Item 1. Business
ITEM 1. BUSINESS
iHeartMedia is the number one audio media company in the U.S. based on consumer reach.
Within the audio industry, companies operate in two primary sectors:
• The ‘music collection’ sector, which essentially replaced downloads and CDs and
• The ‘companionship’ sector, in which people regard their radio and podcasting personalities as trusted friends and companions on whom they rely to provide news on everything from entertainment and local content to points of view, storytelling, information about new music and artists, weather, traffic and more.
We operate in the second sector and have used our large scale and national reach in broadcast radio to build additional complementary platforms. We are now the only major multi-platform audio media company, with each platform building on and extending our companionship relationship with the consumer.
Our product strategy is ‘be where our listeners are with the products and services they expect from us’. We provide our consumers with the products and services they expect from us regardless of where they are and what platforms they're using. Our reach now extends across more than 250 platforms and over 2,000 different connected devices-and that reach continues to grow.
The platforms we lead in are:
• Broadcast radio : We have a strong relationship with our consumers, and our broadcast radio audience has the largest reach of any audio company in the U.S. with an audience that is over twice as large as that of the next largest commercial broadcast radio company, as measured by Nielsen.
• Digital : Our iHeartRadio digital platform is the number one streaming broadcast radio platform-with five times the digital listening hours of the next largest commercial broadcast radio company, as measured by Triton.
• Podcasts : We are the number one podcast publisher-and we are more than three times the size of the next largest podcaster publisher as measured by audience, according to Podtrac. We are leading advancement of the podcast industry and have the largest growth across all podcast publishers in both global downloads and US audience, which increased 62% and 15%, respectively during 2020.
• Social media : Our personalities, stations and brands have a social footprint that includes 228 million fans and followers as measured by Shareablee, which is nine times the size of the next largest commercial broadcast audio media company. This social footprint was at the heart of delivering 20 billion social media impressions for our iHeartRadio Living Room Concert for America and 19.4 billion social media impressions for the virtual 2020 iHeartRadio Music Festival.
• Events : Historically, we had over 20,000 local live and virtual events per year and eight major nationally-recognized tentpole events. To respond to the realities of the COVID environment, we reimagined our overall approach to events and successfully built out many virtual events and produced 4 of our major tentpole events virtually. These live and virtual events provide significant opportunities for consumer promotion, advertising and social amplification.
We have been able to unify all of our local brands under a master brand "iHeartRadio". Using that umbrella has allowed us to build our other platforms as well as extend into third-party platforms like Snapchat, YouTube and cable and broadcast television.
Our business model has been to build strong consumer relationships at scale and monetize them by renting those relationships to unaffiliated third parties. We are transforming our sales process to be more competitive with the major digital players that have brought data, targeting and technology into the media buying process. Additionally, we have built out a strong marketing sales function to support the marketing needs of advertisers and agencies in addition to the more traditional media buying transactional relationships.
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Our History
iHeartMedia, Inc. was formed as a Delaware corporation in May 2007 for the purpose of acquiring the business of iHeartCommunications, Inc., a Texas corporation (“iHeartCommunications”), which occurred on July 30, 2008. Prior to the consummation of our acquisition of iHeartCommunications, iHeartMedia, Inc. had not conducted any activities, other than activities incident to its formation in connection with the acquisition, and did not have any assets or liabilities, other than those related to the acquisition.
On the Petition Date, we and certain of our subsidiaries filed the Chapter 11 Cases under Chapter 11 of the United States Bankruptcy Code (“Chapter 11”). We emerged from Chapter 11 on the Effective Date. Our Class A common stock began trading on the Nasdaq Global Select Market on July 18, 2019.
Our Business Segments
As part of the Separation and Reorganization, we re-evaluated our segment reporting and have determined that our current business segments are:
• Audio , which provides media and entertainment services via broadcast and digital delivery and also includes our events and national syndication businesses; and
• Audio & Media Services , which provides other audio and media services, including our media representation business, Katz Media Group (“Katz Media”), and our provider of scheduling and broadcast software, RCS.
Audio Segment
Our Audio segment operations include broadcast radio, digital, mobile, podcasts, social, live and virtual events including mobile platforms and products, program syndication, traffic, weather, news and sports data distribution and on-demand entertainment. Our Audio segment revenue was $2,681.2 million in 2020, $3,454.5 million in 2019 and $3,353.8 million in 2018.
