iHeartMedia Beyond Borrowed Time

3/15 Update: Today iHeartMedia filed for Chapter 11 bankruptcy protection, after coming to a deal with a viable cross-section of its creditors to wipe some $10 billion in debt off of its balance-sheets…leaving the “restructured” company with about $10 billion left to pay down. Some creditors, who hold eight to nine figures of this debt, will be wiped out, but it’s too early in the process to tell just who will get screwed the most. Just today, iHeart tendered nearly 20 filings with the U.S. Bankruptcy Court in Texas’ Southern District – and those to whom the company owes money, as well as other interested players looking to intervene, have filed another 70+, suggesting this process will not be smooth nor speedy. [Original post follows below.]

What a strange way to go bust. After spending years telling the public that all was well – consolidation, automation/syndication, and cost-cutting was “good for radio” and tens of billions of dollars of debt was of little to no concern – Clear Channel iHeartMedia is finally preparing to pay the piper.

On February 1, the nation’s largest radio broadcast conglomerate welshed on a $106 million dollar interest-payment, triggering a 30-day countdown to default. As the clock ran down, on March 1 the company also skipped an additional $138 million in interest-payments, all in the hopes of forcing its creditors to the table to hammer out a soft landing in Chapter 11 bankruptcy, similar to what Cumulus Media did late last year (though Cumulus was only in one-tenth the debt that iHeart is, and Cumulus’ reorg-timetable has also hit some snags).

In between skipping these payments, iHeart tendered a restructuring offer to its lenders that seeked to reduce the company’s total debt from nearly $21 billion to $5.5 billion, all of which would be expected to be repaid over five to seven years. In exchange, “senior lenders” would receive an 89.5% equity share in the company, including 100% ownership of Clear Channel Outdoor – the most healthy division in the iHeartMedia constellation, and the one that iHeart itself’s been drawing money from over the last few years in order to juggle its crippling debt. Bain Capital – the private-equity firm which more than doubled iHeart’s debt when it took the company private in 2008, setting it up on the crash-trajectory it faces now – would walk away with less than 2% of the restructured company. Read More

NextRadio Reaches Carrier Milestone

The radio industry’s efforts to carve out space for itself on mobile phones took some big strides foward this summer. In late July, AT&T announced that it would seek to enable FM reception capability in the Android devices it offers. This month, after a NextRadio-led Twitterstorm, T-Mobile declared it would do the same.

This is an important milestone for the NextRadio effort: three of the four major wireless providers in the United States have embraced the notion that terrestrial radio should be part of the media mix on mobile platforms. It will be interesting to see how long Verizon, the #1 carrier in the country, decides to hold out on offering FM radio as a feature in its phones. That it took until 2015 for this to happen is testament to the gatekeeping-power of the wireless oligopoly in the United States. Read More

New HD Radio Loophole: Royalty-Evasion?

For several years now, there’s been a growing tension between broadcasters, online radio services, and the music industry over the issue of royalties. Current law requires streaming media services to pay performance royalties on the music they stream, while historically broadcasters have been exempt from these fees (everyone pays royalties to songwriters and publishers). Read More

Radio Advertisers’ Digital Dilemma

Broadcasters are touting the fact that, after a multi-year slump, advertising revenue is looking up. The Radio Advertising Bureau reports that advertisers dropped more than $3.7 billion (estimated) on spots in the second quarter of 2012 – representing a total investment of $6.8 billion for the year so far, and up 1% from 2011. The fastest-growing segment where advertisers are spending their money is in the digital realm: up 7% this year compared to last.

This does not, however, mean that those who are in charge of allocating radio advertising dollars are necessarily satisfied with what they get for their investment. An illuminating compendium of video interviews with media buyers, produced by Edison Research, suggests that radio lags far behind in its knowledge and exploitation of the digital media environment. Read More