The first shoe has fallen in what promises to be a prolonged period of massive reorganization and debt restructuring in America’s radio landscape, as one of the largest radio station owners has filed for Chapter 11 bankruptcy. Announced on Wednesday (11-29), Cumulus Media has filed voluntary petitions to reorganize under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court for the Southern District of New York.
Cumulus Media owns roughly 70 country music radio stations, along with 446 total stations in 90 media markets. The company is also partnered with Big Machine Records via the NASH Icon record label with artists Reba McEntire, Martina McBride, Hank Williams Jr., and Ronnie Dunn. Cumulus also owns NASH Country Daily, which used to be the well-circulated country music periodical Country Weekly before Cumulus purchased the magazine in 2014, retooled it to their country-centric “NASH” brand, and eventually shut down print operations in April of 2016 due to dwindling revenues.
What effect the Cumulus bankruptcy will have on the country industry remains to be seen, but it may not be as bad as it sounds. Since Cumulus still has plenty of cash reserves, it plans to continue operations mostly as normal through the Chapter 11 restructuring. It’s a different story for rival iHeartMedia who is the #1 radio station owner in America ahead of Cumulus, and is facing its own financial woes. The hope is the filing will reduce Cumulus Media’s debt load by roughly $1 billion—or 69% of the company’s responsibilities—giving it the flexibility to deal with rigors of the changing media marketplace moving forward.
“Over the last two years, we have focused on implementing a business turnaround to reverse the Company’s multi-year ratings, revenue and EBITDA declines, create a culture that fosters motivated and engaged employees, and build an operational foundation to support the kind of performance we believe Cumulus is capable of delivering,” says Mary Berner, President and CEO of Cumulus Media. “As we have demonstrated in many measurable ways – including increased ratings, revenue market share gains, improved employee satisfaction, reduced employee turnover and, over the last several quarters, our return to year-over-year EBITDA and revenue growth – that turnaround has not only been successful but is continuing. However, as we have noted consistently, the debt overhang left by previous years of underperformance remains a significant financial challenge that we must overcome for our operational turnaround to proceed.”
The previous years of underperformance are mostly due to the previous CEO of Cumulus Media, Lew Dickey. Lew was fired in September of 2015 after taking Cumulus down a path that relied greatly on using country music to revitalize the company. Along with Lew Dickey’s brother, Cumulus Vice President John Dickey, the company planned and entire suite of “NASH” media and consumer products, not limited to tiers of radio stations to appeal to different country music listeners, consumer goods such as clothing, furniture, food, and even paint and restaurants, along with their label partnership with Big Machine Records that hoped to revitalize the careers of iconic country artists left in the lurch by modern country radio’s focus on youth, and tight Top 40 playlists. Ultimately the plan turned out to be more sizzle than serious strategy.
“The actions we are taking today to address our balance sheet are a critical step forward for Cumulus,” continued Cumulus CEO Mary Berner. “We will use this restructuring process to relieve the financial constraints on our continued progress, allowing us to focus our resources on investing in our business and people to strengthen our competitiveness and ultimately drive growth.”
But just like with the exit of the Dickey Brothers, this Chapter 11 filing will certainly have reverberations in country music, which unlike other genres and music industries, still relies very much on radio to connect with consumers, and promote artists.
All this news comes as iHeartMedia has made it known they do not expect to be “a going concern” in 12 months or less, leaving even more uncertainty for the country music industry.