1300 Stations Now Under Bankruptcy Umbrella

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(By Radio Ink Publisher Deborah Parenti) Should we look at that statement as good news? Of the approximate 11,300 AM and FM radio stations in America, over 11% of them (iHeart with 850/Cumulus with 445) are now under the umbrella of bankruptcy. And there are many in our industry who are cheering that fact. Why are they cheering? Why is this good news to them? It’s not because they wanted those two companies to fail. Rather, they see light at the end of a long, dark tunnel. Radio’s two big companies are finally facing the elephant in the room and working on plans to shed over $22 billion in debt that for years has been kicked down the road.

Many radio executives have been prognosticating, even hoping, this day would come. They were hoping radio’s two biggest companies would get their restructure in motion, get it over with, and get back to business. Since the day Mary Berner took over Cumulus she has been very forthcoming that the debt situation she inherited needed to be addressed. And she’s following through with addressing their $2 billion in debt.

Since the day Bob Pittman inherited iHeart’s massive debt load, while unable to move that needle, he transformed a radio company into a multi-media platform giant. Many may not agree with all of the decisions made, but conventional wisdom alone was never going to be enough to erase that massive debt. Bold moves are never sure bets but credit should go to those who dare to try.

It appears 2018 may be the year it all gets cleaned up, and certainly that IS good news for all. Of course, anything can happen along the way; these bankruptcy plans could fall apart, which would be catastrophic (and rare). Other radio companies could find themselves in the same position. And for sure, there are going to be many who are not repaid a penny in these situations. For them, none of this is great news.

Industry watchers have said for a long time that the enormous amount of debt iHeart and Cumulus have been carrying around, combined with their inability to pay it down, has been marring the entire industry. It has cast a dark shadow over everyone, including advertisers, and the sooner they both clean up their balance sheets and come out on the other side stronger, the better it will be for everyone.

When you really think about it, shouldn’t we all be rooting for Mary Berner and Bob Pittman to succeed? Shouldn’t we hope both Cumulus and iHeart emerge as more solid companies, making the industry stronger? We all know there were a lot of layoffs along the way, and there may be more, but there are still many thousands of employees we should also be cheering for, championing their efforts to create great content, market and sell that great content, and best of all, serve their communities all across the country better than any other medium. This could be the dawn of a new day for radio.

Radio Ink Publisher Deborah Parenti

Deborah Parenti is Publisher of Radio Ink Magazine and can be reached at Parenti@aol.com

31 COMMENTS

  1. Others choose the music for them. Well that maybe true it’s not the younger generation. So enjoy what you have left as the audience ages out until you have nothing left. I understand it perfectly… maybe at your old school thought that is just frankly too old school. Just keep doing what you been doing because that’s the way it’s always been done. How’s that working out for companies like Iheart? ?

  2. Note to Bob MacKay:
    I trust many readers will have already concluded that the anonymous troll, TheBigA, refuses to consider the facts of the tremors under the radio foundations. He also takes every opportunity to avoid the facts or consider reality while posting superficially weak justifications and obfuscations of the issues troubling many in the industry. He may not be “Bob”, but he could be “Weave”.

    I think that stations who are streaming do so in an attempt to maintain an audience who don’t have radio on their devices or radios at home. Beyond that, radio needs to address its own programming before going into the storm door or pest control businesses.

    Meanwhile, was it so long ago that programmers hooked into promoting “commercial free” music sweeps? Even a rube from the hills would hear that and conclude that the stations didn’t really like commercials and were apologizing to audiences for airing those vile elements. Advertisers wonder the same thing.
    (Please be aware that none of that is part of “telling the story”.)

    But, I suggest, Bob, these are only surface issues. Adjusting those to some degree will do little to advance radio’s need to drastically advance the medium. In other words: These are, primarily, “deck chair” matters.

    If radio, generally, is to pull up and get back to altitude, adjustments will have to be made. Not superficial fiddling. CORE matters – base, fundamental, communicative approaches that radio, so far, refuses to consider or exploit.
    Mary has been kept in the dark, as have both “Bob” – and “Weave”. There are others.

