iHeartSiriusXM?

[davideduardo]

The fact is that Sirius is in bad financial shape. They are about $10 billion in debt. iHeart has $5 billion in debt. Put them together.

When cash flow can fully cover debt service and payments, having a lot of debt does not mean a company is in bad financial shape. Remember, it costs around $400 million to put just one of those big XM or Sirius satellites into orbit.

SiriusXM has equity of $30 billion, and had pretax income last year of just under $10 billion. In other words, they made enough in one year to pay off all the debt and then some.

https://finance.yahoo.com/quote/SIRI/balance-sheet/

 

[TheBigA]

Their net debt to adjusted EBITDA ratio is 3.6x, and the company generated positive free cash flow in excess of $1 billion last year.

Regardless, they're in no position to acquire iHeart at this point. That's obviously where Apollo Global comes in.

The problem is that Apollo Global already owns a lot of broadcasting, and this would bring up ownership limits.

Perhaps they feel they can get a waiver since this FCC seems to be handing them out to anyone who wants one.

 

[davideduardo]

Regardless, they're in no position to acquire iHeart at this point. That's obviously where Apollo Global comes in.

They could, in theory, merge, if the holders of each agreed. In a merger, assets are combined and the shareholders of each prior companies get proportional amounts of the new one.

The problem is that Apollo Global already owns a lot of broadcasting, and this would bring up ownership limits.

If ownership caps are changed, that may be a non-issue. But in the bigger picture of things, it allows the new company to select the best stations in markets where they are above current caps.

Perhaps they feel they can get a waiver since this FCC seems to be handing them out to anyone who wants one.

Agreed. I'd guess that the bigger gamble is over what new ownership limits might allow if they are changed.

 

[TheBigA]

They could, in theory, merge, if the holders of each agreed. In a merger, assets are combined and the shareholders of each prior companies get proportional amounts of the new one.

I think the shareholders of both companies are looking for an exit strategy. John Malone isn't getting any younger.

 

[Theater of My Mind]

As usual, this entire thread is almost entirely about money with almost no interest by the participants about what it means for the content or the audience. No wonder radio is dying, it's all about playing shell games with debt while laying off the people who used to create the actual product.

The further concentration of broadcast media that would result from the merger of two of the biggest radio companies is unlikely to improve that. In fact, the most likely result is even more talent layoffs, less programming diversity and less choice for the audience. In fact, this is a dream com true for the iHeart executives who stand to cash in on the "growth" gravy train by sidestepping the FCC market cap obstacle and merging with the satellite radio competitor instead.

Don't worry, Eduardo and Big A will chime in immediately below to lecture us on why bigger companies and less competition is always great for the radio consumer.

 

[davideduardo]

As usual, this entire thread is almost entirely about money with almost no interest by the participants about what it means for the content or the audience. No wonder radio is dying, it's all about playing shell games with debt while laying off the people who used to create the actual product.

Interesting point, except for the fact that radio revenue (inflation adjusted) is off by 2/3 since 2000. So the objective of every station owner is to survive and try to find a way to preserve a bit of asset value and maybe make some money.

The further concentration of broadcast media that would result from the merger of two of the biggest radio companies is unlikely to improve that.

Actually, it might improve it a lot. If fewer companies offered audiences to advertisers, it would be easier to buy radio. Advertisers today find radio very labor-heavy to buy, with different companies having the same formats in different markets. Putting a buy together is very much more intricate than buying national media, such as streamed podcasts.

In fact, the most likely result is even more talent layoffs, less programming diversity and less choice for the audience.

Consolidation improved the choice of formats, as big clusters could afford to have a broader assortment of formats. When I got into radio, in my hometown, Cleveland, we had 3 Top 40 stations, 3 MOR stations and two R&B stations. Now there are over 20 different formats there!

In fact, this is a dream com true for the iHeart executives who stand to cash in on the "growth" gravy train by sidestepping the FCC market cap obstacle and merging with the satellite radio competitor instead.

