http://www.medialifemagazine.com/coming-the-collapse-of-radios-iheartmedia/
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Latest opinion piece (3/29/16)on iHeart troubles
- Thread starter joebtsflk1
- Start date
It reads like a lot of wishful thinking to me. The main debt holders are Bain and Lee. They aren't going anywhere. I expect the company will settle with the smaller creditors, pay them off, and continue operating as usual until such time as they can do an IPO or sell to a foreign conglomerate. They need a change in ownership laws to do the latter, and I expect it will come later this year.
As a foreign I have to ask... Is it even legal that more than 800 stations are owned and operated by the same company? Isn't that a kiss of death for many small and mid market broadcasters?
Absolutely. Every station they bought was approved by the FCC and the Department of Justice. There are 14,000 radio stations in the US, so 800 is only about 6%.
iHeartMedia may own only 6% of the stations but they own some of the most powerful stations in the biggest markets. Much like the big banks .... "too big to fail" seems to fit iHeartMedia.
This is just pure speculation on my part, but iHeart Radio might be able to hold off the boogieman for awhile by selling off all of their properties outside of the top 50. This is what they did with ClearChannel Outdoor, which I erroneously thought had been completely spun off. CCOutdoor is still in Salisbury/Ocean City MD and Gainesville FL, both of which I think may be hot beach markets. Otherwise, it's strictly top 50 in their outdoor biz.
At one point, they owned just short of 1,200 stations. That was mostly due to the dogs that came as part of the consolidation frenzy from 1996 to around 2000.
The worst of the dogs have been sold, given away or taken off the air. Many of the smaller market operations that don't present cost saving opportunities have also been sold.
In the US, the formation of monopolies or oligopolies is controlled on a market by market basis, with caps on the number of stations that can be owned and further tests on revenue and audience share when stations are sold.
Having 800 stations is not in any way illegal or even close. In fact, if they wanted to go out right now and pick up a thousand stations in places like Rogers City, MI, and Bisbee, AZ, there would be no major impediment to doing so.
IHR still has stations in trust that have been there for going on 10 years (2 in the Dayton, Ohio market come to mind). THey still have stations in markets like Lima, Ohio and Somerset, KY and either are in no hurry to sell them or can't get what they want for them. There is a lot of wishful thinking among ex-jocks who seem to be hoping for liquidation of the company and the return of these stations to mom and pop owners, who presumably will hire big, live air staffs and have big, non-researched playlists.
Where "too big to fail" could come into play is the FCC not wanting hundreds of stations going silent, and in some cases that would have the majority of a market's major signals going away. This would also leave big holes in the EAS, which is the one thing the feds seem to care about.
Where "too big to fail" could come into play is the FCC not wanting hundreds of stations going silent, and in some cases that would have the majority of a market's major signals going away. This would also leave big holes in the EAS, which is the one thing the feds seem to care about.
The analysis of the article isn't wrong, but I don't believe the debt holders have much to gain by pushing the company into bankruptcy court. I think there will be a restructuring that will result in a debt for equity swap and Bain and Lee will lose their controlling share. Management will be forced to be more fiscally prudent, so the Manhattan HQ will likely be gone. The outdoor business may be given to some of the debt holders.
A breakup accomplishes nothing. A bunch of debt holders would try to secure the key assets with the chaff of the remotely programmed, low rated stations being avoided. It's more valuable as a whole. The debt and equity holders will take a write down. The assumptions that justified the value the assets were acquired for haven't been borne out.
A breakup accomplishes nothing. A bunch of debt holders would try to secure the key assets with the chaff of the remotely programmed, low rated stations being avoided. It's more valuable as a whole. The debt and equity holders will take a write down. The assumptions that justified the value the assets were acquired for haven't been borne out.
I'm confused. Why would two of the largest equity holders in iHeart lose their controlling share(s)? iHeart isn't publicly traded, so it isn't like a new Board of Directors drives out other board members.
The investors can recommend a management change, but since they aren't broadcasters, I doubt they would bother. Same goes with the NYC office. Large companies commonly have NYC headquarters for geographic availability to their clients. iHeart has already down-sized their corporate structure from the CCU days, so doing more isn't going to move the expense needle enough to matter. There comes a time when you can't always cut your way to prosperity.
Many of the CC Outdoor markets have already been sold with the remaining ones on the market. I doubt if anything will be "given away". The principal investors will want to maximize values for sale. Giving things away are not maximizing value.
Again, I'm not sure why you would assume debtors would be interested in becoming radio licensees. They wouldn't, nor do they care about things like ratings. Debt holders are interested in their invested businesses making money and paying their debt obligations.
It's time for IHeart to spin off its 850 radio stations and sell them to local groups! Get rid of voicetracking and rehire local d.j.s. Pay more attention to your local market and tailor your station to what's happening in your hometown, not be dictated by the management in Dallas, New York or Los Angeles. Consolidation sucks!
They have lots of small stations in their Aloha Trust that they'd love to sell for pennies, and nobody seems interested. They've taken to donating some of them to minority groups.
There are also loads of radio stations in a similar trust that Cumulus would love to sell, but there are no buyers. These small market stations are what's dragging down these two companies. If they could just find some people who want to buy radio stations in smaller markets, they'd quickly be able to turn a profit.