  3. Here is the Million Dollar Question to Deborah Parenti, Ed Ryan, Ronald Robinson, Dave Sanders, “The Big A” (come on, admit it Big A!- you are in fact Bob Pittman, or his relative lol!)… Anyway, NOT ONE audio streaming service is even close to making money. Not one!!!!… The business model is not working. Yet, the radio industry has had this insane obsession to be “digital” for the last 10 years or so, with streaming. Why??? What do advertisers on iHeart radio stations think, when they hear unrelenting promos on that iHeart radio station, PROMOTING THE IHEART APP!! Those promos are suggesting that the listener TURN OFF that radio station, and go to the streaming app. What message does that send to the radio station advertisers?????!!!!…That is insanely stupid. And WHAT IF, all the millions of dollars and resources that companies like iHeart have spent on streaming efforts… had been actually INVESTED IN THE RADIO STATIONS????? The money could have been spent on acquiring and retaining real LOCAL, compelling radio personalities (not voice-tracking), on station promotion, REDUCING commercial loads, etc. There are hundreds and hundreds of radio stations still making good profits. Many radio leaders – dare I say including Bob Pittman and his iHeart minions- MAY have been horribly horribly misguided in their direction and efforts!! Streaming is a MULTI-BILLION DOLLAR MONEY LOSER. Period. Ask Sirius, Pandora, or Spotify if you don’t believe me. Many people of all ages STILL LISTEN TO RADIO… and the #1 reason that people TUNE OUT of a station or tune out of radio…is TOO MANY COMMERCIALS!! So cut down the commercials …go back to 2-minute breaks… invest in personalities and strong local promotions… and you will keep your audience!! This industry obsession to “be digital” is absolutely insane. Crazy. It’s like we want to jump off the profit cliff, and land in the Valley of Huge Losses like the aforementioned companies. That is all!…

    • Why does it have to be one or the other? Advertisers want their commercials everywhere. You can either let them spend money someplace else, or sell them a complete package of on-air and online.

      Why online? Because people don’t carry portable radios any more. They carry phones. The only way to hear radio on a phone is by stream. At home, the new radio is the Amazon Echo. The only way to hear radio on an Echo is by stream. So those two devices make streaming necessary, even if it’s unprofitable.

      • You totally and completely missed the point, Big A. I never said that radio stations should not stream their “radio on-air product.” I’m talking about completely misguided focus and completely misguided use of financial and other resources… that is, radio “leaders” not focusing and investing in the profitable radio business, while being obsessed with the digital. Intolerably-long commercial loads drive listeners from a station and ultimately from radio… to streaming and elsewhere. Putting in voice-tracking and firing live and local personalities, negates a local station’s huge advantage over streaming. Things like that. …The Big Picture.

        • The only digital radio stations are doing is streaming their on air product and podcasting. So I’m not sure what your complaint is about.

          You realize it’s the commercial breaks that make the money. Cutting the breaks will mean less revenue. Where do you get the money to pay the live & local hosts if you cut the source of revenue?

    • Bob…Great question. Last week at the Radio Ink Hispanic Radio Conference Jeff Smuylan said he’s been streaming his stations longer than anyone and he still loses money on it. The problem is that’s where listeners are listening. That genie is never going back in the bottle. When I go on a trip I use my phone to listen to the local station I love. It’s a scenario I imagine is happening everywhere every day. There’s no way stations cannot be there. And you are correct, streamers are bleeding money. And, it’s obvious local stations need great local talent. You are not breaking news there. The question is how do stations stream and make money at it — or at least not lose money at it. Perhaps that’s where our industry has dropped the ball.

  4. Note to “None”:
    Was Bob hired to turn the CC ship around or was he brought aboard only to keep it floating?
    Whatever was in his agreement, he failed to do both – while continuing to accept his pay and bonuses.

    • The same people who hired Bob are the ones who pay the bonuses, and want him to continue with the company after bankruptcy. Maybe they know something you don’t.

  5. None of you get it.

    First off, Bob Pittman wasn’t even in the picture at CCU when this debt was piled onto that company ten years ago, so be fair to the man as to whom the real culprits are at iHeart.

    The real problem all radio companies have today is not debt, but rather rapidly eroding profitability. Costs have escalated tremendously while revenue has been dormant. Debt service is nothing more than an indication of profit ratio.

    Music audiences have shifted online while local advertisers are defecting to digital display and search.

    These guys can all shed as much debt as they want and every one of them will be bankrupt again within 5 years.

    Radio’s problem is not on the balance sheet, it’s in the P&L. The underlying business model has failed under private equity ownership. This industry can’t be saved at this point. It will be death by a thousand cuts over the next twenty years.

