In third quarter 2019 iHeartMedia delivered a one-two revenue punch: stable and growing ad sales from a resilient broadcast and networks business, and fast-growing digital revenue from podcasting and streaming. The company’s broadcast segment out-performed the radio industry by 3%, network revenues shot up 9% and digital throttled ahead by 34%. “Our traditional radio business remains stable and growing while our high-growth digital business continues to accelerate,” Chairman and CEO Bob Pittman said.
Reporting results Thursday, the company said it’s making progress attracting new business from three key revenue segments it identified in August, after emerging from Chapter 11. Those include increasing its share of radio ad spend, tapping into TV and digital ad revenue pools, and building new revenue opportunities from podcasting and sponsorships. Pittman held up a 3% overall revenue increase (nearly 5% when political is excluded) as evidence of this progress. And he pointed to Miller Kaplan data showing iHeart out-performed the radio industry by 3% as another indicator.
As the country’s largest radio company and biggest commercial podcaster, iHeart is benefitting from all the new energy surrounding audio today as some advertisers shift parts of their media mix into it from other areas. “We've begun to see a shifting of media mix from other sectors toward audio and, as the leading audio company in the U.S., we’re benefitting from that,” he told analysts. The company is attracting money not previously earmarked for radio, Pittman said, in part by first hooking them as sponsors for tentpole events like this month's iHeartFiesta Latina and December’s Jingle Ball tour.
Building a multi-platform audio company has allowed iHeart to offer a holistic approach to ad sales, Pittman explained. “Audio has never been hotter and iHeart has leadership across all major platforms: broadcast radio, streaming radio, podcasting and social,” he said. “Having that array of multiple platforms gives us multiple touchpoints with the audience, an opportunity to touch them in many different ways, as well as offering the advertisers this broad array of opportunities.” And that’s led some marketers who previously shunned radio to come on board via other platforms, including some who have been converted into major radio advertisers.
President COO and CFO Rich Bressler said the environment for spot radio “continues to feel pretty good” with the telecom, financial services, media and publishing categories all showing strength. And Pittman said they’re “beginning to feel some strength in the broadcast radio sector overall.”
Developing More ‘Long Tail’ Business
Apart from running through operating results and providing color on the ad market, Pittman also teased a new programmatic advertising product iHeart is beta testing called Ad Builder that’s designed to develop more “long tail” business. The self-serve platform creates customized audio ads for advertisers “using proven techniques to get their businesses heard, based on info the advertiser shares about their business,” he said. Once a client approves the ad, allocates a budget and selects a schedule, an automated process creates a media plan that “connects the ads to the right people at the right times.” The goal, Pittman said, is to move beyond the company’s current client list of 60,000 accounts and target the roughly 7 million prospects that are economically unfeasible for sales reps to call on. Pittman said he expects adoption of Ad Builder to occur gradually over the next 3-5 years.
He also voiced support for radio to move from selling based on cost per point to impressions- based sales, a movement currently underway in the TV business. “If we can get more advertisers to buy impressions, it will allow us to sell through all of our dayparts” and better monetize inventory outside radio’s Mon.-Fri, 6am-7pm primetime, he offered.
For evidence of a renewed interest in radio, Pittman pointed to Procter & Gamble, which has become one of the medium’s biggest clients following years of radio silence. P&G’s recent 7% growth in net sales validates its use of radio, Pittman suggested. “That’s been an interesting model that a lot of other advertisers have looked at,” he said, suggesting that more marketers are considering the addition of radio to their TV and digital mix to “to get more reach, more cost efficiency and unique impact.”