Our radio stations, podcasts and content can be heard on AM/FM stations, HD digital radio stations, satellite radio, on the Internet at iHeartRadio.com and our radio stations’ websites, and through our iHeartRadio mobile application in enhanced automotive dashes, on tablets, wearables and smartphones, on gaming consoles, via in-home entertainment (including smart televisions) and voice-controlled devices. As of December 31, 2020, we owned and operated 858 live broadcast radio stations and had a local sales force servicing approximately 160 U.S. markets, including 48 of the top 50 markets (with four markets embedded in larger markets), and 86 of the top 100 markets, (with six markets embedded in larger markets). We are also the beneficiary of Aloha Station Trust, LLC, which owns and operates 5 radios stations, and Sun and Snow Station Trust, LLC which owns and operates 1 radio station, all of which we were required to divest in order to comply with Federal Communication Commission (“FCC”) media ownership rules.
According to Nielsen's Fall 2020 book, we have the most number one ranked stations across the top 160 markets, and across the largest 50 markets, with 76 and 28 number one ranked stations in these markets, respectively. With our broadcast radio platform alone, we have over twice the broadcast radio audience of our next closest broadcast competitor. We also have five times the digital listening hours of our next closest commercial radio broadcast competitor.
We generate advertising revenue through three primary channels. The first is a transactional media relationship with national agencies where the Company is selling defined advertising units and impressions, primarily of inventory on our broadcast radio stations. The second is through a direct marketing relationship with both local and national clients and agencies where we use our diverse portfolio of assets to help develop a specific marketing solution tailored to the defined needs of the advertising partner. The third channel is the newest and smallest, but fastest growing, channel using data to develop specific targets and often executed over a technology platform. These three channels can all be used in varying degrees of efficiency over our multiple platforms including broadcast radio, digital streaming and display, podcasting, social amplification and events. Our national scale and structure allows us to offer these solutions at a national, regional or local level, or any combination thereof. Our advertisers cover a wide range of categories, including consumer services, retailers, entertainment, health and beauty products, telecommunications, automotive, media and political. Our contracts with our advertisers range from less than one-year to multi-year terms.
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Our Audio segment has the following businesses and revenue streams:
Broadcast Radio : Our primary source of revenue is derived from selling local and national advertising time on our domestic radio stations, generating local and national broadcast revenue of $1,604.9 million in 2020, $2,233.2 million in 2019 and $2,264.1 million in 2018. Advertising rates are principally based on the length of the spot and how many people in a targeted audience listen to our stations, as measured by independent ratings services.
Increasingly, across both national and local markets, our advertisers are demanding data rich, analytics-driven advertising solutions. iHeartMedia offers a comprehensive suite of tech-enabled advertising solutions (that provide advanced attribution and analytics capability) through our SmartAudio platform, which includes:
• Our digital-like ad-buying solution that allows clients to view the available broadcast inventory across various cohorts to address their specific needs;
• Our application of data science to aggregate business data from broadcasts and the user insights that come from listeners using our digital platform; and
• Our tools to present the effectiveness of clients' broadcast radio advertising campaigns by providing detailed digital dashboards on the results of the advertising spend
These programmatic, data and analytic and attribution solutions to account for an increasing proportion of ad buying and we expect that it will continue to expand in the future.
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Radio Stations
As of December 31, 2020, we owned and operated 858 radio stations, including 244 AM and 614 FM radio stations. All of our radio stations are located in the United States. No one station is material to our overall operations. We believe that our properties are in good condition and suitable for our operations.
Radio broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the “Communications Act”). As described in “Regulation of Our iHeartMedia Business” below, the FCC grants us licenses in order to operate our radio stations. The following table provides the number of owned and operated radio stations in the top 25 Nielsen-ranked markets:
Nielsen Number
Market of
Rank (1)
Market Stations (2)
1 New York, NY 6
2 Los Angeles, CA 8
3 Chicago, IL 6
4 San Francisco, CA 6
5 Dallas-Ft. Worth, TX 6
6 Houston-Galveston, TX 6
7 Atlanta, GA 7
8 Washington, DC 6
9 Philadelphia, PA 6
10 Boston, MA 8
11 Miami-Ft. Lauderdale-Hollywood, FL 8
12 Seattle-Tacoma, WA 9
13 Phoenix, AZ 8
14 Detroit, MI 6
15 Minneapolis-St. Paul, MN 6
16 San Diego, CA 8
17 Tampa-St. Petersburg-Clearwater, FL 8
19 Denver-Boulder, CO 8
20 Nassau-Suffolk, NY 1
21 Charlotte-Gastonia-Rock Hill, NC-SC 4
22 Portland, OR 7
23 Baltimore, MD 4
24 St. Louis, MO 6
25 San Antonio, TX 7
Total Top 25 Markets 154 (3)
(1) Source: Fall 2020 NielsenAudio Radio Market Rankings.
