Last week, I rambled quite cohesively about the difficulty of radio to hang on to listeners in the coming years. It was so neat, Hypebot republished it HERE (if you want to catch up).
Just a few days ago, iHeart decided not to listen to me. It went ahead and filed for a $100 million IPO. What does this mean? In the near future, you (through your broker or mutual fund) will have a chance to own iHeart Media stock.
iHeart didn’t give an indication of how many shares it would issue or how much each share would cost on the initial public offering date. They did state that they would use the proceeds to pay down debt. They need to pay down debt. They’ve been operating under bankruptcy rules for the past year and have successfully restructured their debt by $10 billion.
iHeart saved themselves $10 billion. Ain’t that awesome? It is, from their perspective. But what about the perspective of the companies who were owed $10 billion.
Companies owed $10 billion worth of iHeart services won’t get the money they were owed. Some of those companies who had to take a hit include the PROs (performance rights organizations). Who was owed how much? THIS ARTICLE lays it out. Here’s the part that interests us now:
A story in Variety itemizes some of the companies listed as creditors on the iHeart docket. They include Nielsen (owed $20 million); SoundExchange ($6.4 million); Warner Music Group ($3.9 million); Universal Music Group ($1.3 million); and Spotify ($2.1 million). In addition, iHeart owes performance rights organizations ASCAP and BMI just over $1.4 million and $2 million to Irving Azoff’s Global Music Rights.
These companies, and really any of the companies, who were owed millions which equaled billions had two choices:
1. Say no way. I’m not taking less. They owe me and I want it.
Possible result: iHeart goes out of business you you get nothing.
2. Negotiate and find a number that you can reluctantly live with, in terms of payout.
Possible result: You get that number, which is less than you expected when the first business deal was made. But at least you get a number. And iHeart can continue as a company and give you more money going forward.
This is a lousy decision to have to make if you’re the the creditor (the person/company owed the money). But that’s what good adults do. Bad adults do too.
Note: We’re talking millions and billions of dollars above. These types of deals take place every day in every pocket of business, from the deli owner who owes her meat & cheese suppliers to the the small business manufacturer of a particular auto part who is owed $150,000 from a GM factory in Michigan that might close down.
The result of smaller businesses going under can be personally catastrophic. I have one friend who operated a great coffee shop. He expanded too quickly, costs got away from him, and he ultimately had to not only close the shops, he had to declare personal bankruptcy. His marriage failed. Imagine how he felt waking up every morning, having to wake up and live with this situation. It took him years to dig out. (Happy Ending Alert: He got remarried, had two kids, and loves the new career path he took.)
From family to friend, here’s what iHeart had to say about their desire to raise $100 million:
“Consumers listen to the radio because the voice on the other side sounds like a friend,” the company said in its filing. “It is this companionship relationship that has withstood the test of time.”
In the words of that classic hugger and nose-to-nose rubber, former Vice President Joe Biden, that’s “a bunch of malarkey.”
Flashback with me to what I wrote last week:
…radio is facing a major problem. Their core listeners are getting older. Read THIS from last week’s Rolling Stone. The youngin’s are teaching the oldsters how to stream. And since they aren’t streaming from radio’s iHeart app, where do you think the parents are learning from where to stream? They’re streaming Spotify or Apple Music.
“Radio should be afraid. Very afraid. I believe the boardrooms should be full of people… staring right into the eyes of high school and college students. Because those kids are the future of radio. And guess what – those kids aren’t listening to radio.”
So when iHeart writes about how we listen to radio for companionship, that may be true if we’re Will Smith in I Am Legend or we live in an alternate Walking Dead reality, where the world around us is becoming less connected. But we don’t.
While this may make some sense on the talk radio side (we listen to Hannity or Rush [Limbaugh, not the “Spirit of the Radio” Rush] because they’re saying exactly what we’re thinking or because we hate their guts), I don’t know if it makes any sense on the music side. Name a DJ – sorry, on air personality – who hosts the midday show on WLTW, one of the highest rated radio stations in America. Okay. Who hosts the drive time slot on your favorite radio station? I want names.
The absurdity of iHeart’s statement about “companionship” and the voice of a “friend” is that iHeart has done a great job of eliminating that familiar friend on the other side of the dial. From safe, unambitious programming decisions to way too many commercials to an on demand culture that, quite frankly, doesn’t care for broadcast radio (for millennials and those younger than them), there aren’t too many friends left.
