Over the years, iHeartRadio and its parent company iHeartMedia have become an industry powerhouse, with iHeartRadio owning more than 850 radio stations in the U.S. and providing listeners with nearly endless streaming radio stations. You’ve likely heard the phrase “you’ve got to spend money to make money,” but in the case of iHeartMedia that hasn’t proven to be the case, as the more than $20 billion in debt it has been dealing with for the past 10 years have caused the company to file for chapter 11 bankruptcy, which it announced on Wednesday, March 14.
“The agreement we announced today is a significant accomplishment, as it allows us to definitively address the more than $20 billion in debt that has burdened our capital structure,” iHeartMedia chairman and CEO Bob Pittman said in a statement. “Achieving a capital structure that finally matches our impressive operating business will further enhance iHeartMedia’s position as America’s number 1 audio company.”
The agreement cuts the amount of debt that iHeartMedia will now be dealing with in half, leaving it with “just” $10 billion in debt. This leaves plenty on the company’s plate when it comes to repayment, but it also means it’s in a healthier place than it was before the filing. The real question is: How will this affect iHeartRadio customers?
The answer is that it shouldn’t really affect customers at all. You’ll still be able to listen to iHeartRadio-owned radio stations, go to iHeartMedia events like concerts, and listen to streaming internet radio using the iHeartRadio app, which remains one of our favorite radio apps. This is essentially a business move and as such, it affects business behind the scenes, but not the company’s core products.
Of course, that is speaking in the short term. In the long term, the company’s still-massive debt load could prove problematic when it comes to staying afloat. This could also mean that the company will be looking to cut what it perceives to be dead weight, so we may end up seeing radio stations with lower numbers going off the air, though it doesn’t seem that iHeartMedia is planning any such actions in the near term.
With streaming services like Spotify and Apple Music nipping at its heels, iHeartRadio may turn its focus away from traditional radio in the coming years, with moves like its 2016 VR partnership with Universal. Pittman’s optimistic tone may prove to be short lived, but the company has managed to grow despite its debt, and we don’t expect that to change any time soon.
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