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iHeart Failure: Can Radio Be Saved?

There was a time when Clear Channel Communications ruled the world. It was a mega media company, wheeling and dealing through almost every part of the music business, from radio stations to streaming services to ticket sales and artist management at one time or another. Remember when it famously crushed the Dixie Chicks insurrection of 2003 under its heel? That sent a message: nobody messed with Clear Channel. When the company took the name of its iHeart streaming service in 2014, it seemed like a sign that its leadership was progressive and had a strong vision of the future. They were a massive entertainment company that was going to go toe-to-toe with Apple, Pandora and newcomer Spotify in the new arena of content delivery. To listeners, it seemed like the company was on top of the world and on the cutting edge.

But behind the scenes, iHeart Media had the same problem that so many of us struggle with: We can’t let go of the past. Whether you talk too much about your high school sports career, insist on wearing muscle shirts (“Suns out, guns out!”) or consistently click on social media memes with titles like “share if you remember what this is,” you are having a hard time escaping the gravity of your own history. For iHeart Media, that history is present today in the form of approximately $20 billion in debt. Twenty billion! That’s more than the gross domestic product of Iceland! What does iHeart Media owe all that money for? 850-or-so good-old-fashioned radio stations pumping out AM and FM signals across the United States.

You see, for the past decade, iHeart Media has tried to be both a traditional media company and a new media company at the same time. But they bought their new car before they paid off their old one. And man did they overpay for the old one. It was a lot like all of the folks who bought H2 Hummers to take their kids to lacrosse practice in the mid-2000s – what seemed like a solid investment just turned out to be a trendy Sherman tank (except Sherman tanks got better mileage). And just like everybody sheepishly trying to hide their ridiculously oversized H2 in the garage so that the neighbors don’t think they are South American despots in the witness protection program, iHeart Media is stuck with loans for something it doesn’t really know how to use.

As Spotify, Apple Music and Amazon’s Prime Music leave the rest of the music industry in their dust (Spotify has a gazillion subscribers and the other two have “real” businesses to support their streaming platforms), poor iHeartRadio is the only one who has to send money home to mom and dad. Management at iHeart thought that “synergy” and “leverage” and other meaningless business buzzwords would make them unstoppable online, but the truth is that all of the infrastructure they owe so much money for is slowing them down like an olympic sprinter pulling her father behind her in a Barcalounger.

This is also bad news for fans of terrestrial radio, who are neglected as iHeart Media desperately turns its resources toward the internet in hopes of finding some kind of magical infusion of positive energy. “You guys wait here,” iHeart Media tells them. “We’ll come back for you.” But anybody who has watched their high school crush drive off to college can tell you, they never do.

A few weeks ago, iHeart Media announced that there is significant doubt about its future. In short, the company was giving investors the heads up to prepare for impact. Leadership is proposing some complex debt shenanigans, but it seems unlikely that they will be enough to pull the company out of its nosedive. And so, what happens when it hits the ground? Just like everything else that falls from a great height, iHeart Media will probably shatter into a lot of different pieces. I’m not sure anybody will want to buy 850 radio stations, unless they can get them (really, really) cheap. So I predict that those stations will splinter into various smaller groups.

As for the streaming service, who knows? Without the licensing efficiencies that all of those AM and FM radio stations must have created, it’s unclear whether it is a legitimate contender. It may last longer than Pandora (too slow to adapt) or Tidal (not as easy as it looks, is it?), but I have a hard time believing that it can make money in fourth place.

In any case, for anyone who likes music or wants to promote their brand to music listeners, this bear’s watching. I’m not sure that the old business model for radio is sustainable, but I’m excited to see how somebody takes a run at it – somebody who doesn’t have a landslide of debt slowing them down.