iHeart Strategy Revealed (IMHO)
(Originally published January 2020)
Can you remember the last time something impacted the radio business the way the current iHeartMedia re-org has? Neither can I.
It seems that after years of trimming, cutting and doing everything possible to make money there would be no further cuts possible. And if there were the bankruptcy would have cleared them up. Yet Monday this week they announced with great fanfare a re-org that will cut almost 10% of their workforce. Everyone asked the same question. Cut? Where?
So what are they up to…? Everyone whose jaw is not on the ground is buzzing with theories. And so now you get to hear mine.
iHeart has 855 stations with 448 outside the top 100 markets. Assuming that maybe 80% of the radio revenue comes from the top 30 markets it’s conceivable that iHeart has decided that all the stations below the top 30 are going to essentially be shut down. Oh, they'll keep them on the air, but eliminate the local staffs – no more programmers, DJs, sales people, etc. These stations will all be programmed, sold and managed from larger market hubs. Local sales will be handled on the phone as necessary and because in the scheme of things that's not a lot of money, most of the station inventory will be for national network clients through Premier or as part of their national packaging.
iHeart may have concluded that the hassle of managing those stations below the top 30 simply isn’t worth the small incremental revenue (at a much lower profit margin) that local advertising creates for iHeart. It takes the same management bandwidth to manage stations in Grand Forks, ND as in Los Angeles. All the staffing, engineering, studio maintenance, traffic, promotion, office rent and legal liability is minimized in my theory. And by retaining the stations in these smaller markets, iHeart can clear national campaigns and continue to promote their iHeart digital platform and events.
Might sound crazy and lots of holes in my theory…but there you have it. That's my story and I'm stickin' to it!
(Update September 2020) It would seem the Covid19 crisis has only accelerated iHearts reorg. They are in a remarkably good position to survive this crisis. Whether there will be radio budgets when we get 'back to normal' is another question.