IHeartMedia files for bankruptcy protection
iHeartMedia filed for federal bankruptcy protection on Thursday, culminating weeks of maneuvering and years of troubled finances.
Under a deal worked out with creditors, iHeartMedia will wipe away $10 billion in debt. There’s not expected to be an immediate impact on the company’s 855 radio stations, including 21 in Tennessee.
The Chapter 11 bankruptcy was filed in the Southern District of Texas bankruptcy court after weeks of extensions on negotiations that ramped up after iHeartMedia missed a $106 million debt payment in February.
The company touted 18 consecutive quarters of revenue growth, and music industry executives expressed confidence that the bankruptcy does not signal a nail in the coffin of the terrestrial radio industry.
Still, iHeartMedia’s top competitor, Cumulus, has battled similar financial turmoil in recent years. And streaming services, having already shaken up how consumers buy music, are increasingly competing with radio stations as the preferred medium for how fans discover new music.
“The agreement we announced today is a significant accomplishment, as it allows us to definitively address the more than $20 billion in debt that has burdened our capital structure,”
More: iHeartMedia’s 7 Memphis stations still running. Page 13A
iHeartMedia CEO Bob Pittman said. “Achieving a capital structure that finally matches our impressive operating business will further enhance iHeartMedia’s position as America’s No. 1 audio company.”
Even though the company’s bread and butter is its radio stations, iHeartMedia has employed a number of innovations in recent years as it became a multimedia company. Bobby Bones, one of its star morning show hosts, whose show emanates from the Big 98 offices in Nashville, is an example of how iHeartMedia’s reach extends beyond the radio waves.
Bones, a published author with a successful touring band of his own, produces content for radio, social media, podcasts, television and streaming. When Bones touts a new country artist, it almost immediately moves the needle in terms of sales and name recognition.
David Macias, co-founder and president of the label services company Thirty Tigers, said iHeartMedia deserves credit for those innovations. Macias, whose company was among the first in country music-dominated Nashville to embrace on-demand streaming services, said he doesn’t view the iHeartMedia bankruptcy as a broader signal of terrestrial radio falling off a cliff.
“I don’t think this means the terrestrial radio business isn’t viable,” Macias said. “But it may mean that it needs to get smaller.”
Belmont University media studies professor Rich Tiner agreed. Tiner said when radio was at its apex, it had especially strong appeal with local listeners. But part of iHeartMedia’s strategy has been to acquire as many radio stations as possible and cross-program content.
That took the local personality and appeal out of the content, Tiner said.
“In 1948, television came along and it was supposed to be the end of radio,” Tiner said. “But what radio did was innovate, and that innovation was to become the platform for music, specifically hit music. It was really radio 2.0.
“I wonder if these recent events call for radio 3.0. And I don’t know what that would look like, but I tend to think it would involve more local flavor and more local content.”
There’s no doubt that streaming services are intruding into the music discovery space that has always been a strength of broadcast radio. Country music fans still rely on broadcast radio to learn about new artists, and a single radio hit can turn an artist into a household name, which increases their ability to tour and grows the entire country music ecosystem.
Spotify, the world’s No. 1 streaming service with over 71 million premium subscribers and 159 million total monthly users, views music discovery as one of the keys to its growth. In documents filed with the federal Securities and Exchange Commission in advance of its initial public offering next month, Spotify made clear that it intends to compete with companies like iHeartMedia on the music discovery front.
“With our Ad-Supported Service, we believe there is a large opportunity to grow users and gain share from traditional terrestrial radio. In the United States alone, traditional terrestrial radio is a $14 billion market, according to BIA/ Kelsey,” Spotify said in its initial disclosure document filed with the SEC. “The total global radio advertising market is approximately $32 billion, according to Magna Global. With a more robust offering, more on-demand capabilities, and access to personalized playlists, we believe Spotify offers users a significantly better alternative to linear broadcasting.”
After iHeart missed its debt payment in February, Liberty Media made a $1.16 billion offer for a 40 percent stake in the company. As negotiations between the two companies progressed, Liberty purchased $400 million of iHeart’s debt.
Liberty Media counts SiriusXM, Formula One auto racing and the Atlanta Braves baseball team among its assets.
Reach Nate Rau at 615-259-8094 and nrau@tennessean.com. Follow him on Twitter @tnnaterau.