All but, maybe, one or two executives are nor really likely to have any gain. Everyone in radio is in a position of seeing their job eliminated or their pay reduced.

Don't worry, Eduardo and Big A will chime in immediately below to lecture us on why bigger companies and less competition is always great for the radio consumer.

I built my first cluster in the 60's. By the end of the decade, I had 9 stations in one market, and could afford to do things like an all classical music format; it made money because it shared all the G&A, technical, legal and accounting costs and gave us a certain amount of prestige, too. Half of my stations could not have worked if they were stand-alones and t hat was 60 years ago.

 

[TheBigA]

As usual, this entire thread is almost entirely about money with almost no interest by the participants about what it means for the content or the audience.

I agree. The dealmaker here is Irving Azoff. He previously created the merger of Live Nation & Ticketmaster. It was just found by a court to be an unlawful monopoly that unfairly overcharged music fans. Having lost that case, he is now looking to do something very similar to radio. The part I found interesting is he's not risking any of his own money in the process.

Azoff's core job is artist manager for The Eagles. He also founded Global Artist Rights that charges companies like iHeart & Sirius higher royalty fees for his artists. Those higher fees are passed on to music lovers (like you) that make his clients more money. So yes, it's all about money without any concern about what it means to the audience. Just as long as Don Henley gets more money. Think of that the next time you hear one of his songs.

 

[NoWayNoCC]

This is yet another merger that needs to be swatted down instantly by antitrust regulators, but you know it won't be.

 

[CTListener]

This is yet another merger that needs to be swatted down instantly by antitrust regulators, but you know it won't be.

Why do so many people consider iHeart to be a radio monopoly, or anything close to it? Believe it or not, there are many cities in this country where iHeart owns not one radio station.

 

[ted chittenden]

Interesting point, except for the fact that radio revenue (inflation adjusted) is off by 2/3 since 2000. So the objective of every station owner is to survive and try to find a way to preserve a bit of asset value and maybe make some money.

From a business standpoint, buying a company that has incured a lot of debt with your own company which also has a lot of debt *only* makes sense if you believe you have a way to *earn more* from the combined revenues than at least the interest you are paying on that debt. While some may argue economies of scale, I have yet to see that work in practice in any material sense, especially in the radio industry, which makes me suspect that @Theater of My Mind's arguments on this have a lot more validity than you give him/her credit for. What I think is most likely to happen should this merger actually occur is that jobs and over-the-air stations will disappear faster than they otherwise would if both IHeart and XM had not merged.

Actually, it might improve it a lot. If fewer companies offered audiences to advertisers, it would be easier to buy radio. Advertisers today find radio very labor-heavy to buy, with different companies having the same formats in different markets. Putting a buy together is very much more intricate than buying national media, such as streamed podcasts.

Advertising agencies, like everybody else, should be careful of what they wish for. While it is true that in monopolistic and monopolistic competition (where there are only a few big companies to deal with), advertising agencies will have to deal with fewer people when purchasing national advertising time, it is also true that the prices they will pay for their national ad campaigns will actually rise as there will be little to no competition for their ad dollars from other over-the-air broadcasters. Historically, this has happened in other areas (think of the farmers versus the railroads in the 1880s and 1890s) and I see *absolutely* no reason why it wouldn't happen in the broadcasting industry.

Consolidation improved the choice of formats, as big clusters could afford to have a broader assortment of formats. When I got into radio, in my hometown, Cleveland, we had 3 Top 40 stations, 3 MOR stations and two R&B stations. Now there are over 20 different formats there!

As far as I can tell, those extra formats that station cluster owners put wern't very profitable, either. What happened (and this appears to be the case with Hubbard and its AM oldies and sports stations in Phoenix) is that the clusters' more profitable outlets are used to prop up the less profitable operations. This will continue to occur until the cluster owner decides that he/she doesn't want to prop up his less profitable stations and then decides to either try to sell the less profitable outlet to a religious or noncom (whose audience [mostly] doesn't support the stations' advertisers) or cancel the unprofitable stations' licenses altogether. And, if the owning company is a publically traded one, the scenario I just laid out will happen more quickly than in privately held concerns.