We had a guest on our radio show a few weeks ago, Andy Leff (listen HERE to the podcast). Andy has managed or co-managed artists like Hanson and King Crimson. In our interview, Andy reminisced about a time when radio really mattered to someone like him. He relied on DJs to be the filter; they helped him determine what to listen to. He knew who they were and, yes, felt like they were friends.
But times have changed. Click above on the King Crimson words. That was a progressive band in which Andy, in his time managing the group, purposely kept away from streaming. He didn’t want their catalog on a platform that he felt devalued music. The band will have its entire catalog out on Spotify within the next two months.
Why? Yes, they were able to squeeze more years than most out of physical product and downloads, which drove more dollars into the band’s pockets. That isn’t happening for the group anymore. Here’s an excerpt from the article:
“The reason we’ve been slow on Spotify is that, unlike apparently the whole of the rest of the industry that’s been telling us that physical is dead, we’ve had rising physical sales for probably the last 10 years,” (current manager John) Singleton said, referring to titles issued via the band’s own DGM label. “But that argument was valid for a while, and it isn’t anymore.”
He went on to say that, at this point, the pros of streaming outweigh the cons. “In the end, our prime function is to serve the music and make the music available, and Spotify has now definitely become one of the places that people, particularly younger people, find music.”
Did you read that, radio?
We need to go back and refer to those two choices up above that dealt with bankruptcy. Remember when one of the choices was to make a bad deal, which gave us something as opposed to nothing just so iHeart could survive? We still want iHeart to survive. Whether their on air jocks are our friends or not, on the music side, we still want iHeart to play songs. Lots of songs. In fact, how cool would it be if they could follow an NPR-type model and play fewer commercials and receive support from listeners.
Wanna know how NPR (and PBS, on the TV side) can survive on donations from grants (the government helps), corporate underwriting (a fancy phrase in which “underwriters” get their message across but that message isn’t a commercial, even though the same information was conveyed as a commercial), and donations from listeners like you? Because NPR has done exactly what iHeart – and other commercial broadcast radio, let’s not just pick on iHeart – has NOT done. NPR has created relationships with the listeners. NPR has provided programming and information that their highly educated and informed audience wants.
Commercial broadcast, hit radio, has not done that. The audience wants what’s on their Spotify playlist. That’s why songs stream billions of times. Commercial radio plays what its ADVERTISERS feel is appropriate.
See the difference? NPR = Listeners Terrestrial Radio = Advertisers
Is it possible to make a hybrid model? Could the the broadcast radio streaming equivalents be commercial free? Instead of an opportunity to sell more advertising, what if terrestrial folks changed the paradigm and used their streams as an opportunity to play more music? Get away from what is being played over the air. Hire whole new on air staff. Get a license (if that’s what is needed) to make the stream supported by listeners and underwriting. Consider the stream an infinite crowdfunding exercise, only make the appeals fun. Have artists come in and help during the interviews. Give them more time, any time of the day, to add their two cents (not literally, that could be considered pay to play) to the dialog.
Meanwhile, if you’re Top 40 radio, play the real world’s Top 40. Let your list change daily, depending upon the top streams on Spotify, iTunes, YouTube. Add Shazams and, if not now, when the information is available, requests through Alexa and Echo. If Arianna Grande has 12 of the top 15 songs, then so be it. Let your list be more a reflection of what listeners really want. Yup, you’ll have to make the labels provide clean versions (“explicit” use of f-bombs is a badge of honor now for many of the artists on the top-streamed tracks).
This format may put some of a label’s radio promo people out on the street, but this is about radio surviving. Adapting. Trying something new.
I can’t find the article (Google wasn’t my friend here, but if you can find it, let me know), but I saw recently an AM station somewhere in America that switched its format and now only plays podcasts. Will it work? Maybe. But at least they’re trying.
And that’s what radio needs to do. It needs to keep trying. It can’t rest on its past, like the record business did for too long. Recorded music has rebounded – hech, Universal may be worth $40 billion now. Maybe iHeart and its friends around the dial should spend more time dreaming up new ideas and a little less pretending to be our friend.
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Professor David Philp is Assistant Professor Music & Entertainment Industries and Popular Music Studies at William Paterson University. He is the co-host of the only FREE advice college radio-based music & entertainment industry talk show in America, Music Biz 101 & More, which airs live most Wednesday nights and is available as a podcast HERE every night (days too). Your favorite professor is also co-author (with Dr. Steve Marcone) of Managing Your Band – 6th Edition. Reach him at PhilpD@wpunj.edu or find him on LinkedIn HERE. The WPU Music & Entertainment Industries program is ranked one of the best by Billboard Magazine. Don’t believe us? Click HERE for truth!