Basically, American Radio Is Being Suffocated By Billions in Debt & Could Implode Any Moment
- The stock prices for America’s two largest radio station owners have fallen 93% and 78% respectively over the last year.
- iHeartMedia carries $20.6 billion in debt alone.
- Companies are spending profits simply on paying the interest on their debts.
It was inevitable, and it is inevitable. With the largest owners of American radio stations carrying around such an incredible debt burden, and working under an outmoded business model, the implosion and reorganization of the radio business is not a question of “if,” but “when.” And it might be happening sooner than later.
The two largest radio station owners in the United States—iHeartMedia (formerly Clear Channel) and Cumulus Media—both have billions in debt, are both looking to restructure that debt to avoid bankruptcy or default, and are both dealing with dwindling profitability. Even when the companies are able to post strong quarterly earnings, the interest on the debt they owe and impending payoff dates make it virtually impossible to see a way forward for the companies. It appears they will never be able to pay down they’re debt. So they have resorted to endlessly restructuring their debt to put off due dates indefinitely.
iHeartMedia tried to save itself in January by selling off five outdoor markets in its lucrative billboard sign business—Clear Channel Outdoor Holdings, inc.—to competitor Lamar for $458.5 million. But instead of solving the financial problems for the company, it may have exacerbated them.
Despite owning 840 radio stations with a weekly listenership of 110 million, and boasting an additional 80 million online users through the iHeartRadio app, the company carries a total of $20.6 billion in debt. Just the interest on the debt, which totaled $1.74 billion in 2015, ate away some 25% of the company’s earnings last year. This meant despite pulling in a whopping $6.5 billion in revenue in 2015, the company still lost $661 million due to debt interest and other expenses.
But that’s not the company’s only problem. Tied to the outdoor billboard division sale, a group of iHeartMedia’s senior creditors took exception to how the company attempted to move a portion of the proceeds of the sale from one division of the company to another, and sent iHeartMedia a default notice on their debt. iHeartMedia has challenged that default notice in court, but if they lose, the debt could come due in total in less than two months time, and send the company into bankruptcy.
iHeartMedia has made a habit of restructuring debt over the years to avoid catastrophe, but even if they are able to wiggle out of the current default notice, they still have to solve their long-term debt and revenue issues. The company’s iHeartRadio app is doing well, but they continue to spend incredible money to promote it with festivals and awards shows, while some investors and technology experts question the app’s long-term effectiveness in an increasingly on-demand world.
iHeartMedia’s closest competitor Cumulus Media is also looking to restructure its debt. In the aftermath of attempting to un-Dickey the company by demoting founder Lew Dickey and firing his brother John Dickey who was the architect of the company’s “NASH” play into the country radio market, the company is looking to restructure senior notes of its debt that are set to come due in 2019.
Currently, Cumulus Media has a total of $2.5 billion in debt, and each year the company has to shell out $140 million in interest on that debt. Though by the numbers this debt is not as large as iHeartMedia’s, Cumulus has more serious underlying problems compared to its competitor. Both company’s stock prices have been decimated in the face of rising debt concerns. iHeartMedia’s stock at the moment trades near $1.00, and has fallen over 78% in the last year. But Cumulus’ stock price has performed even worse, trading at $0.52 currently and falling 93% over the past year, putting the company at risk of being de-listed by major exchanges.
Cumulus also has a manpower problem. They’ve lost nearly 2,000 employees in the last 18 months, or almost 50% of their work force. And these aren’t layoffs, this manpower has left voluntarily, leaving Cumuls scrambling to fill key vacancies. The rats are fleeing the sinking ship so to speak. Cost cutting measures have only resulted in parallel revenue losses for the company. Cumulus has a bit more time to figure out its financial future compared to iHeartMedia, but its overall situation may be more dire, especially since they don’t have a major technology play like the iHeartRadio app to peg their future on in an increasingly on demand, non-traditional radio media landscape.
Meanwhile CBS Radio—the 4th largest radio station owner in the country—is rumored to be looking to be sold by its parent CBS, possibly to the 3rd largest radio station owner, Townsquare Media. Townsquare is buffered to some extent by its vast collection of music blogs, including Taste of Country, The Boot, Brooklyn Vegan, Pop Crush, and many more, but still faces the impending realities of traditional radio. Townsquare is also one of the few radio owners who has been able to pay down its debt as opposed to just restructuring it. In October they made a voluntary $20 million payment on their debt to bring it down to $298.5 million total. But they’re still operating with a huge debt burden.
So should we be cheering the implosion of American radio, since it has become such a lumbering monolith, wrongfully thinking it can cut its way back to profitability by syndicating programming nationwide and relying on less manpower, which is what got radio into this spot in the first place? What will the radio landscape look like if the major networks fall into the hands of creditors via bankruptcy and default? Would it become even more of a lumbering monolith, or would radio station ownership and operation revert back to the local communities that can offer something unique and relevant to its listeners?
