On its first quarterly earnings call in 20 months, iHeartMedia changed formats, so to speak, with a rare appearance by Bob Pittman on the call. After emerging from Chapter 11 May 1 and returning to the public markets July 18, new investors are sizing up the company and Pittman used the occasion of its second quarter 2019 results call to reintroduce iHeart to the public equity world. The Chairman and CEO brought a big picture perspective, outlining how a new streamlined capital structure and separation from Clear Channel Outdoor will allow it to “focus exclusively on increasing our lead as the No 1 audio company in the U.S.”
Pittman began by differentiating iHeart from the rest of the radio pack. “We don’t think of our company as a radio company,” he said, pointing to iHeart’s scale, national footprint, multiple consumer platforms, data and analytics capabilities, and a marketing solutions approach to advertising. With audio hotter than ever and pureplay music services getting Wall Street’s attention, Pittman posited that the broad audio sector consists of two fundamental pieces: radio and music collections. Radio delivers companionship, a human touch and a connection to the world, he said, while music collections are used for “me time” and to “escape the world.” He cited research showing 90% of consumers agree with the statement that they listen to both AM/FM radio and music collections – but at different times and for different reasons. “iHeart plays on the companionship side,” Pittman explained, keeping people company and engaged. As evidence of that audience engagement – a metric of rising import among advertisers – the chief executive referenced comScore and Nielsen data showing iHeart’s broadcast radio audience spends 30 minutes a day with its stations, compared to digital goliaths Google (24 minutes) and Facebook (18 minutes), putting it at the top of the media world in this metric and in total audience reach.
More ‘Entry Points’ For Advertisers
Pittman mentioned earlier in the call that the company would be making the rounds at various investor conferences and his remarks Thursday offer hints as to what the talking points may be in those meetings. The company is focused on using its multiple platforms of broadcast, digital, podcasting, social and events to deepen the relationship with consumers, while giving advertisers more “entry points” into the company. “This sets us apart, not only from all audio companies, but in the media business as well,” he declared. And in contrast to streaming audio services, iHeart has a “well distributed listener base.” For example, 75% of iHeart listening comes from 35% of its audience, while 73% of Spotify listening is from 3% of its audience and 72% of Pandora’s listening comes from 5% of their audience. “That resonates with our advertisers,” he offered.
Digital has become a major growth driver for the company, with revenues rocketing up 33% in second quarter. And podcasting plays a starring role in the growth. Podcasting listening on the iHeartRadio app tripled in the past year, as the platform loaded up on podcasts, driven in part by its acquisition of Stuff Media. The growth strategy involves using radio’s reach and engagement to expose people who have never heard a podcast to the burgeoning medium. Brand advertisers are jumping on board, from established billion dollar companies like Procter & Gamble to new brands like Fair.com, a pre-owned car leasing app.
Hook A Larger Podcast Audience
In fact, iHeart now sees podcasting as one of its four major listening platforms, alongside AM, FM and digital streaming via the iHeart app, which in June posted a 12th consecutive month of year-over-year growth in listening hours and now boasts 130 million registered users. Podcasting, which Pittman called “a very important strategic move for our company,” serves not only as a way to make its big radio shows available on demand but also provides an outlet for “shows we can’t put on the radio but in many ways are like radio shows.” When it comes to content and promotion, the relationship between broadcast and podcast has become increasingly fluid, Pittman said, singling out the launch this month of the weekly radio show “Sunday Night Podcasts,” which will allow some of iHeartRadio’s most popular podcasts to reach new audiences while helping expose the medium to radio listeners who aren’t yet podcast consumers. The goal is to get a larger audience hooked and it appears to be working: unique listeners for the company’s podcast network grew 272% year over year.
Pittman also touched on iHeart’s business model and plans to better monetize its monthly broadcast audience of 275 million listeners. Step one is to increase its share of radio advertising spend. Citing Miller Kaplan data, Pittman said iHeart outperformed the rest of the broadcast radio industry by 3.5% in 2019. That was accomplished by bringing revenue not previously designated as radio money into the sector and moving beyond just negotiating with radio buyers to work directly with marketers and media planners on integrated marketing solutions.
The second step is to tap into TV advertising revenue pools. TV’s reach is down from 95% to 89%, while radio holds steady in the low 90s and reaches most of the 40% of the TV audience that are light viewers. “We think there’s a big opportunity for us to help in the mix of TV, not replace TV, but add to its effectiveness,” Pittman said.
The third leg of the plan is to build new revenue streams from podcasting and sponsorships.
To tap into the $80 billion digital advertising pool, iHeart has invested in data and analytics through the Smart Audio program “that makes our broadcast inventory look like digital inventory” while addressing market demand for more effective targeting, measurement and attribution.