    • That’s an interesting observation, and if you broaden it to incorporate digital, the same problem exists there. Both Sirius and Pandora were heading towards Chapter 11 a few years ago, until a cash cow like Liberty Media stepped in to stabilize them. Sirius has stabilized, but Pandora is still teetering on the edge, unable to turn a profit after 17 years, and accumulating a pretty big debt. These big investment companies can provide a quick, short term infusion of capital when a company is looking to grow. But if the company doesn’t use that capital to deliver greater profits, you end up in Chapter 11. Because of what you say, with no growth happening in traditional radio, the only real hope is for radio to find financial partners who can benefit from their reach, and their ability to drive listeners to other platforms, because radio stations alone won’t be able to create the kinds of profits they did in the past.

  6. Note to Dave Sanderrs:
    It’s both, Dave.
    Those with massive debt have an excuse to avoid getting past the “bad radio” mode.
    Those without the debt are unwilling to invest in providing more appealing and more effective radio – assuming they would know how to go about that.
    They don’t.
    Beyond a constant ‘telling of the story”, they are buffaloed.

  7. AM/FM radio is the absolute best – we love you so much because having a competitor like you – in deep denial about your own future – helps us absorb your audience, city by city, demo by demo, listener by listener. Keep pumping those millions to Nielsen who’ll tell you what you want to hear. But we know exactly who is listening. We’re going to take you apart piece by piece as you tout the strength and resilience of your deck of cards. Keep up the good work.

    Your friends at,
    Spotify
    Apple Music
    Google Play Music
    Amazon Music
    Pandora
    YouTube Music

  8. As usual, no one is asking the question that really needs to be answered before the industry can move forward.

    Does bad radio exist because of this sort of debt in the industry, or does this sort of debt in the idustry exist because of bad radio?

    Once you (honestly) figure out that answer and act upon it, only then is there any real hope for the industry thriving long term.

    • My answer to your question is that Pandora, Spotify, and all the other companies do bad radio. How does it affect their finances? Name all the popular personalities on Pandora. Name all the local talent, and all the local newscasters on Spotify. Name one.

      • Problem is, the personalities worth listening to are few and far between. As we all know on the radio, music is dominant. But the truth is, companies like Spotify do it better. Radio still has the arrogance of thinking it has the right to tell the audience what to listen to. That’s why streaming companies that let the listener decide what they listen to have the ability to kill the radio industry. Scoff all you want, but it’s just a matter of time before the technology becomes cheaper, more reliable, and more universally available.

        • You didn’t answer my question. I answered yours.

          You also don’t understand the difference between a mass medium and a personal device. They are two different things. Some people like having others select their music for them. For them, there’s radio. Spotify doesn’t do it better. You do all the work. Spotify is simply the platform.

        • To Dave Sanders: “Radio has the arrogance of thinking it has the right audiences what to listen to”? How are Spotify and Pandora really different? You look for a song or artist and it ‘recommends’ similar for playlists or stations. The only difference is music was once recommended by on air people and is now recommended by algorithms.

    • i wonder if bad radio comes in part from the size of companies today. How many decisions are made away from the market? How aggressive and competitive can a station be when they own the competition?

  9. This gives the entire industry a black eye. Read the comments to the USA Today article and you will see what I mean. Yes an article in the USA Today, from a bankrupt industry on the brink of extinction, kind of ironic. There is no good that comes out of this for the industry, now we have to go around and apologize for the inept operators of 2 of the bigger owners of radio stations in the country. now we will spend countless hours explaining to everyone that Radio is still fine, in fact we have more listeners than ever, are the number one reach medium and the future is brighter than ever. Instead, we sound like we are making excuses. Great work buffoons at Cumulus and Iheart. I am still not sure how the people who are “restructuring the debt” can be happy about giving away $10 billion that was owed to them? How does that work? Didn’t Iheart generate that money and debt by promising people they would pay it back with interest, like an investment? Now they can’t keep their promise to their debt holders, why would we believe they will keep promises to clients? or employees? This entire situation makes me sick.

    • You are 100% right. The Board of Directors at Clear Channel/iHeart has never held Bob Pittman accountable. Never. And you wonder how Bob Pittman or Mary Brenner would react, if their advertisers filed Chapter 11 and stiffed them for half the money owed! Would “everyone be happy” then, lol!

      • Accountable for what? Bain & Lee each have two seats on the Board. My view is they decided this was the time to pull the plug. They get 10% of the company. BTW its not unusual for advertisers to stiff radio. But it’s not the same thing. Lenders rarely get full payment on a debt. Somewhere along the way, a deal gets made. Especially when the debt is $20 Billion.