(2) Excludes stations held in trust for sale.
(3) Our station in the Nassau-Suffolk, NY market is also represented in the New York, NY Nielsen market. Thus, the actual number of stations in the top 25 markets is 154.
Digital: Our Company’s reach now extends across more than 250 platforms, and 2,000 different connected devices. We generated digital revenue of $474.4 million in 2020, $376.2 million in 2019 and $284.6 million in 2018, comprised of streaming, subscription, display advertisements, podcasting and other content that is disseminated over digital platforms. Our leading streaming product, iHeartRadio, is a free downloadable mobile app and web‑based service that allows users to listen to their favorite radio stations, as well as digital‑only stations, custom artist stations, and podcasts. Monetization on the free streaming application occurs through national and local advertising. We also have two subscription-based offerings-iHeartRadio Plus and iHeartRadio All Access.
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• Podcasting . Within our digital business, our multi-platform strategy has also enabled us to extend our leadership into the rapidly growing podcasting sector. Overall podcasting industry revenue is expected to exceed $1.0 billion by 2021, according to Magna Global, from an estimated $0.9 billion in 2020. Podcasts continue to expand the audio landscape, and the number of users has increased to 104 million in the U.S. in 2020, with 37% of the U.S. population aged 12 and above having listened to a podcast in the last month (compared to 9% in 2008), according to Edison in March 2020. iHeartMedia is the number one podcast publisher, as measured by Podtrac with 254 million global monthly downloads and streams and 29 million U.S. unique monthly users, in January 2021 and has the most shows featured in the Top 10 across all categories. We also have one of the first and only podcasts to pass 1 billion downloads with Stuff You Should Know, as measured by Podtrac. In the fourth quarter 2020, we acquired Voxnest, Inc., the leading consolidated marketplace for podcasts and the best-in-class provider of podcast analytics, enterprise publishing tools, programmatic integration and targeted ad serving. With this acquisition, we are able to provide podcast advertisers with additional targetable inventory at scale by allowing the effective and efficient monetization across an entire range of podcast inventory on this one-of-kind programmatic platform. We generated $101 million in podcasting revenue in 2020, an increase of 90.6% from the prior year.
Networks: We enable advertisers to engage with consumers through our Premiere Networks and Total Traffic & Weather services. We generate broadcast advertising revenue from selling local and national advertising on our programs featuring top personalities, and also generate revenue through the syndication of our programming to other media companies. Premiere Networks and Total Traffic & Weather generated revenue of $485.0 million in 2020, $614.7 million in 2019 and $582.3 million in 2018.
• Premiere Networks is a national radio network that produces, distributes or represents 120 syndicated radio programs and services for more than 6,500 radio station affiliates. Our broad distribution capabilities enable us to attract and retain top programming talent. Some of our more popular syndicated programs featured top talent including Rush Limbaugh, Ryan Seacrest, Sean Hannity, Bobby Bones, Glenn Beck, Elvis Duran, Steve Harvey, the Breakfast Club, Colin Cowherd and Delilah. We believe recruiting and retaining top talent is an important component of the success of our radio networks.
• Total Traffic & Weather Network delivers real-time local traffic flow and incident information along with weather updates, sports and news to more than 2,100 radio stations and approximately 170 television affiliates, as well as through Internet and mobile partnerships, reaching over 190 million consumers each month. Total Traffic & Weather Network services more than 230 markets in the U.S. and Canada. It operates the largest broadcast traffic navigation network in North America.