All but, maybe, one or two executives are nor really likely to have any gain. Everyone in radio is in a position of seeing their job eliminated or their pay reduced.

This is the downside of unregulated market capitalism. Ultimately, and again this has been noted historically, without regulation, the few gain at the expense of the many. And your above paragraph sums that up quite nicely for the field of radio broadcasting.

I built my first cluster in the 60's. By the end of the decade, I had 9 stations in one market, and could afford to do things like an all classical music format; it made money because it shared all the G&A, technical, legal and accounting costs and gave us a certain amount of prestige, too. Half of my stations could not have worked if they were stand-alones and t hat was 60 years ago.

The last point I will make to your response is one that I have made elsewhere but bears repeating. If you have one company or person holding the licenses for all of the OTA broadcasters in a given market, then the political views of those that either do not agree with the owner or who the owner (or corporate head) has a damaging personal relationship with will be aired seldom, if at all. And while that may make for good capitalism it *most certainly* does not help a democracy, no matter how strong that democracy may be.

 

[TheBigA]

What I think is most likely to happen should this merger actually occur is that jobs and over-the-air stations will disappear faster than they otherwise would if both IHeart and XM had not merged.

That's been happening anyway. At both companies. In fact it's been happening in the entire industry. It has nothing to do with a merger.

If you have one company or person holding the licenses for all of the OTA broadcasters in a given market,

There is no one company that holds all of the licenses of the OTA stations in a given market. That wouldn't change in this merger.

As far as I can tell Irving Azoff isn't doing this for politics.

 

[ted chittenden]

Why do so many people consider iHeart to be a radio monopoly, or anything close to it? Believe it or not, there are many cities in this country where iHeart owns not one radio station.

The only major U.S. cities I know of where IHeart doesn't own any radio stations are Buffalo and Kansas City (where the company never got a foot in the door) and Chattanooga and Richmond (where they traded stations with Audacy). I should also note the states that currently hav no IHeart outlets: Maine, South Dakota, Vermont, Montana, Idaho, and Wyoming. With its 2007 sale of radio stations to Townsquare, IHeart did get out of a lot of smaller markets, but with the exceptions I noted above, it is still in the nation's largest markets. Furthermore, from a business standpoint, this makes sense as the larger the population any given station or station cluster serves, the greater its chances of negotiating deals in its favor from advertising agencies.

 

[TheBigA]

Furthermore, from a business standpoint, this makes sense as the larger the population any given station or station cluster serves, the greater its chances of negotiating deals in its favor from advertising agencies.

However, what we've seen is that radio usage in larger cities is lower than in rural areas. Thus it has less influence and has less value for advertisers.

If Spotify was buying iHeart, you might have a point. But Spotify is a Swedish technology company that has no interest in obsolete media.

 

[CTListener]

The only major U.S. cities I know of where IHeart doesn't own any radio stations are Buffalo and Kansas City (where the company never got a foot in the door) and Chattanooga and Richmond (where they traded stations with Audacy). I should also note the states that currently hav no IHeart outlets: Maine, South Dakota, Vermont, Montana, Idaho, and Wyoming. With its 2007 sale of radio stations to Townsquare, IHeart did get out of a lot of smaller markets, but with the exceptions I noted above, it is still in the nation's largest markets. Furthermore, from a business standpoint, this makes sense as the larger the population any given station or station cluster serves, the greater its chances of negotiating deals in its favor from advertising agencies.

Still, not close to being a monopoly. It has competitors in those major markets, and sometimes those competitors' stations top iHeart's in ratings and billing. Two (or more) can play that cluster game, you know.

Yes, iHeart may own the market's only station in a specific format -- country WWYZ in Hartford, for example -- but the regulators don't care about that, nor should they, any more than they should care that New York City has no country station at all, or that my little market (Hanover-Lebanon) doesn't have an urban contemporary or a hip-hop station.