  10. As long as IHeart doesn’t come out of Chapter 11, it will be good for radio. Let IHeart die…and sell off the stations to companies who are interested in radio, not financial engineering. I own and operate three FM stations. One station competes directly with an IHeart station. We have a live afternoon jock–they voice track out of Pittsburgh. We have a news director–they pipe in news readers from WLW. We try to keep rates up–they take anything they can get just to show some cash flow.

    The PE boys have bled dry and killed Toys-R-Us, they’ve bled dry IHeart, now let it die.

  11. I must have slept through Econ 101 ( God knows the professor did, but thats a story for another time ) but someone please tell me how a company can file bankruptcy and see its stock rise 8 percent, albeit 4 cents. Just doesn’t make sense to me

    • The part of the company that declared bankruptcy is private, no stock. The part of the company that has stock (ie, Clear Channel Outdoor) isn’t part of the bankruptcy, but is now 100% owned by the creditors.

  12. Deborah’s column here is well-articulated and well thought out. That said, regardless of the underlying reasons for these bankruptcies, the perceptions by advertisers and others about 2 major radio companies in bankruptcy cannot be good. And by no means, should we be lauding the executives of these companies!! Lawyering up, getting legal stays against your creditors and filing bankruptcy does not take any special talent and certainly does not in and of itself demonstrate leadership talent. Donald Trump used bankruptcy many times for his businesses, to eliminate debt. On the other hand, Warren Buffet has never gone near any company with bankruptcy history. And only 25% of companies that have gone through Chapter 11 bankruptcy survive in the long term, so there’s that. Time will tell. But with the onslaught of emerging digital products (and the iHeart app has failed to get the critical mass of pure play digital music apps) and iF there is another recession…it will be interesting to see if Cumulus and/or iHeart survive long term. Time obviously will tell.

  13. Radio’s two big companies are finally facing the elephant in the room and working on plans to shed over $22 billion in debt that for years has been kicked down the road. That 22$B has generated much income and wealth before the last holders standing with the doggie bag AND scooper. It’s not like it hasn’t been almost perfectly executed to the basis point in this media shell game.

    Fred; Why the act if 1996 only? Isn’t it the lack of responsiveness of the overall industry established on older road maps? Like an old school time machine for a once accepted model for income generation, older investment philosophy of another era, demographic and time. Same actors today whose ads or metrics are ‘hot air’ until proven otherwise, which now will be seen in behavior pre and post ad using tracking technologies and laser beams. A newer National Radio platform, reinvents inside the auto and uses home media tech and radio becomes more like a hybrid delivery platform routed wisely. Anticipated revs are about 1/3 paying for dynamic and curated radio, 1/3 will just be control rooms. 1/3 will remain like an older school community station, but scaled geographically for best advertising results and balance sheets for today, not for the LBO world of 2005… every 10-12 years, like the old town square clock.. the bell makes … fiddle sounds. And we roll on. Like ‘Sammy the Snail’ makes his way in the book and CD, our little fans just say, Go Go Go!

  14. It is politically correct to root for the big guys to succeed. I’m sure there are a number of smaller companies that will have their debt wiped out that may but them in financial trouble. Who will root for them to survive and come back stronger? We only know about the top 20 creditors but I am sure there are many more who are owed smaller amounts but that may represent a bigger amount of their accounts receivable. I will also wish them the best of luck in this deal.

  15. Deborah, well said. Informed, thoughtful and right on the mark. This is indeed good news for the entire radio community. Best regards and congratulations on your insightfulness and statesmanship.

    Gordon Hastings

  16. If it’s any more difficult to run 1300 stations than it is to run a few, the new leaders of these two companies have my sincere condolences. They appear to have an impossible job.

    The damage done by using unlimited amounts of OPM to overpay for most of their properties can’t be undone by a Chapter 11.
    Obviously, I don’t have a dog in the race but it seems to me that survival of these mega companies might necessitate spinning off the worst failing stations into a confederation of independent stations… an alliance of sorts where local competing manager/operators could be brought in to localize programming and take control of income and expenses.
    These operators should have an easy path to ownership by repaying a portion of the unsecured creditors over a long term. The remaining profitable stations could remain as the core of both companies.
    This nightmare began with the Communications Act of 1996 and it’s far from over.

    • Fred, all this corporate debt is like TAXES… you always gotta pay your taxes or there are consequences too, right?!

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