Sponsorship & Events : Prior to the outbreak of the COVID-19 pandemic, we held over 20,000 live, in-person local events annually and eight major nationally-recognized tent pole events. These events which, including endorsement and appearance fees generated by on-air talent, resulted in $209.5 million of revenue in 2019 and $200.6 million of revenue in 2018 from sponsorship, endorsement and other advertising revenue, as well as ticket sales and licensing. Our eight major tent pole events include: the iHeartRadio Music Festival, the iHeartRadio Music Awards, the iHeartRadio Wango Tango, the iHeartRadio Jingle Ball Tour, the iHeartCountry Festival, iHeartRadio ALTer Ego, the iHeartRadio Podcast Awards and the iHeartRadio Fiesta Latina. As a result of the COVID-19 pandemic, Wango Tango and the iHeartRadio Music Awards were not held in 2020 and the iHeartRadio Music Festival, the iHeartRadio Jingle Ball Tour, the iHeartCountry Festival and the iHeartRadio Fiesta Latina tent pole events were held virtually. With the outbreak of the COVID-19 pandemic, we identified opportunities to continue to engage with audiences through virtual events, including the iHeart Living Room Concert for America, First Responder Fridays, Wednesday Night Living Room Concerts, Commencement: Speeches For The Class of 2020 and the HBCU Homecoming Celebration and continuing with virtual offerings of four of our tent pole events, the iHeartRadio Music Festival, the iHeartRadio Jingle Ball Tour, the iHeartCountry Festival and the iHeartRadio Fiesta Latina, and over 1,000 local virtual events. In 2020, our live and then virtual local and tent pole events, including endorsement and appearance fees generated by on-air talent, resulted in $107.7 million of revenue from sponsorship, endorsement and other advertising revenue, as well as ticket sales and licensing. We expect to continue to look for opportunities to supplement our live local and tent pole events with virtual events on a go forward basis, which would provide additional opportunities to engage with consumers and advertisers.
Other : Other revenue streams connected to our core broadcast and digital radio operations include fees earned for miscellaneous services such as on-site promotions, activations, local marketing agreement (“LMA”) fees and tower rental provided to advertisers and other media companies. These services generated revenue of $9.4 million in 2020, $20.8 million in 2019 and $22.2 million in 2018.
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Audio & Media Services Segment:
We also provide services to broadcast industry participants through our Katz Media and RCS businesses, which accounted for $274.7 million of revenue in 2020, $236.7 million of revenue in 2019 and $264.1 million of revenue in 2018.
• Katz Media Group is a leading media representation firm in the U.S. Katz Media represents more than 3,400 non-iHeartMedia radio stations and over 800 television stations and their respective digital platforms. Katz generates revenue via commissions on media sold.
• RCS is a leading provider of broadcast and webcast software. Our software (radio station automation, music scheduling, HD2 solutions, newsroom software, audio logging and archiving, single station automation and contest tracking software) and technology (real-time audio recognition technology) is used by more than 9,000 radio stations, television music channels, cable companies, satellite music networks and Internet stations worldwide.
Ultimately, our superior local, national, and online sales force combined with our leading digital, events, content, and representation business position us to cover a wide range of advertiser categories, including consumer services, retailers, entertainment, health and beauty products, telecommunications, automotive, media and political. Our contracts with our advertisers range from less than one-year to multi-year terms.
Our Growth Strategy
Our strategy is centered on building strong consumer relationships with national reach. Providing this kind of at-scale companionship creates high-value advertising inventory for current audio advertisers as well as new advertisers and delivers superior returns to both. Moreover, we believe that we can leverage our investments in technology and data-informed decision making to capture increasing market share of the long tail of national and local revenue. The key elements of this growth strategy are:
Continued capture of advertising spend from all mediums
We intend to take advantage of our national scale, the brand power of "iHeartRadio," and product innovation to capture additional share of the overall radio advertising pool. We also believe our enhanced audience data and related analytics tools should drive capture of additional revenue from other advertising sectors, including digital and television, as advertisers are able to target audiences and measure the efficacy of their ad spend in a manner that mirrors the capabilities of these other mediums. We believe our advertising partners value the unique reach, engagement and return potential of audio, as well as iHeartMedia's differentiated platforms and marketing expertise, positioning the Company to capitalize on this trend.
