iHeartMedia’s IPO May Demonstrate Future Of Music Radio

2In an effort to pay down its massive debts, iHeartMedia is set to file for an IPO, a move by the bankrupt internet radio company which could be indicative of what the future may hold for other music companies involved in radio, and specifically internet radio, may do moving forward.

 

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Guest post by Bobby Owsinski of Music 3.0

iHeartMedia is about to file an IPO that’s meant to pay down its massive debt, but could show what the future of music radio in the United States is going to be. The company, which is the largest station group in the country with 848 stations, filed paperwork earlier in the month for the potential offering.

iHeart has been in bankruptcy for the last year and has managed to cut its massive debt of $21 billion down by about a third. The proceeds from an IPO would go a long way to trimming that down even further and allow the company to exit bankruptcy later in the year.

There’s more to this than just the financials, however. Radio, especially music radio, is changing fast and what happens here might give us a sense of what the future might bring to both.

If you look at the numbers in various reports and surveys, radio listenership is stronger than ever. Despite giant inroads made by streaming, radio is still the most consumed audio source in the car and there are a host of other metrics that seem to indicate that radio is still popular and growing. There’s a chink in the data armor though. The number of listeners below the age of 25 is decreasing rapidly, as radio becomes unimportant for music consumption to them.

Radio used to be the primary driver of new music. Listeners discovered new artists from the radio, and program directors, even in small markets, had the ability to “break” a song that was relatively unknown by the rest of the country.

2Those days are now long gone, as music radio has become a reactive medium, with program directors (there are fewer of them as station groups have gobbled up most smaller stations and program them from a central location) now relying more on streaming charts from Spotify or Apple Music than their own tastes. As a result, the hits that are added to radio playlists are often past their freshness date. Gen-Z listeners have already moved on to something newer and radio has lost any chance of getting them as a result.

Since there are so many other audio entertainment sources available, radio has taken a hit in advertising as well. Although iHeart’s revenue is still strong at a bit less than $1 billion, just give a listen to most stations during a commercial pod and you’ll probably hear at least one free public service announcement. Radio listeners are clearly fed up with the commercial load per hour, yet radio in general insists on having as many commercial spots as possible, even if they’re not generating money. That’s not a way to attract new and skeptical listeners.

Things have even changed with college radio, which was once a major source of music discovery with the demographic most interested in music. For budgetary reasons many colleges have sold off their terrestrial transmitter and moved their station online, and have lost much of their audience as a result.

Record labels still view radio as important though – not so much for breaking an artist but for taking what already has traction to the next level. Radio may not deliver the prime music lovers, but it does deliver casual music consumers, which is a bigger market but tougher to crack.

iHeartMedia has not stood still in terrestrial radio though. It made a big move into digital as soon as CEO Bob Pittman (of MTV fame) took over in 2010, and now boasts 128 million registered users. It’s value to the music industry is in the terrestrial stations it owns however, even though the company’s online offering is close to Spotify in consumption among what’s known as “heavy listeners.” iHeart provides radio stations online while most of the music consumers that count to the music industry want on-demand or customized playlists that they get from most streaming services.

So iHeartMedia’s IPO should be interesting in that it will give the company some financial breathing room and space to work. Will it continue to offer up the same old radio the same way, or will it try to innovate in an attempt to get Gen-Z on board? If it does nothing to change, music radio’s audience will continue to erode until it’s a shadow of its former self.

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