Radio still remains one of the most viable way to reach both local ears, and the masses. As radio goes, so could go the music that relies on it to find an audience.
March 24, 2016 @ 9:13 am
The faster it implodes, the better, IMO. And whatever happened to the whole NASH thing, anyway?
March 24, 2016 @ 12:19 pm
Free public fm radio playlist are way repetitive, the bands I dig, Lucero, B’B’ Smoke, Whiskey Myers, Chris Knight and so on are Not, on the radio, good comment Razor!
February 15, 2019 @ 12:10 pm
My first job was selling radio ads for Clear Channel in 2006 for a major country music station. I lasted 8 months and packed my bags because I knew the product was over priced and I hated wearing a tie. Even back then our sales staff saw the writing on the wall, but trudged on. For 13 years I’ve been waiting for the inevitable collapse.
Fast forward 13 years, I’m living in Nashville, as a staff writer and creating the same over priced content I sold. Go figure!!
And I get it, the music is not always good and is dumbed down for the masses. But the masses want it that way. My teenage nieces and nephews want to hear the stars because that’s who they see on the E channel, CMT, and People magazine. It’s Hollywood. Throughout history, top 40 music in any genre will have bad music.
What I’m saying is, the radio product is what it has always been… watered down music with the occasional undeniable song that you’ll sing for the rest of your life.
The problem isnt the product, it’s that radio isn’t worth what the suits said it was worth when they structured these deals. And now they’re dying, i think…..but I’ve been saying that for over a decade.
Side note..
The music industry as a whole is dying. I just recently had a song reach number 3 on the highway XM and I might make enough money to take my girlfriend out for a nice steak. XM, Apple, Spotify, Pandora etc don’t pay much to spin their product, but they’re members are paying upwards of $10 a month for unlimited listening. I’ve never paid more in my life for music. These platforms are far bigger crooks than FM.
At least FM will pay the songwriters when something hits millions of ears.
March 24, 2016 @ 9:44 am
Tomorrow would be good. Given those debt loads, I don’t see any creditors wanting to take over the networks, that would just compound their problems. When Clear Channel and Cumulus collapse, the immediate effect would be dozens of frequencies flooding the market, which should have the effect of making them affordable for local radio operations, whether commercial, like WEAK, The Voice Of Rainbow Valley, airing cheap ads for local businesses, listener-supported or community. Hopefully, such stations will learn the lesson, that playing shitty music isn’t a real good idea.
March 24, 2016 @ 9:54 am
I fear what might take their place, Comcast radio? But then again, how could it get worse? And if someone brings up how radio is irrelevant because of all the streaming options, I’m gonna snap. Local radio is the spice of life!
March 24, 2016 @ 12:31 pm
Yes, as much as we would love to wizz on the grave of corporate radio, we can never forget about the law of unintended consequences. Who’s to say what replaces it isn’t twice as bad, and figures out a way to reach more people? I don’t think any of us are in a position to predict what might happen if Cumulus and iHeart default.
March 24, 2016 @ 10:04 am
Bye Felicia.
March 24, 2016 @ 10:26 am
Let em burn…
March 24, 2016 @ 10:37 am
Shocker.. Music Radio stations have become slaves and victims to their own greed and the corporate world..
They’ve lost their connection with the local base and have become so vanilla. All the programming is just so formula driven and pathetic.
The best example is when you compare one of these conglomerate stations crap programming to some of the few (if you can find them) independent local stations.
Radio will always be there.. Hopefully the smaller stations benefit the most from the collapse of the big shyt machine.
March 24, 2016 @ 11:27 am
…ditto for network television . pathetic , generic , mindless entertainment , for the mostpart , too much advertising , too little creativity ( vanilla ) too much focus on an ADD- riddled market place . In Canada , people are cancelling cable in droves and going to other forms of programming delivery . People use satellite , MP3 players , streaming ,or cable radio specialty stations for music …..commercial radio is either overdone classic rock stations , talk/news/sports radio or bad ” country music “.
March 24, 2016 @ 12:32 pm
People are canceling cable in droves in the United States as well. This is another big, looming issue for American media coming down the pike.
March 24, 2016 @ 7:38 pm
The difference is that Cable/Pay TV still has live sports. Live sports is pretty much the only thing keeping the cable and satellite companies afloat since live TV is no longer the draw is once was (with the rise of Netflix, Amazon, Hulu, etc.) and companies like Dish/Sling TV and now Sony are putting big money behind creating streaming options for cord cutters who want to watch AMC or FX. Live sports, specifically if you live in the state/TV area of your favorite team is the one thing that no company has been truly able to replace yet. It may come, but services like MLB.TV are only good if you are a Braves fan living in Oregon or Minnesota.