We have made, and continue to make, significant investments so we can provide an ad-buying experience similar to that which was once only available from digital-only companies. Our SmartAudio programmatic solution provides improved planning and automated ad-buying by relying on sophisticated planning algorithms and a cloud-based network across all of iHeartMedia's broadcast radio inventory to deliver highly optimized plans to our advertising customers. With SmartAudio, advertisers can do impression-based audience planning and dynamic radio advertising that utilizes real-time triggers such as weather, pollen counts, sports scores, mortgage rates and more to deploy different campaign messages based on what is happening in a specific market at a specific moment. SmartAudio has allowed brands to use broadcast radio advertisements to dynamically serve the most relevant message in each market, at each moment, just as they do with digital campaigns, to ensure increased relevance and impact. Further SmartAudio is the first fully digital measurement and attribution service for broadcast radio that we believe can transform the way advertisers plan, buy and measure much of their audio campaigns to better optimize the extensive reach of radio. We continue to look for ways to further develop our advertising capabilities in order to expand our share of advertising partners' budgets.
Increasing share of national advertising market
Broadcast radio is the number one consumer reach medium, and advertisers have a renewed appreciation for its scale, diverse demographic access and impact. We intend to complement our current local advertising presence in approximately 160 U.S. markets by further growing our stake in national advertising campaigns through our multi-platform portfolio of audio assets, roster of on-air talent, and the amplifying effect of our listeners' social engagement. As a result of our ongoing technology investments, national advertisers can now look to our audio offerings with their extensive reach, efficient pricing and digital-like analytics as powerful alternatives to other national ad mediums.
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Broadening the scope of audio engagement
We continue to expand the spectrum of choices for our listeners-both in terms of compelling content and the array of ways in which it can be consumed. During 2020, we launched BIN: Black Information Network, the first and only 24/7 national and local all news audio service dedicated to providing an objective, accurate and trusted source of continual news coverage with a Black voice and perspective, and The Black Effect Podcast Network, a joint venture with Charlamagne Tha God developed to amplify Black voices, celebrate Black creators and invest in the Black community, with culturally relevant content across a variety of genres.
In addition, the proliferation of smart speakers, smart televisions and other connected devices greatly increases the range of options for accessing and interacting with our content, with significant increases to listenership across these devices in 2020. We are also very focused on rapidly growing content categories, such as our leadership position in podcasting. These initiatives not only improve the listener experience-they facilitate further engagement and heightened frequency of advertising impressions.
Notably, iHeartRadio, our all-in-one digital music, podcast and live streaming digital radio service, is available on an expansive range of platforms and devices including smart speakers, digital auto dashes, tablets, wearables, smartphones, virtual assistants, televisions and gaming consoles.
We have continued to extend our leadership position in podcasting, and we are now the largest podcast publisher. We believe that podcasting is to talk what streaming is to music and is the next strategic audio platform. Our podcasting platform allows us to capture incremental revenue as well as extend station brands, personalities and events onto a new platform-ultimately extending and deepening our consumer relationships and our opportunities for additional advertising revenue.
Employing technology to gain greater penetration of the full spectrum of advertising clients and segments
In addition to having sellers in approximately 160 local markets across the U.S., which few media companies can claim, we intend to extend our technology platform to address the clients that we do not currently reach through direct sales operations. As indication of the size of the potential opportunity, we currently have approximately 50,000 total clients compared to millions of clients for some of our largest social and search competitors which utilize technology solutions for advertisers of all sizes. In the third quarter 2020, we acquired Unified Enterprises Corp., which provides customers with a complete advertising solution across all forms of digital media, including the information and intelligence data that they need to make informed decisions about their advertising investments. Additionally, in the fourth quarter of 2020, we acquired Voxnest, Inc., a podcast programmatic technology solutions business that allows for the consolidation of the fragmented podcast marketplace and the best-in-class provider of podcast analytics, enterprise publishing tools, programmatic integration and targeted ad serving. With this acquisition, we are able to provide podcast advertisers with additional targetable inventory at scale by allowing the effective and efficient monetization across an entire range of podcast inventory on this one-of-kind programmatic platform. During the first quarter of 2021, we entered into a Share Purchase Agreement to acquire Triton Digital, a global leader in digital audio and podcast technology and measurement services, from The E.W. Scripps Company for $230 million in cash, subject to certain adjustments and conditions. These acquisitions, coupled with our leading broadcast footprint, will establish us as the only company able to provide a complete set of advertising technology and measurement solutions for all forms of audio: on-demand, broadcast radio, digital streaming radio, and podcasting..
