Friday afternoon’s reports of a potential tie-up between iHeartMedia and SiriusXM will create a juggernaut of audio. Not just radio. Not just streaming. Not just podcasting. But all audio and in particular audio advertising. And it goes well beyond the public facing brands each company owns.
The combined group would have a monopoly on satellite radio, continue to be the largest station owner with over 860 stations, create by far the largest producer of podcasts by reach, have multiple apps (SiriusXM, iHeartRadio, Pandora) with combined paid and free levels, have the largest audio syndication service (Premiere Networks), multiple audio tech platforms (Adswizz, Jelli, RCS), the largest advertising rep firm (Katz), and with SiriusXM’s deal this week to be the exclusive seller of audio advertising on YouTube, have their hands in more audio content than anyone else with Spotify falling to second.
It is that broad array of audio content that separates iHeart and SiriusXM already from other audio players. Only Audacy at a much smaller scale provides anything close to what they do in terms of diversity of products.
At last weeks’ NAB Show, nearly all the people I spoke to had the same question. What is the latest on the ownership caps and what will happen next? The growing belief is that FCC Chairman Brendan Carr is preparing to eliminate the ownership caps completely creating a free-for-all for buyers to acquire as many stations as they’d like. But there’s still a question as to where the existing station groups, many of whom still have large debt payments due, will get their financing to pay for acquisitions. It’s why we’re seeing groups like Cumulus, Beasley, and SBS all recently agree to debt for equity deals with their note-holders or how Jeff Warshaw used the acquisition of Alpha Media’s debt to position Connoisseur Media to gobble up any of those or other groups as he’s involved in multiple potential merger talks.
Which also ties in to the management restructuring both Audacy and iHeart did earlier this month. Local radio ad sales are no longer the main focus of those two companies. The diversity of their products enables them to continue to shift away from focusing simply on AM/FM spot advertising to the broad suite of digital offerings they provide. It may also explain why iHeart has continually been against the pending deregulation as they see the supposed “competitive advantages” constantly pushed by the NAB. As iHeart’s Bob Pittman and Rich Bressler wrote in a 2018 memo to staff regarding degregulation, “Having more FM stations does not cause advertisers to prefer us over other options, and more FM stations is not a substitute for ideas, relationships, compelling programming and data solutions for our advertising partners.”
They followed, “Our clients can already buy all the stations in a market regardless of who owns them, but too often they have decided not to, instead diverting ad dollars to other media, and radio revenue overall has declined. Increased ownership by one owner offers no benefit for the advertiser, and therefore no benefit for the radio industry. We need enough stations to fully serve the community and the advertisers within it, not enough stations to gouge the marketplace as this new proposal and some of its supporters imply.”
While it can be argued that continued cutbacks of local staffers goes against their argument to fully serve the community and advertisers, the continued shrinkage of local revenue makes these moves necessary. Whether a station group has hundreds of stations or just one, they still need to be profitable to stay in business. Many of these stand-alones on the AM dial are folding on a weekly basis and very few of these stations and clusters are capable of getting investment money for a new buyer to come in.
Perhaps SiriusXM will bring their national strategy to iHeart’s local stations? Perhaps they’ll move the remaining star talent to the satellite and streaming and divest of the stations before they lose more value? Should this deal come to fruition, there will be one giant player in national audio. Meanwhile the NAB and its other constituents will be left wondering how to consolidate more because they were focused solely on broadcast when the big players were broadening their horizons.