The sad thing that the radio stations face is that their content is anything, but exclusive. The local announcers have rapidly been cut or have been replaced by generic voices, the content is easily found on Spotify or iTunes and even the talk portions of the radio industry have been hurt by the rise in popularity of podcasts. Hell, NPR is now directing their talent to not mention NPR One or their podcasts because they are so afraid of bleeding listeners.
March 24, 2016 @ 10:49 am
I wonder how much money finance and deal guys made during the acquisition stage?
How much of the debt does that make up?
And who benefits from allowing one company to own so much of the radio business? This giant entity owning everything makes no sense.
Too much consolidation and monopoly in business these days. All business.
Hope they don’t shed the debt and then continue on with the same low grade product, and huge market share. Needs to be broken up.
March 24, 2016 @ 11:00 am
“So should we be cheering the implosion of American radio, since it has become such a lumbering monolith, wrongfully thinking it can cut its way back to profitability by syndicating programming nationwide and relying on less manpower, which is what got radio into this spot in the first place? What will the radio landscape look like if the major networks fall into the hands of creditors via bankruptcy and default? Would it become even more of a lumbering monolith, or would radio station ownership and operation revert back to the local communities that can offer something unique and relevant to its listeners?”
This is the million dollar question.
Obviously, having these radio stations parceled out to more local or regional ownership groups would be ideal. I mean, things couldn’t actually get worse, right? … Right?
March 24, 2016 @ 11:06 am
By the way, Margo Price on Conan tonight! (3/24/16)
March 24, 2016 @ 11:36 am
If it means more of these stations go back to smaller local and regional ownership it’s fantastic news. If it means a significant number of stations just shutting down, it’s a disaster.
March 24, 2016 @ 12:21 pm
Where did the debt come from trig? / when was it accumulated?
March 24, 2016 @ 12:36 pm
From Billboard:
“The company has $20.6 billion in long-term debt related to its 2008 purchase by private equity groups Bain Capital Partners LLC and THL Partners.”
March 24, 2016 @ 1:12 pm
I have always said that when Clear Channel changed its name to iHeart Radio, it was the musical equivalent of United Fruit changing its name to Chiquita. The name might sound nicer, but the stench of the past wrongs is evident!!
March 24, 2016 @ 1:15 pm
“Insert obligatory “Who cares, radio sucks” comment”
But in all seriousness, radio has always been one of the premier ways to reach consumers, especially since many of them listen in the car even if they didn’t watch the news in the morning.
It’s an obsolete format, but it’s all encompassing reach would mean a near implosion of it’s cultural relevance if it were to implode.
March 24, 2016 @ 7:33 pm
It’s a major impact but they had to see it coming as some vehicles are being designed without radios. Just an input plug for iPod or phone. And most now have satellite radio. When they get a taste of that is definitely better.
March 24, 2016 @ 1:35 pm
“…. it”™s all encompassing reach would mean a near implosion of it”™s cultural relevance if it were to implode.”
I’m OK with that. Right now it is doing more harm than good so let it implode. I see no downside except possibly the loss of some jobs. And as for “who’s to say what takes it’s place won’t be twice as bad” — there comes a point where it just doesn’t matter anymore. I think we’re close to that point, if we aren’t there already.
March 24, 2016 @ 4:42 pm
The problem for iHeart isn’t that it isn’t making money it is that it has too much debt from the LBO. It’s EBITDA (earnings before interest tax depreciation and amortization expenses) was $1.8bn on just over $6bn of revenue. That is about the same EBITDA as a sucessful retailer like Nordstrom. Now they do have too much debt and they will need to cut the debt – maybe they can get bondholders to agree to turn their debt to equity, or they have to go bankrupt and come out with less debt. Now maybe with all their interest, they haven’t been able to invest behind new initiatives. And yes they have earnings pressure as radio continues to fall (I mean with streaming who listens to radio any longer?) But this is case where bankruptcy means ‘cut the debt’ not ‘going out of business liquidation sale.
March 24, 2016 @ 6:08 pm
All the good cable channels have shows that have nothing to do with their premise.
Cmt, MTV, history,gac, discovery, Vh1, ect…
Walking dead and a few other shoes are the few exceptions on cable. And Netflix is starting to produce somevpretty decent shows.
March 24, 2016 @ 8:06 pm
Here’s a really weird concept: let’s go back to local radio stations with choices of programming that reflect the listener community! OH! WAIT! I already enjoy that concept in the Northern California central valley-5 great radio stations, all publicly funded and dependent on listener support for their vibrant existence. What are these other canned national media outlets of which you speak? Why would anyone listen to them?
