iHeartMedia Layoffs: What They Mean for Listeners & the Industry

iHeartMedia’s layoffs of hundreds of employees this week in a self-described move to modernize the company most likely means two things: A shift in emphasis from AM-FM airwaves to apps, streaming and podcasts; and an increase in centralized, syndicated programming rather than live, local DJs. 
“You’re simply taking content that someone has already produced and pushing it out someplace else on another channel — there’s a lot more money in that,” says Gordon Borrell, CEO of broadcast-analyst firm Borrell Associates. “Say what you want about iHeart, but they’re making some pretty smart and strategic decisions to stay afloat and morph in what’s becoming a difficult media environment.”
This week’s layoffs, part of what former employees have called a “a bloodbath” cut deeply into iHeart radio stations around the U.S., particularly those in “mid-major” markets such as Pittsburgh and Asheville, North Carolina, The deep and unexpected cuts have shocked record labels’ radio-promotions departments, who have lost many of their long-standing relationships. “When you’re talking to the market guy, he’s saying, ‘They let go of all these people and I’m running an automated system right now,'” says a label source who frequently works with iHeart. “Which is a shame because there is a huge need for something more local.”

IHeart reps wouldn’t comment on the number of layoffs or discuss strategy, other than releasing a statement that says in part, “This is another step in the company’s successful transformation as a multiple platform 21st century media company, and we believe it is essential to our future.” (Although listenership for iHeartMedia’s more than 850 stations remains strong, traditional radio advertising revenue has declined, and the company emerged from Chapter 11 bankruptcy last year, cutting its debt from $16 billion to $6 billion.) The stock price for iHeart, which has been the subject of recent takeover speculation from cable giant and SiriusXM satellite-radio parent Liberty Media Corp., has jumped from roughly $17 to $18 since the layoffs went public earlier this week.

The label source suggests iHeart is trying to move into the “Spotify and Pandora side,” by structuring its business more like a digital or streaming service than a traditional radio station. In turn, it is drastically cutting smaller stations while feeding content from the bigger markets into iHeartRadio, which has 128 million users, and other digital apps. “It just doesn’t take a lot of money to do that” the source says.

This centralized, digital-focused approach is in contrast with iHeart’s broadcast competitors, including Townsquare Media, whose 320-plus stations emphasize regional personalities and shows about, for example, the best local pizza in Rockford, Illinois. Sean Ross, a longtime industry analyst who edits the Ross on Radio newsletter, says it’s unlikely that other large broadcast companies, including Entercom and Cumulus, will follow iHeart’s lead in shifting this aggressively towards the digital business. “Consolidation has been ongoing throughout the industry,” he says, “but I don’t think people [at other radio companies] see this as an excuse to push the button.”

Spokespeople for iHeart and Townsquare wouldn’t comment, but Borrell believes iHeart is expanding its focus to sell advertising nationally, while Townsquare remains locked in on local advertisers in each of its markets. “I suspect they will both win, one way or another,” he says.

To illustrate iHeart’s new approach, Borrell says he was earlier streaming a Philadelphia rock station on an Amazon device while working in Virginia. “I’m listening to my favorite station and they didn’t need to put a DJ down here in Williamsburg,” he says. “They’re getting a lot of mileage out of their existing content. Why would they need to produce more?”

Laid-off iHeartMedia DJs and programmers aren’t exactly sympathetic to that point of view. One employee who lost a job Tuesday said the station cut just about all the on-air talent except for the morning show. “I don’t know how sustainable that is,” this source says. “I just don’t think you can have a market of this size without any local talent other than a morning show.”

The label source is just as gloomy about what iHeart’s cuts say about consolidation in the radio business, noting fewer acts will get airplay as a result. “Most artists want to hear their song on the radio. Sure, you can market digitally, you can market online, you can run an ad and it shows up on Facebook. But the bottom line is when you wrote that song, your dream was to hear it on a full-fledged radio station. That’s the saddest part.”

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