August 10, 2022

Latest Breaking Music News | MusicApp1

Music News, Artists, Reviews & Trends

Radio Earnings: Podcasts a Big Factor in 2021

Despite showing year-ending improvements, radio companies had mixed results on Wall Street on the days following their earnings releases: iHeartMedia shares fell 7.2% before recovering 2.6% the following day, Cumulus’s share price barely moved, and Entercom Communications’ shares plummeted 23.9% one day and fell another 11.1% on the next — 27.4% in total.

Each of these leading radio companies are managing expectations for the future differently. After a year of social distancing, “pent-up consumer demand” and “an economic bounce-back” will drive iHeartMedia sales back to 2019 levels by the end of 2021, president, COO and CFO Rich Bressler said during iHeartMedia’s earnings call on Thursday.

Not so fast, said Cumulus CEO Mary Berner in the company’s Thursday  earnings call. Despite the upswing from a miserable second quarter, “we’re not out of the pandemic woods yet,” she said.

Beasley Media Group CEO Caroline Beasley offered tempered optimism, saying broad vaccine distribution will bring “more normalized revenue levels” later in the year.

The bright spot throughout the past year has been podcasts’ continued  growth, which is expected to play a key role in these companies’ recovery.

At iHeartMedia, 99.8% growth in podcasting revenue helped digital revenue improve 53% in the fourth quarter. Cumulus’ 12% growth in digital sales was “led by podcasting growth of nearly 40%” in 2020, said Berner. Its stable of podcasters — including political commentators Ben Shapiro and Mark Levin, both in Apple’s top 10 podcasts in January — have Cumulus’ podcast revenue “pacing up nearly 30%” in the first quarter of 2021, she said.

For an industry needing to expand its digital footprint, podcasts’ double-digit growth creates an attractive narrative for investors.

In dollars and cents, however, podcasts are a small part of radio companies’ total revenue. Broadcast radio is still iHeartMedia’s cash cow, bringing in $2.2 billion, or 54.5% of 2020 income. iHeartMedia’s podcasts accounted for 4.5% of fourth-quarter revenue, and even though it grew by $21 million in fourth quarter, it was overshadowed by non-digital revenues’ $150.2 million decline. For the entire year, iHeartMedia’s $101 million of podcast revenue marked a 91% improvement from 2019 but was only 3.4% of total revenue. The key here is the growth potential, although it’s questionable whether it can ever come close to broadcast revenue: U.S. podcasting revenue will grow 45% to $1.13 billion this year, and climb to $1.33 billion in 2022, according to eMarketer — but that’s still just a fraction of the $18 billion broadcast radio market.

To their credit, radio companies are focused on building podcasting businesses from the ground up and making them priorities, despite their relatively small financial impact. They have not fallen into an “innovator’s dilemma” by focusing on their core businesses at the expense of a small but important product. iHeartMedia has spent about $350 million to build a tech and advertising business to support its podcasts: It will acquire Triton Digital for $230 million, and previously purchased Voxnest, cloud-based audio platform  Radiojar and podcast creator Stuff Media. For its part, Entercom spent “under $50 million” on two podcast creators, Cadence13 and Pineapple Street, said CEO David Field during its Wednesday earnings call.

Outside of radio, some companies have turned podcasts into an arms race: Spotify, for instance, has spent hundreds of millions of dollars on podcast content creators, hosting and advertising platforms, and licensing – in 2019 it paid more than $100 million to be the exclusive home of The Joe Rogan Experience. Few companies have such a large wallet. In a nod to Spotify’s podcast spending spree, Frank Balboa-Lopez, CFO at Cumulus, said it will grow its podcasting business “organically and profitably.” While Cumulus looks at deals being shopped and are open to “smart acquisitions,” he said, the radio company “made our bet on partnership arrangements with our talent as opposed to going out and spending a lot of money on I.P. or infrastructure.”

For all their digital growth, radio companies survived 2020 with old-fashioned cost-cutting. iHeartMedia had three rounds of layoffs last year and created a plan to save $250 million through cost-cutting and “modernization initiatives,” such as programmatic ad sales. Operating expenses did fell $229.8 million in 2019, according to iHeartMedia’s financial reports. Bressler said $100 million of annual savings will be permanent after the pandemic, citing centralized resources, reduced hiring and changes in real estate needs, among other factors. Cumulus will continue the cost-cutting efforts that saved $90 million in 2020, and Entercom lowered expenses $100 million over the year.

Source link

About Post Author

Share via
Copy link
Powered by Social Snap