MEMO: Questions for Broadcasters Ahead of Q3 Earnings Calls

TO: Interested Parties
FROM: musicFIRST Coalition
DATE: November 4, 2021
RE: Questions for Broadcasters Ahead of Q3 Earnings Calls

This week, the largest U.S. broadcasters hold their third quarter earnings calls. If Townsquare Media, the first radio broadcaster to report Q3, is any indication (with total digital revenue increasing 20% year-over-year), advertising revenue will continue to bounce back faster than anticipated. Last quarter, these large radio broadcasters reported better than expected profits, selling to investors that they are well-positioned to rebound to pre-pandemic revenue levels, and as a result, expectations are high for the third quarter.  For example, in their Q2 earnings reports:

• iHeart reported a 77% year-over-year revenue increase of $862 million
• Cumulus reported a 54% year-over-year increase of $224.7 million
• Audacy reported a 73% increase of $304.5 million
• Townsquare reported a net revenue increase of 45% year-over-year

Broadcasters are confident about their financial strength and came out of Q2 projecting a return to 2019 revenue levels by the end of 2021. This comes as BIA Advisory Services also projects local advertising revenue to hit $12.7 billion (including over-the-air and digital) for 2022.

Given the crowing from broadcasters about a rapid rebound in revenue, the musicFIRST coalition — the voice for fairness and equity for music creators — believes radio executives should answer questions about the future of how their stations compensate artists.

1. Are broadcasters continuing to sell a full recovery from the pandemic?

iHeartRadio, Cumulus, and Audacy generate billions of dollars in revenue every year and have amped up their talk of a bullish earnings rally. For example, iHeartRadio said that they are in the midst of a “strong recovery” and that their revenue will boomerang back to pre-pandemic levels this year. They paint the picture of a strong financial future on investor calls, claiming they are approaching a full bounce back from the COVID-19 pandemic. Yet, when it comes to efforts to require them to compensate artists fairly when their music is played on AM/FM radio, they claim they can’t afford it. 

While these corporations use music creators’ work to fill their airwaves, and in turn bring in advertisers, they claim they cannot afford to give compensation to the artists. If business is booming, why do they continue to refuse to pay musicians for their work?

2. The public agrees: artists should be paid for their work. Digital services pay music creators. Why doesn’t AM/FM radio?

Delivery systems for music have changed, and as a result, different platforms are treated differently under the law even though they deliver the same product. The law has not kept up with the market. It doesn’t make sense.

National polling commissioned by musicFIRST shows that the American public backs bold action to ensure that artists are treated with respect and paid when their songs are played on AM/FM radio. Only 30% of Americans said they were aware that artists aren’t paid when their music is played on AM/FM radio. Meanwhile, over half reported that they knew that streaming services like Spotify and Pandora do pay artists for streams.

Radio broadcasters continue to rely on the public remaining in the dark on this issue. Because once they do become aware, Americans overwhelmingly believe it’s unfair that music creators and artists are not paid when their music is played on the radio — by a 2-to-1 margin, 54%-22%. 

If music creators are paid when their music is played on digital services such as SiriusXM, Spotify, and Pandora, they should be paid when AM/FM stations broadcast their programming. In fact, when terrestrial stations broadcast their music on the Internet, they do pay. Why should there be no financial obligation from radio stations to pay artists for their work when we ask digital music providers to compensate musicians fairly for their labor?

3. Dominant broadcasters are engaging in a stock buyback frenzy. If they cannot afford to pay music creators and are laying off workers, why are they repurchasing their stock?

According to InsideRadio, on Wednesday, October 27th, iHeart spent $60 million of cash on hand to repurchase shares of its stock. One day later, CEO Jeff Smulyan of Emmis Communications, announced the company would offer to buy back 2 million shares of its Class A common stock.

Yet, the top four broadcasters, which own nearly 2,000 radio stations around the country, have decimated local radio with layoffs. The recent history of local radio is for smaller stations to become affiliates of conglomerates and face the financial axe.

For example, iHeart, a billion-dollar corporation that owns 850 radio stations, has been systematically cutting DJ and other jobs across the country. In doing so, it’s increasingly relying on non-local programming dictated by its corporate office. Many of the latest rounds of layoffs occurred in 2020 during the most distressing period of the pandemic. 

As iHeart engineered what was termed a “bloodbath” of layoffs over the last year, its stock price soared – up 220% since June 2020. Let’s follow the math: local workers lost their jobs, music creators didn’t get paid for their work, but iHeart executives’ stock options soared. Entercom, which recently changed its name to Audacy, joined iHeart in conducting nationwide layoffs. In doing so, they fired local DJs in many markets. 

About musicFIRST
musicFIRST works to ensure music creators get fair pay for their work on all platforms and wherever and however it is played. We rally the people and organizations who make and love music to end the broken status quo that allows AM/FM to use any song ever recorded without paying its performers a dime. And to stand up for fair pay on digital radio — and whatever comes next.

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