Utilizing our unique bundle of advertising inventory to drive uplift
By adding other high cost per mille, the cost of every 1,000 advertisement impressions (“CPM”), platforms into our mix, as well as providing unique and differentiated solutions for advertisers, we believe that we have the potential to see a CPM uplift. Although our primary focus is revenue, we also aim to maximize the value of our inventory. Moreover, we are continuing to develop platforms (including podcasts) that independently garner superior CPMs.
Leveraging the iHeartRadio master brand to expand our high-profile events platform
Audio is a social experience and an important extension of the medium is events. For our listeners, events are an opportunity to interact with fellow fans and engage with their favorite artists. For our advertising partners, they are a chance to reach a captivated and highly targeted audience directly tied to our high reach and strong engagement broadcast radio platform. They also provide an opportunity to extend into platforms like cable and broadcast television, create ancillary licensing revenue streams and serve as an opportunity for ticket revenue. This is especially true with respect to our expansion into virtual events during 2020, which were live streamed over various networks and platforms. As with all of our platforms, the data collection
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from these sources is valuable to both our product creation process and our advertisers. Through our portfolio of major award shows, festivals and local live events and virtual events, we intend to continue to find innovative ways to integrate sponsorships and deliver unique advertising moments. In so doing, we will seek to create additional revenue opportunities through this platform.
Competition
We compete for share of our listeners’ time and engagement, a challenging task in today’s fragmented and multi-tasking world. We believe our national reach, the strength of our brand and assets, the quality of our programming and personalities, and the companionship nature of our medium allows us to compete effectively against both our legacy competition-cable and broadcast television, and other broadcast radio operators-as well the new, digital competition, including streaming music and video services, social media, and other digital companies.
Similarly, we compete for advertising and marketing dollars in the U.S. advertising market against an increasingly diverse set of competitors. Our legacy competition for the radio, podcast and digital advertising market includes legacy broadcast radio operators, as well as satellite radio companies, podcasters and streaming music companies with ad supported components of their business. We also compete in the larger U.S. advertising market-inclusive of the radio, podcast and digital opportunity-by developing and offering competitive advertising products intended to attract advertising and marketing dollars that might otherwise go to companies in the cable and broadcast television, digital, search, Internet, audio, print, newspaper, sponsorship and other advertising spaces.
Intellectual Property
Our success is dependent on our ability to obtain and maintain proprietary protection for our technology and the know‑how related to our business, defend and enforce our intellectual property rights and operate our business without infringing, misappropriating or otherwise violating valid and enforceable intellectual property rights of others. We seek to protect our investments made into the development of our technology by relying on a combination of patents, trademarks, copyrights, trade secrets, know‑how, confidentiality agreements and procedures, non‑disclosure agreements with third parties, employee disclosure and invention assignment agreements and other contractual rights.
As of December 31, 2020, we own approximately 200 issued U.S. patents, 140 pending U.S. patent applications, 10 issued foreign patents and 10 pending foreign patent applications, in addition to 662 U.S. trademarks registrations, 51 U.S. trademark applications, 784 state trademark registrations, 30 state trademark applications, 916 foreign registered trademarks and 108 foreign trademark applications. The duration of our intellectual property rights vary from country to country, but our U.S. patents expire 20 years from the patent filing date and we expect that our trademarks would expire between 2021 and 2034 assuming all required fees are paid.
We have filed and acquired dozens of issued patents and active patent applications in the U.S. and we continue to pursue additional patent protection where appropriate and cost effective. We intend to hold these patents as part of our strategy to protect and defend the Company’s technology, including to protect and defend the Company in patent‑related litigation. Our registered trademarks in the U.S. include our primary mark “iHeartRadio” and various versions of the iHeart word marks and logos. We have a portfolio of internet domain names, including our primary domains www.iheart.com and www.iheartmedia.com. We also have licenses with various rights holders to stream sound recordings and the musical compositions embodied therein, as further described under “-Regulation of our Business-Content, Licenses and Royalties” below.
