In the second quarter, iHeart saw a slight improvement in the advertising trend. | History

Battling a challenging advertising environment and continued economic uncertainty, iHeartMedia is focusing on new revenue growth opportunities while aggressively managing costs. After reporting a 3.8% decline in revenue to $811 million in the first quarter, senior management told analysts on Tuesday that it sees a slightly improving trend as the second quarter unfolds.

“We’re probably seeing a slightly better market than we expected. And our expectation based on what we’re seeing today is that it will continue to improve throughout the year,” said CEO Bob Pittman. Many marketers learned during the 2020 retreat that when they get in and out of the ad market, it actually costs them more to get back in, Pittman said. “Hopefully this is a lesson that softens the impact of this downturn.”

The audio giant is seeing strength in several unexpected ad categories, including automotive. No individual advertiser generates more than 2% of its total revenue and no category more than 5%. Automotive and financial services now make up a little more than 5 percent, said president and chief operating officer Rich Bressler.

Creating additional cost efficiencies

Although iHeart spent more than it did in the first quarter, Pittman told analysts it will generate positive free cash flow in each of the remaining quarters in 2023. The company plans to adjust its operating structure to create additional cost efficiencies.

Podcasting was the fastest-growing advertising segment for iHeartMedia in the first quarter, totaling $77 million, up 12% from a year ago. Overall, its Digital Audio Group — which includes streaming radio and other online businesses — saw revenue rise four percent year-over-year to $223 million. Without the boost in podcast ads, however, it would have risen just one percent. Either way, iHeart’s podcast and digital businesses remain profitable.

Broadcasting and podcasting are complementary

Pittman also said iHeartMedia benefits from an extensive radio operation that gives it a “natural advantage” in podcast content creation, promotion, marketing and ad sales. “At its core, podcasting is an adjacent and really complementary business,” he said.

To date, Pittman said data shows that 68% of broadcast radio listening occurs outside the home and that 69% of podcast listening occurs at home, which he says “clearly illustrates that broadcast radio and podcasting are complementary and complementary businesses of consumer use.”

Pittman also used the call to reaffirm radio’s resilience despite a soft advertising market and continued economic uncertainty. “Broadcast radio will continue to have long-term sustainable revenue growth,” he said. “Remember that advertising follows the consumer and consumers are on radio and stay on radio, unlike the significant decline in consumerism seen with newspapers, magazines and linear television.” As an example, he noted that the CBS television network, the largest linear television network, has seen its user reach cut in half since the early 2000s, while iHeart’s broadcast radio user reach has grown slightly and now reaches more than twice as many people as CBS. “Radio offers not only reach, but a unique reach that you can’t get with many other products on the market.” Still, it gets a disproportionately lower share of advertising dollars than its share of media consumption. If agencies and marketers used an algorithm to allocate their media mix, Pitman said radio would fare better because of the lack of media bias in human decision-making today.

Looking ahead, iHeart expects second-quarter revenue to be down in the mid-single digits from a year ago, or in the low single digits when political ad sales are removed from the comparison. The forecast for the Multi-Platform Group — which includes 850 radio stations and diverse networks and has been hit harder by the advertising decline — is for revenue to decline in the high single digits, Bressler said, while the Digital Audio Group is expected to rise in the mid-single digits.

“Accepting continued improvement in the advertising market, we believe our Multi-Platform Group’s revenue will continue to recover and our Digital Audio Group’s revenue will continue to grow in 2023,” Bressler said. “If this recovery in the advertising market continues into 2024, we expect to resume our growth trajectory that was interrupted by this period of advertising softness.”

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