More detail from the massive iHeart filing includes an analysis of why the company had to make the decision to file for bankruptcy. iHeart executives say it had to do with market conditions, the challenges the radio industry faced, and the 2008 financial crisis. They also mention that Cumulus had to do the same thing.
In the filing, iHeart points out that the reasons they had to file for Chapter 11 were, among other macroeconomic and industry-specific challenges, the financial crisis that began shortly after the acquisition of iHeart in 2008 significantly reduced advertising and marketing spending, leading to declining advertising revenues across iHeart’s businesses. Concurrently, new competitors entered the broader media and entertainment industry, leading iHeart’s advertising customers to redeploy certain of their advertising spending to the rapidly-growing digital advertising industry. These changes have been felt throughout the radio industry.
“For example, iHeart’s largest broadcast radio competitor, Cumulus Media, sought chapter 11 bankruptcy protection on November 29, 2017 and consummated a chapter 11 plan on June 4, 2018. In order to keep pace with competition from within the broader media industry, iHeart has continued its transformation from a terrestrial radio broadcasting company into a diversified media, entertainment, and data company. This included the addition of streaming, digital formats, and live events. iHeart’s transformation has led to continued revenue growth and outperformance of the broadcast radio industry. In line with this strategy, the Debtors expect the traditional terrestrial radio broadcasting market to continue to decline in the coming years.”
Cumulus recently emerged from bankruptcy, after 180 days, and half its debt load gone.
iHeart points out that while market conditions were deteriorating cuts were made to try to keep the company running. “iHeart implemented various initiatives to reduce costs and increase revenue generating opportunities. For instance, iHeart has continuously reduced headcount to fund growing business segments, consolidated locations and positions, and cancelled burdensome contracts. In 2014, the Debtors executed an iHeart restructuring plan with an objective to reduce operating expenses without impacting top line revenue. The plan included increasing the management spans of control in the sales organization, eliminating certain highly compensated employees, reducing programming costs by moving towards centralized resources, and reducing overhead in the Katz Media Segment. As a result, operating expenses were reduced by roughly $60 million. Additionally, throughout 2017, the Debtors implemented further cost-saving initiatives and decreased iHeart’s employee headcount by roughly 4 percent, producing $30 million in annualized savings. The Debtors leveraged a good deal of their overall savings to invest in supporting the key growing portions of their business, such as the launch of iHeart on demand, a national sales channel, programmatic sales systems, data analytics, and smart audio products.”