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iHeart Is Flatlining. Q1 2017
iHeart Media Inc., once known as, Clear Channel Communications, is experiencing a financial and existential crisis. After cultivating a corporate culture that values form over substance, they have managed to demonize their own brand and ruin radio as we once knew it. iHeart’s next quarterly report plans to include language warning investors that it may not survive another year.(* These gloomy predictions follow a sunny report detailing an uptick in 2016. They are preliminary and are subject to change.)
Where is there to go but down for iHeart?
Clear Channel and Bain Capital entered into the one of the biggest mega leveraged buyouts to date in 2008. What other pinnacle of broadcasting was left to gobble up? In 2017, there is nowhere for the company to go but down, and that is exactly what is happening. Clear Channel, once valued at $26.7 billion, a figure which was scribbled on the back of a cocktail napkin, was then sold to a group of investors. It is now worth one tenth of what it was in 2008.
Clear Channel is driven by a revolving sales staff that is often too-young and too inexperienced to carry a 28-billion-dollar debt on their shoulders. In the current era of radio broadcasting, there are no Mr. Carlson’s running small stations like WKRP. They were all purchased by The Evil Empire – or one of its 3 major competitors. The local flavor, connection and commitment of radio has vanished.
The integrity of the iHeart brand isn’t resonating with listeners or investors because it’s basically bullshit. Climbing the corporate ladder is a dog-eat-dog-world. Regardless of the logo they plaster on t-shirts, billboards, and bumper stickers, they are heartless. Budget cuts, voice tracking, loss of localism in most markets, nationalized programming, competition from streaming services, and other unfavorable factors are to blame for iHeart’s dismal state today. Let’s not forget this huge problem, CORPORATE GREED. That’s iHeart’s greatest sin, and they are certainly guilty. When asked about what he did for a living, Clear Channel’s Founder, Lowry Mays didn’t speak about musicians, ratings, or disc jockeys – he instead, made his feelings clear by commenting, “If anyone said we were in the radio business, it wouldn’t be someone from our company. We’re not in the business of providing news and information. We’re not in the business of providing well-researched music. We’re simply in the business of selling our customers products.”
So, what can iHeart employees and shareholders expect? If he’s as smart as they say, current CEO, Bob Pittman will probably get out while the gettin’ is good. He’s not been “smart enough” to save iHeart so no one really knows. Expect some of the stations to be sold in order to reduce debt. They’ll likely retain the most profitable stations, which feature predominantly talk radio in major markets. The music stations in their current formats are not attracting new listeners, nor resonating with old ones, and they require a dramatic change to remain relevant.
How Much Change?
Will the change include shuttering the doors of this broadcasting giant and doing away with radio forever?
History and common sense indicate radio will be around forever. These frequencies are governed by the FCC and no federal bureaucracy wants less to govern. iHeartMedia will fundamentally change, there is no doubt; however, public broadcasting, in whatever form, will be around long after we are gone. At the present moment, only wall street insiders can speculate on how drastic the change will be. The current Congress should reexamine the 1996 Act, but we predict that will not happen either. After consulting a gypsy tea leaf reader, the suggestion for investors is to sell short, and for employees to refresh their resumes. It is, after all, the era of Corporate Personhood and Citizens United. Let the people eat cake and bow down to crony, corporate capitalism – it’s the wave of the future.