The New York Post is reporting that private equity firm Silver Lake Partners may be interested in buying iHeartMedia. According to the paper, Silver Lake is in talks with iHeart creditors, which are gearing up to take control of the company once it emerges from Chapter 11.
iHeart filed for Chapter 11 in march and is expected to emerge with 50% less debt later this year. The company went into bankruptcy with more than $20 billion in debt.
If Silver Lake were to buy iHeart the paper says it may look to form a partnership between iHeart and arena venue manager Oak View Group. iHeart bought a stake earlier this year in Oak View, which manages the New York Islanders arena and for a fee books events into Madison Square Garden, the Prudential Center, and Los Angeles’ Forum.
Radio Ink forgot to mention that Silverlake has to wait until they themselves get out of bankruptcy before they can make an official bid.
Wooops, “corrections and retractions”. Confusing Silverlake with another potential investor… no coffee yet.
“iHeart filed for Chapter 11 in march and is expected to emerge with 50% less debt later this year”…….. So iHeart will be all smiles that they will only owe 10 billion plus and out of chapter 11? Something is very wrong here!
Concerts are making a lot of money. Radio stations help sell tickets. So the partnership would be a source of revenue for the company. BTW they’re not “diverting resources to a streaming app.” If you read RadioInk on a regular basis, you’ll see that digital is the only real growth area in owning radio stations today. Generally speaking, revenues for radio stations are up at best about 1% a year, regardless of how much stations spend on content. The “lavish concerts” you mention are profit centers. That’s why they do them. Those two items are why the company isn’t in much worse shape. If they only had to depend on radio revenue, the debt would be far worse.
BigA, any company only has so many dollars and resources. Those are finite. So yes, any resources that Iheart has put towards their online app, is in fact diverting resources that could be applied elsewhere. By Pittman’s own admission, iHeart has been unable to make the app profitable, even after millions of dollars spent on that app. Meantime, many of the radio stations ARE profitable, not counting the debt servicing. And the iHeart app streaming revenues are less than 5% of the radio station revenues! You stated that radio revenues are up only 1%…imagine how much more they could be up, if attention, focus and monies were spent on developing new radio personalities and more promotion of the radio stations.
“…imagine how much more they could be up, if attention, focus and monies were spent on developing new radio personalities and more promotion of the radio stations.”
They spend on stations that are doing well, and they run VT on stations that aren’t. And if you study them on a market by market basis, the amount they spend doesn’t always translate to revenue or ratings. They have full staffs in NY, LA, and Chicago, and those clusters are making money. But they’re not growing. So costs increase every year, and they can’t add more spots or increase the rates. That’s the problem. How to grow to cover increased costs when they can’t add spots or increase rates. Rent keeps going up. Utilities, insurance, salaries, and other fees go up all the time. They spend lots of money on talent. That’s why even during bankruptcy, no one is looking to leave. There’s a lot of internal movement of staffs from market to market. Audiences today are listening to radio differently. Not just on-air, so focusing 100% of attention on-air will miss a big chunk of audience. But even if they add new personalities, it won’t actually translate into increased revenues because they’re basically topped out. Unless a new personality gives them access to new money from an untapped advertiser, it won’t improve the situation. Spending more money on something that doesn’t directly result in more revenue doesn’t make sense.
You don’t re-build or build better radio stations, and better radio content, by diverting resources to a streaming app or by putting on lavish concerts, or by voice-tracking key dayparts. These were some of the major behavorial mistakes by current iHeart management (Pittman and his minions). So how Silver Lake thinks that buying a concert booking company is improving the radio stations, is befuddling!