Once again, there really aren't a lot of "local groups" looking to spend millions on radio stations, and then spend millions more to hire local staff. It's simply not realistic. In market after market, the minute a local group gets involved, the first thing they do is cut costs.
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Folks who want to bring back radio in the 1970s need to realize we'd have to drastically cut down the number of signals in a market. A place like Dayton, Ohio would never be able to support 30 signals with 7 jocks and 5 news people apiece, especially with all the other competition for the ad dollar.
@Kelly A
If iHeart cannot service their DEBT, then the holders of the DEBT can force the company into bankruptcy court where the holders of the EQUITY, could lose all of their shares. To head that off, the equity holders may give up a substantial portion of their stake in return for the retirement of debt and being able to retain some of their stake.
iHeart will be unable to service it's debt indefinitely. They'll be unable to Rollover debt when it becomes due, even if they can generate enough cash to cover the minimum debt service requirements under the current terms. I don't see anyone loaning them any more money unless it is as senior secured debt on specific assets.
If iHeart cannot service their DEBT, then the holders of the DEBT can force the company into bankruptcy court where the holders of the EQUITY, could lose all of their shares. To head that off, the equity holders may give up a substantial portion of their stake in return for the retirement of debt and being able to retain some of their stake.
iHeart will be unable to service it's debt indefinitely. They'll be unable to Rollover debt when it becomes due, even if they can generate enough cash to cover the minimum debt service requirements under the current terms. I don't see anyone loaning them any more money unless it is as senior secured debt on specific assets.
But that hasn't happened, and isn't the issue here. So all of these iHeart opinion pieces are based on a false premise.
I can remember Clear Channel having selected many small markets for offloading, and even had a "Departing Markets Manager". These were places like Mansfield, Ohio. A few of those markets were sold, most were nit and were eventually brought back into the fold (allowed to listen in on the company conference calls again).
K
K.M. Richards
Guest
I'm juxtaposing two quotes to make a point.
If (and it's still an "if" until the fat lady ... er, I mean Bob Pittman, sings) iHeart goes under and/or has to spin off part of its holdings to stay afloat, the scenario hoped for by blackgold is for a new owner for each AM/FM or standalone FM, meaning up to seven new owners per market. This is, I believe, what gr8oldies refers to when he says "bring back radio in the 1970s" in his rebuttal.
Let's presume the seven new owners are operating the strongest possible signals in each market. They're going to be in a position to steal away whatever talent the weaker signals have. Those smaller stations are going to end up being "computer in a closet" operations, either buying a turnkey automated format (
) or going onto a satellite-delivered format. Either way, blackgold's dream of increased local focus is diluted. At best, what localism had been incorporated into the smaller stations will shift to the bigger ones, and at worst that localism will disappear and not be replaced by the large signals.
Oh, and some of those smaller stations will fail anyway, go silent and turn in their licenses. The law of unintended consequences just lowered the number of individual voices instead of increasing them.
And as far as format being dictated by regional or national management, a shift away from iHeart would likely result in much the same choices as you have now, because programming will still be targeted at where the ad sales are.
Mr. "862 posts" is trounced in this round by Mr. "9326 posts", because the latter is a realist and the former is a dreamer.
If (and it's still an "if" until the fat lady ... er, I mean Bob Pittman, sings) iHeart goes under and/or has to spin off part of its holdings to stay afloat, the scenario hoped for by blackgold is for a new owner for each AM/FM or standalone FM, meaning up to seven new owners per market. This is, I believe, what gr8oldies refers to when he says "bring back radio in the 1970s" in his rebuttal.
Let's presume the seven new owners are operating the strongest possible signals in each market. They're going to be in a position to steal away whatever talent the weaker signals have. Those smaller stations are going to end up being "computer in a closet" operations, either buying a turnkey automated format (
) or going onto a satellite-delivered format. Either way, blackgold's dream of increased local focus is diluted. At best, what localism had been incorporated into the smaller stations will shift to the bigger ones, and at worst that localism will disappear and not be replaced by the large signals.Oh, and some of those smaller stations will fail anyway, go silent and turn in their licenses. The law of unintended consequences just lowered the number of individual voices instead of increasing them.
And as far as format being dictated by regional or national management, a shift away from iHeart would likely result in much the same choices as you have now, because programming will still be targeted at where the ad sales are.
Mr. "862 posts" is trounced in this round by Mr. "9326 posts", because the latter is a realist and the former is a dreamer.
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They're going to be in a position to steal away whatever talent the weaker signals have. Those smaller stations are going to end up being "computer in a closet" operations, either buying a turnkey automated format (
Last edited by K.M. Richards; Today at 01:43 PM. Reason: corrected unintentionally funny typo .
let me guess, "TURKEY" automated format?!
You're under the assumption that they won't be able to service their debt. iHeart isn't insolvent, not even close. Bankruptcy wouldn't benefit any of their investors, since the station values aren't based on assets, but cash flow. Without good operators, the value bottom falls out. It wouldn't be in the best interest of any of their investors to force iHeart into Bankruptcy or to liquidate their cash cow stations.
Unless you're clairvoyant or a corporate insider, you don't know what their status is. Would you happen to be a disgruntled former Clear Channel or iHeart employee, or just an iHeart hater? Just curious what camp you fall into.
- Status