We believe that our intellectual property has significant value and is important to our brand‑building efforts and the marketing of our products and services. We cannot predict, however, whether steps taken by us to protect our proprietary rights will be adequate to prevent misappropriation of these rights. In addition to the forms of intellectual property listed above, we own rights to proprietary processes and trade secrets, including those underlying the iHeartRadio digital platform. While we use contractual and technological means to control the use and distribution of our proprietary software, trade secrets, and other confidential information, both internally and externally, including by entering into confidentiality agreements with our employees, contractors, and partners and maintaining physical security of our premises and physical and electronic security of our information technology systems, such measures can be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors.
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Human Capital Management
Of the many strengths that iHeartMedia possesses, none is more valuable than our people. Our business relies on our ability to attract and retain talented employees. To attract and retain talent, we seek to provide a work environment that creates a diverse, inclusive and supportive workplace, with opportunities for our employees to grow and develop in their careers and provides meaningful work, supported by competitive compensation, benefits and health and wellness programs, and by programs that build connections between our employees and their communities.
Workforce Composition
As of February 22, 2021, we had approximately 10,200 employees. These employees represent the diverse and complex nature of iHeartMedia with skills in programming operations, sales, engineering, podcasting, digital and beyond, as well as corporate support, such as information technology, legal, human resources, communications and finance. Our workforce is comprised of approximately 88% full time and 12% part time employees. Approximately 6% of our employees are subject to collective bargaining agreements. We are a party to numerous collective bargaining agreements, none of which represent a significant number of employees. We believe that our relationship with our union and non-union employees is good.
Total Rewards
We operate in a highly-competitive environment and make significant investments in our people and provide competitive pay and comprehensive benefits including:
• Employer sponsored health insurance;
• Company provided life insurance;
• Paid sick, holidays and vacation;
• Spirit days so that our employees may volunteer in their community;
• 401(k) plan; and
• An Employee Assistance Program, which is available to all full-time employees and their household members at no cost and provides services such as in person and telephonic counseling sessions, consultation on legal and financial matters and referrals for services such as child-care and relocation.
In response to COVID-19 we quickly took action enabling our employees, where possible, to work from home, voluntarily expanding our sick leave benefits to include additional time off for COVID-related illness, implementing flexible work policies, making resources available to parents who were homeschooling their children and offering a mid-year annual enrollment to give our employees the opportunity to elect additional coverage if they so desired.
Talent Development & Training
The Company is committed to supporting and developing its employees through global learning and development programs. We invest in a variety of employee training and compliance programs that give our employees the tools and information they need to make better decisions, become better leaders and managers, become better communicators and to work more collaboratively as a team. iHeartMedia employees engage in a variety of extensive training throughout the year and in 2020 our employees completed over 200,000 training courses which equated to over 100,000 hours of training.
Diversity
Diversity and inclusion are key to our success. As a company, we value diversity and respect all voices, from both inside and outside our Company. Since our Company reaches 90% of all Americans every month, listening to, understanding and integrating input from diverse voices and views are critical to our business success. One of our top priorities at iHeartMedia is to create an inclusive organizational culture to attract and develop a dynamic workforce that is as diverse as the audiences and communities we serve which includes and supports gender identity, race, sexual orientation, ethnicity, religion, socioeconomic background, age, disability, national origin and more. In addition, our Board is committed to seeking director candidates who can best contribute to the future success of the Company and represent stockholder interests through the exercise of sound judgment and leveraging of the group’s diversity of skills and experience, resulting in board members with diverse backgrounds, including, among other attributes, gender, ethnicity and professional experience.
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Our diversity and inclusion efforts are led by our Chief Diversity Officer, who reports directly to our Chief Executive Officer and our President. Current key initiatives center around accountability, education, mentorship and recruitment across all leadership and skill areas. We have instituted a Diversity, Equity and Inclusion Advisory Committee, which will bring important and timely issues around diversity and inclusion to senior management for consideration; serve as a sounding board as Company policies and decisions about diversity and inclusion are made; institute training and development programs on important diversity issues and help guide our efforts. Additionally, our Chief Executive Officer, President and other senior leaders have diversity and inclusion objectives embedded in their long-term performance goals.
Workplace Safety
Employee health and safety in the workplace is of utmost importance to our Company. We believe that all employees, regardless of our job role or title, have a shared responsibility in the promotion of health and safety in the workplace. We collectively are committed to providing and following all safety laws and rules, including internal policies and procedures. This means carrying out company activities in ways that preserve and promote a clean, safe and healthy environment.
