Bob Pittman Tells CNBC That Radio Has Done A Poor Job 'Monetizing Its Product'
March 12, 2015 at 3:52 AM (PT)
iHEARTMEDIA Chairman/CEO BOB PITTMAN told CNBC's "Squawk on the Street" that radio's problem is its inability to monetize its product.
"NIELSEN came out with a study of [radio's] return of investment [which shows] a 6-to-1 ROI [for every dollar invested in radio], which by most estimates is much greater than television or digital," said PITTMAN. "What's happened in radio is that it has done a very poor job of monetizing what they have."
PITTMAN added that the industry's high return of investment is due to the lack of fragmentation within the market. "Years ago, when I was in the TV business, we were saying 'Oh my gosh, there are 50 radio stations in a market. How fragmented. There are only 10 TV networks.' Now there are thousands of TV networks and suddenly radio looks very mass market compared to TV and digital."
PITTMAN continues to be a cheerleader for the industry, noting that about 92% of people in the U.S. still listen to radio every week. "It's part of people's lives. It's your best friend sitting in that empty seat next to you in the car," he said, adding the industry is making progress to improve monetization.
"The good news about our business is that we don't need a new product to generate more revenue. We just need to monetize better what we have," he said. "What's happened forever is that we've dealt with the radio agencies, who do not determine how much money goes to radio. They just spend what's allocated. We didn't have the relationship with the people who determine the allocations, and we didn't have the research to back up our claims."
He echoed the comments in his talk with the GOLDMAN SACHS TMT LEVERAGED FINANCE CONFERENCE, in which he said that 2015 was called the "Year of ROI" at the company's management conference in LAS VEGAS and that "ROI is the new ratings." Saying that he and CFO RICH BRESSLER "flattened" the company in 2014 and "the changes we made worked," PITTMAN said that the iHEART MEDIA national platform began to "catch on" with advertisers and called radio an "undermonetized" business.
Asked about the industry's cost structure, he said that "we're hanging onto ... costs that were built for another era." PITTMAN stressed three areas on which the company is focusing, including outdelivering the radio sector, bringing new money to the sector ("this is an industry that really should have more money spent in it"), and to maximize the infrastructure and look for efficiencies. And asked about the company refinancing to push its debt out further on the horizon, PITTMAN said that doing so "gives us more time to build our digital platform," which he noted will take more time to build business.