The firm said its plan to slash this expenditure would involve the furloughing of staff, plus reductions in the salaries of top execs, in addition to a freeze on new hirings and marketing spend.
Today (April 14), iHeartMedia has made a similar announcement to its investors, highlighting an operating cost-savings target of $200m for the 12 calendar months of this year.
That target comes in addition to the $50m in annual calendar-year savings iHeart expects to be achieved by the execution of “modernization initiatives” which began in February – a process which reportedly saw hundreds of employees, including a swathe of on-air DJs, made redundant as new investment was pumped into AI-driven programming.
That means iHeartMedia, which last year recorded $3.18bn in total operating expenses – off annual revenues of $3.68bn – is looking to chop a total of $250m off its operating expenses bill for this year alone.
Even this $250m reduction in spending, admitted iHeart COO and CFO Rich Bressler, would only “partially” offset the company’s expected annual revenue declines caused by the COVID-19 pandemic’s impact on advertising.
The timing of iHeart’s announcement today, coming so close to Live Nation’s similar proclamation to the markets, is intriguing, because the two companies share an investor in Liberty Media: Liberty owns around a third of LN, while, via Liberty SiriusXM Group, it also owns a 4.8% stake in iHeart.
“We want our shareholders to know that we have taken immediate and proactive steps to weather this crisis.”
Bob Pittman, iHeartMedia
Like Live Nation, iHeart did not specifically mention further redundancies at the company as part of its plan to get to the $200m in annual cost-savings this year.
Instead, in its own words, iHeart says the savings will be “driven” by the following:
- Reductions in compensation for senior management and other employees;
- Furloughing of certain employees that are non-essential at this time;
- Suspension of new employee hiring, travel and entertainment expenses and 401(k) matching program;
- Major reduction of consultant fees and other discretionary expenses
iHeartMedia Chairman & CEO Bob Pittman (pictured) already announced earlier this month that he would be giving up his $1.5m annual salary for the remainder of 2020.
The company added today that it expected to save money via “decreased variable sales expense and commissions associated with lower revenue”. In truth, this is a bit of a false economy because, in layman’s terms, it really means “we’ll pay out fewer bonuses and commissions to sales staff… because they’ll be selling fewer ads”.
In better news for investors, iHeart – which reaches over 250m Americans each month across digital, podcast and 850 live broadcast stations – used today’s update to reassure its shareholders over its ongoing financial position.
The firm pointed out that over 90% of its debt matures in 2026 or later, and that it had a cash balance of $647 million as of March 31, 2020.
It added that it planned to reduce capital expenditure (Capex) – typically representing spend on property, vehicles and equipment – in 2020 by an expected $80m year-on-year.
Plus, iHeart is estimating that it will benefit from $100m in cash taxes savings in 2020 thanks to the recently announced CARES Act in the US.
“We believe that iHeart… will [be able to] build effectively on our audio-market leadership even in highly conservative macro-economic scenarios such as an extended, multi-year period of sustained US economic weakness.”
Rich Bressler, iHeartMedia
In terms of advertising revenues, the company revealed: “While National, Local and Network revenues have declined year-to-date, Podcasting and Digital revenue continue to show strong growth trends year-over-year.”
It added that it’s anticipated Donald Trump and Joe Biden will provide something of a revenue cushion against the backdrop of this decline. iHeart said: “Political advertising revenue in 2020 [is] expected to remain consistent with prior election years; [a] contribution weighted to the second half of 2020.”
The 2020 US Presidential elections, as things stand, are expected to take place on November 3.
Bob Pittman, iHeart’s Chairman and Chief Executive Officer, said: “We moved quickly to respond to the economic downturn resulting from the COVID-19 pandemic in order to mitigate some of the business impact and to better position ourselves to take advantage of an eventual recovery when normalized demand returns.
“To provide visible and aligned leadership through this downturn, our senior management team and other employees voluntarily agreed to take meaningful reductions in compensation. We want our shareholders to know that we have taken immediate and proactive steps to weather this crisis, and we expect to emerge even stronger given our sufficient liquidity, the continued strength of consumer listening, and our diversified multiple platforms, including digital and especially podcasting.”
“We moved quickly to respond to the economic downturn resulting from the COVID-19 pandemic in order to mitigate some of the business impact.”
Bob Pittman, iHeart
Rich Bressler, iHeart’s President, Chief Operating Officer and Chief Financial Officer, added: “We believe that iHeart’s fundamentally strong cash-generation model, substantial current cash balances, incremental cash savings from the major proactive initiatives announced today, and a patient capital structure position our Company with substantial liquidity reserves and will enable us to build effectively on our audio-market leadership even in highly conservative macro-economic scenarios such as an extended, multi-year period of sustained US economic weakness.
“We believe this substantial financial flexibility will prove a further competitive strength for our Company should the current economic slowdown continue for a prolonged period. With our experienced management team and leadership position as the #1 audio media company in America, we are confident in our business and continue our focus on driving shareholder value.”Music Business Worldwide