promote our podcasts like no other radio company can and our technology and platform assets makes it easy for our talent to create shows and for us to monetize them. All of this makes us the first stop for most podcasts creators,” said Pittman. Last year iHeart aired $100 million worth of promotional announcements on its radio stations.
The just-announced multiyear podcast partnership with the National Football League to create an NFL podcast network is evidence of that broadcast-podcast synergy, said Pittman. “We have this audience, and they have this incredible content and we’re able to pull it together (like) that no one else could do,” he said. “And the opportunity to monetize it is important to them and us.”
‘Small Pool’ Of Users Want Subscriptions
In recent weeks both Apple and Spotify have debuted competing subscription podcast offerings, but iHeartMedia is unlikely to follow suit or throw up any pay walls to listeners looking to access its content. Not only is the company’s business profitable without it, but Pittman questions whether podcasting is ripe for such a fundamental change.
“Content creators want to reach as many people as they can and that appears to be by far the best economic model,” said Pittman. “No one has yet proven that there is any subscription opportunity in podcasting and a number of people have tried already and have not succeeded yet.”
The iHeartPodcast Network has grown to 560 shows and Pittman said the economics of podcasting still means the economic benefit accrues to publishers, not distributors. “Although we are a major distributor with the iHeartRadio app, our economics come from our publishing,” he said. “We have yet to see any evidence that the subscription model will work in podcasting except perhaps for select niche products.
Pittman said his experience in media has taught him that subscription offerings have usually succeeded when they offered consumers a way to lower their expense rather than buying content on an ala carte basis. “We have never seen a free product move to a pay product successfully,” he said. “In the case of podcasting, it’s free and you’re asking to people to pay for something that’s free. I think it’s going to be a very small pool of consumers who will do it.”
‘Steady Recovery’ In Ad Market
Overall, iHeartMedia first quarter revenue totaled $707 million, a 9.5% decline year over year -- the smallest decline since the pandemic began – and is a sign that the upheaval COVID-19 caused to the ad market is fading. Excluding the impact of political advertising, iHeart says first quarter was down 7% reflecting the continued quarterly sequential improvement. The company’s fourth quarter revenue was down 17%. The first quarter results also came in better than the 11% to 13% decline that executives had earlier projected. The results also reflect how big digital has become for iHeart with 22% of its revenue now tied to digital.
“The first quarter outperformed our expectations on all financial metrics,” said Pittman. “Which is not just a continuation of the positive trends we’ve seen across the business – we believe it’s a validation of our long-term multiplatform product and revenue strategy and the investments we have made in growth areas like podcasting, ad tech and the continued expansion of broadcast radio on digital devices.”