On its fourth quarter earnings call, iHeartMedia Chairman & CEO Bob Pittman offered a lookback at the company’s achievements during the past year and a look ahead at what’s to come in the remainder of 2020. The company, he said, delivered “strong results, capping off what was a transformative 2019,” one that saw the company emerge from Chapter 11 with a healthier capital structure and a new listing on the Nasdaq stock exchange. In 2019, the company parlayed its multiplatform assets, and a reawakening among advertisers to audio, to outperform the broadcast sector, Pittman said. “iHeartRadio stations are No. 1 in audience in more markets than the second and third largest broadcast radio operators combined,” he boasted, adding that that is also the case in the top 50 markets.
When it comes to digital streaming, iHeart has a “five times audience lead” over radio’s second largest commercial broadcaster and is the No. 1 commercial podcast publisher, Pittman noted. That dominant position translated into a 33.6% increase in digital revenue in fourth quarter, boosted by significant growth in podcasting.
During the late afternoon call with analysts, Pittman talked up the “complementary interplay” between podcasting and traditional radio and how that is helping the company grow its podcast margins. “That linkage between radio and podcasting is a major part of our dramatic growth in podcasting as we use the power of our huge-reach radio platform to promote and create demand for our podcasts.”
The one-two punch of live events and social media was another area of interplay for the company in 2019. It now boasts 215 million fans and followers on social media, who help amplify its eight tent pole events, like the Jingle Ball Tour and iHeart Festival Latina across their social graphs, producing “the highest awareness among live music events” and opening doors for “advertisers and fans to come into the iHeart ecosystem,” Pittman explained.
As TV audiences decline and radio’s reach remains unmatched, advertisers are starting to drive a shifting in media mix from other sectors toward a reenergized audio world. “And as the leading audio company in the U.S. we have benefitted,” Pittman offered. One way it’s done so is by infusing its sales approach with data and analytics, allowing it to start to tap into TV and digital ad budgets and grow new advertising opportunities through digital, podcasting and sponsorships. All three had strong results in fourth quarter, even up against challenging year-over-year comparisons to fourth quarter 2018, when the company booked half of its political ad dollars in a mid-tem election year.
Stability of its traditional broadcast business and continued growth in its digital and podcasting channels was the main story line for iHeart in fourth quarter. The company reported total revenues of $1.03 billion, flat compared to one year ago, but up 4.3% when excluding the cyclical impact of political revenue. Broadcast revenue at the company’s traditional radio business declined 2.7% but increased 0.8% without political. Digital and networks were the company’s Q4 growth drivers – networks grew billings 2.2% year-over-year, mainly from gains made at the Total Traffic & Weather network, while digital billings shot up 33.6%, boosted by significant growth in podcasting and other digital revenue. Audio & media services billings declined 19.9% but increased 4.5% excluding political. Sponsorship revenue increased 5.3% year-over-year.
Modernization and Restructuring
Pittman also used the call to bring analysts up to speed on the company’s ongoing modernization and restructuring efforts, which he called one of its “most important initiatives since emerging from bankruptcy.” Taking advantage of the “significant investments” it has made in new technologies, the company is constructing “a modern infrastructure that provides better quality, newer products and delivers new cost efficiencies,” he said, referring to its January announcement of a new organizational structure, one that involved widespread layoffs, and an increased reliance on technology. “This modernization is essential to be a major player in today’s digitally focused media world,” Pittman said on the call. Building on its “strong momentum of 2019,” it sets the company on a growth path for the future, adding “to our competiveness, effectiveness, and our efficiencies with our major constituencies.”
Pittman called it a “reimagining of what a true multi-platform media company looks like today,” one that uses technology and artificial intelligence to improve the quality of decision-making, provides resources to help employees become more efficient and effective and improves the experience it provide to consumers. “We believe this is essential to our future,” Pittman said, adding that the changes are expected to deliver $100 million in cost savings by the second half of 2021.
He also provided more color on “centers of excellence” the company is building, which consolidate functional areas of expertise in a specific location. After investing half a billion dollars in technology and infrastructure, the company can now “provide services from anywhere in the company for the benefit of anywhere else in the company, meaning that distance is no longer a barrier,” he explained.
In closing his prepared remarks, Pittman expressed excitement about what lies ahead. “We couldn’t be more excited about where iHeart stands today and we’re well positioned to drive our company forward by continuing to be thought leaders, innovators and operational pioneers in the audio space,” he said. “We appreciate that we have a leading position and unparalleled reach across multiple platforms in the audio world and we intend to utilize those advantages.”