 

[Kent]

As usual, this entire thread is almost entirely about money with almost no interest by the participants about what it means for the content or the audience. No wonder radio is dying, it's all about playing shell games with debt while laying off the people who used to create the actual product.

The tradeoff in having private companies run radio stations is that money will always be important. Ideally, broadcasting companies would deliver what the audience wants to make sure it can get the most listeners possible, which would mean the most advertisers at the highest price point. If you want to argue that doesn't happen or isn't done well, fine, but you can't assert in good faith that broadcasting companies should focus totally on the content and audience while ignoring the bottom line. Private companties can't maintain their existence indefinitely if they're not profitable.

The further concentration of broadcast media that would result from the merger of two of the biggest radio companies is unlikely to improve that. In fact, the most likely result is even more talent layoffs, less programming diversity and less choice for the audience.

I tend to doubt David's notion that programming quality would improve should SiriusXM and iHeart merge. I'll believe it when I see it. From my standpoint, the one thing I would like about a merger between the two companies is that it could mean one app across all of its operations. The dash on my car has 36 buttons that I can set across all service. I have SXM The Spectrum on Preset 1, 102.3 FM on Preset 2, and I have 610 and 810 AM on my 12th and 13th presets. I'd love an app that would let me link SiriusXM to it and allow me to switch seamlessly between it and my favorite stations like my dash works while allowing me to free up some screen real estate. No guarantee that will ever happen, I suppose, but it's not happening under the status quo.

In fact, this is a dream com true for the iHeart executives who stand to cash in on the "growth" gravy train by sidestepping the FCC market cap obstacle and merging with the satellite radio competitor instead.

I don't believe there are any market caps prohibiting a SiriusXM/iHeart merger. They're not considered to be the same service from a market standpoint since one is subscription based while the other is advertising based. The new company might be more aggressive at pursuing acquisitions, but smaller companies have been the ones requesting market cap waivers so far. iHeart, at least under present leadership, opposes lifting ownership caps. That doesn't mean it won't trade if caps get lifted, but iHeart is aware that it can only grow the current business model so much.

 

[gr8oldies]

This is yet another merger that needs to be swatted down instantly by antitrust regulators, but you know it won't be.

Not in this administration. Just write Donnie a big enough check

 

[ted chittenden]

There is no one company that holds all of the licenses of the OTA stations in a given market. That wouldn't change in this merger.

The perspective purchase of the NRG stations in Lincoln, NE, by Connisseur, if approved (which seems likely), would leave Connisseur owning all of the licensed commercial radio stations in that market. While there are some non-commercial outlets (including an NPR affiliate and an independent that broadcasts some Pacifica programs), the fact remains that having one company, even if it isn't IHeart, owning all of the commercial media licensed to a given market is not as far off as you think.

 

[TheBigA]

having one company, even if it isn't IHeart, owning all of the commercial media licensed to a given market is not as far off as you think.

You've changed the parameters of this discussion. Originally, you said:

If you have one company or person holding the licenses for all of the OTA broadcasters in a given market,

Now you've restricted the parameters to only commercial radio. As we all know, the people in Lincoln have many more options beyond commercial radio. What we've seen over the last 50 years is when people have options, they tend to take them.

 

[ted chittenden]

You've changed the parameters of this discussion. Originally, you said:



Now you've restricted the parameters to only commercial radio. As we all know, the people in Lincoln have many more options beyond commercial radio. What we've seen over the last 50 years is when people have options, they tend to take them.

While it is a fair point to say that I changed the parameters, I would also say to you in response to your second point that U.S. antitrust laws should not be ignored because consumers have chosen one medium over another.

 

[TheBigA]

While it is a fair point to say that I changed the parameters, I would also say to you in response to your second point that U.S. antitrust laws should not be ignored because consumers have chosen one medium over another.

Do you know what anti-trust is? If consumers have a choice, there is no anti-trust.