Last week's deal was struck in just the nick of time, hours before the radio giant was set to be shut down by its creditors, and it could well save iHeartMedia, allowing it to be reborn and thrive again.
But, according to an article at Forbes, be assured, the iHeartMedia that emerges from the prearranged bankruptcy worked out last week with creditors will be a very different company—and a lot leaner.
Expect to see a dramatic shedding of radio stations, likely hundreds, many at rock-bottom prices.
According to contributor Gene Ely, never mind statements put out by the company that stations will not be sold off. That’s intended to quell fears among employees and stem any flood of talent.
A station selloff is all but assured for a variety of reasons.
iHM has 850 stations, and some number of them are under-performing—losing money, in plain English—or they’re simply in markets where the company sees no future.
It just makes sense for the company to dump those stations and focus on its most profitable stations and markets where it sees growth potential.
You can bet shedding under-performing stations will be a top priority of the major debt-holders, led by Franklin Advisers, as they assume control of the company under the restructuring.
Valuations for radio stations—what they fetch when put up for sale—have been tumbling in recent years, and they could well be headed for a nose dive.
No.2 Cumulus Media, with some 450 stations, is also in bankruptcy—it filed in late 2017—and it could well be forced to unload a slew of stations as it restructures.
The market could well be flooded with radio properties, according to Ely.
If you are iHM, and you want to unload stations, you’ll want to do so quickly, for whatever price, before the flood begins.
However, that business model was built on one critical assumption: that advertisers, and listeners for that matter, had few other options. With his 1,200 stations, Mays had cornered the market, and advertisers and listeners paid the price.
That business model no longer works.
It began collapsing in the 2000s, and quite early on with the rise of digital. Digital offered advertisers better, cheaper ways to reach local audiences, along with better targeting, and gave listeners better alternatives with Sirius XM and then Pandora and other digital radio services.
That business model was already dead by 2008, when Bain Capital and Thomas H. Lee Partners orchestrated the disastrous leveraged buyout that loaded Clear Channel with billions in debt it could never pay off.