March 25, 2016 @ 7:17 am
There’s no good Country on iheart. The closest is Heartland Radio which is more songwriter / Americana. You can program an artist specific channel, which operates like a Pandora / Spotify by feeding you similar artists. And that’s fine. I use the app mainly for news radio because I live in the mountains where radio reception is spotty.
March 26, 2016 @ 6:31 am
Radio stations are bought and sold frequently, so thats nothing new. I honestly see no downside to this for the consumer as these four conglomerates have pretty much erased the local identities of every station they bought. And thats the problem. People can turn to online streaming for music, but they can’t hear comfortable, familiar voice of the local DJs, the local news, stations that actually promote local artists, etc, through Spotify and Pandora. Lets not forget that for small businesses, the downtown radio station is still on of the best way to advertise. My hope is that such a decentralization will result from this and bring back the intimacy between a radio station and the region it serves..
March 27, 2016 @ 6:04 am
You don’t need to be a weatherman to know which way corporate radio blows!
March 27, 2016 @ 6:42 pm
I can’t remember the last time I listened to local radio. Satellite radio is worth every dime for me. I live in a rural area and local radio is terrible.
March 27, 2016 @ 9:57 pm
I hope this implodes and implodes soon and HARD. Clear Channel absolutely DESTROYED radio on a local AND national level when they tried to (and basically succeeded) in creating a monopoly. Whether your preference is music radio (something I have not been able to stomach for YEARS now) or AM talk radio (around here it’s all conservative/political-based which gets old, I don’t care if you lean to the left or the right or find yourself like me; somewhere down the middle)….
I remember how amazing radio was once upon a time. There were actual DJ’s & one could pick up an actual phone (landline(!)….imagine THAT….people once used a phone for “communication by voice” vs. “communication by non-verbal, non-emotional” text)…& you could request one of a number of songs. You had Casey Kasem counting down the top 40 and offering some interesting anecdotes here and there instead of playlists generated by a computer. On and on and on.
On the AM end? I remember being able to pick up (here in south-central KY) WLS out of Chicago around the midnight hours in the mid-to later 90’s and hearing Jay Marvin’s show (it was WILD….guy was completely UN-HINGED but funny as hell & it made for some amazing/entertaining talk radio….so SAD what that poor guy has gone through in the last decade or so). You could pick up so many of these crazy late night talk shows back in the mid to late 90’s…I LOVED it. From Art Bell (which is now a veritable snooze-fest w/George Noory) to Jay Marvin and at least a few others that I just can no longer recall.
Then came clear channel and they snapped up seemingly ALL of the pertinent stations and the programming became very robotic and boring (on the “talk” and the “music” end(s)….one the music end, again, you simply had a computer simply shuffling through a pre-determined playlist and even the decent stations simply recycled the same songs over and over and over again).
Bottom line (I had absolutely NO IDEA that Clear Channel AKA IHeartMedia was struggling before reading this article, so this was very educational to me and even offered up a slice of hope(!)….I CAN NOT WAIT until those bastards go under. I can not see the dire conditions of AM/FM radio getting any worse outside of the Clear Channel umbrella, which leaves hope that it would end up back on a local level and eventually? While I doubt the glory days of my 80’s youth will ever return….or even the 90’s, when, after graduating high school (1994)? I would work for a while, save my money, then take 6 months off to “find myself”….a process that lasted until Aug. 1998….and during said time-frame (during my “off-time”)? I found some truly NUTTY “talk radio” shows. Another one I remember (though it was early morning) was the “Ron N’ Ron Show” – those guys were friggin’ NUTS! I wish that I could remember all of the absolute insane, yet entertaining shows I would happen across in the early AM hours of the night. Once Clear Channel gobbled everything up? Terrestrial radio became a non-entity to me. Good RIDDANCE (and the sooner the better)!!!
March 28, 2016 @ 10:29 am
These companies paid too much when they were buying up radio stations after the Telecommunications Act in the 90s and 00s.
Radio revenue was stagnant, then it dropped with the recession, and it has really recovered. They bought those stations assuming that revenue would continue to grow.
Businesses are probably never really going to spend more than they are spending now for radio commercials. And they have done an absolutely terrible job at growing digital revenue.
So, the hole keeps growing.
April 4, 2016 @ 5:47 am
I can’t say i feel sorry for them.they actually played themselves out of the market.Good riddance.
July 22, 2020 @ 2:00 pm
I detest iHeart radio with my entire soul. I hope they die a painful death. Same stupid songs over and over and over again. I’ve grown to loathe Madonna, Billy Joel, Pink, UB40, Prince, and every other artist they play. HATE is not a strong enough word.
August 19, 2022 @ 1:12 pm
Six years later and it is still around.