The global effects associated with the COVID-19 pandemic have been unprecedented in their scope and depth. Our commitment and focus on workplace safety allowed navigation of the pandemic to preserve business continuity without sacrificing our commitment to the safety of our workplace. We have been and will continue to be following recommendations of the U.S. Center for Disease Control and other applicable agencies to maximize the safety and well-being of our employees. We have implemented comprehensive health and safety protocols to mitigate exposure risks. With respect to job roles that can be performed remotely, we quickly implemented a Work from Home policy that enabled our employees to continue working while also keeping themselves and their loved ones safe.
Seasonality
For information regarding the seasonality of our business, please refer to Item 7 of Part II of this Annual Report on Form 10-K.
Regulation of our Business
General
Radio broadcasting is subject to extensive regulation, including by the FCC under the Communications Act. The Communications Act permits the operation of a radio broadcast station only under a license issued by the FCC upon a finding that grant of the license would serve the public interest, convenience and necessity. Among other things, the Communications Act empowers the FCC to: issue, renew, revoke and modify broadcast licenses; assign frequency bands for broadcasting; determine stations’ technical parameters; impose penalties and sanctions for violation of its regulations, including monetary forfeitures and, in extreme cases, license revocation; impose annual regulatory and application processing fees; and adopt and implement regulations and policies affecting the ownership, program content, employment practices and many other aspects of broadcast station operations.
This following summary does not comprehensively cover all current and proposed statutes, regulations and policies affecting our business. Reference should be made to the Communications Act, FCC rules, public notices and rulings and other relevant statutes, regulations, policies and proceedings for further information concerning the nature and extent of regulation of our business.
Transfer or Assignment of Licenses
The Communications Act prohibits the assignment of a license or the transfer of control of an FCC licensee without prior FCC approval. In determining whether to grant such approval, the FCC considers a number of factors pertaining to the existing licensee and the proposed licensee, including compliance with FCC’ rules and the “character” of the proposed licensees. Applications for license assignments or transfers involving a substantial change in ownership are subject to a 30‑day period for public comment, during which parties may petition to such applications.
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License Renewal
The FCC grants broadcast licenses for a term of up to eight years. The FCC will renew a license for an additional eight‑year term if, after consideration of the renewal application and any objections thereto, it finds that the station has served the public interest, convenience and necessity and that, with respect to the station seeking renewal, there have been no serious violations of the Communications Act or the FCC’s rules and pattern of abuse of the Communications Act or FCC rules. The FCC may grant the license renewal application with or without conditions, including renewal for a term less than eight years, although renewal for less than the full eight‑year term is rare. While we cannot guarantee the unconditional grant of any future renewal application, our stations’ licenses historically have been renewed for the full eight‑year term.
Ownership Regulation
FCC rules and policies define the interests of individuals and entities, known as “attributable” interests, which implicate FCC rules governing ownership of broadcast stations. Under these rules, attributable interests generally include: (1) officers and directors of a licensee and of its direct and indirect parent(s); (2) general partners and limited liability company managers; (3) limited partners and limited liability company members, unless properly “insulated” from management activities; (4) a 5 percent or more direct or indirect voting stock interest in a corporate licensee or parent (except that, for a narrowly defined class of passive investors, a 20 percent voting threshold applies); and (5) combined equity and debt interests in excess of 33 percent of a licensee’s total asset value, if certain other conditions are met (the “EDP Rule”). An entity that owns one or more radio stations in a market and programs more than 15 percent of the broadcast time under a local marketing agreement (“LMA”), or sells more than 15 percent per week of the advertising time under a joint sales agreement (“JSA”), on a radio station in the same market is also generally deemed to have an attributable interest in that station.
Debt instruments, non‑voting corporate stock, minority voting stock interests in corporations having a single majority stockholder, and properly insulated limited partnership and limited liability company interests generally are not subject to attribution unless such interests implicate the EDP Rule. To the best of our knowledge at present, none of our officers, directors or 5 percent or greater stockholders holds an interest in another broadcast station that is inconsistent with the FCC’s ownership rules.
The current FCC ownership rules relevant to our business are summarized below.
• Local Radio Ownership Rule . The maximum allowable number of radio stations that may be commonly owned in a market is based on the number of stations in the market. In markets with 45 or more stations, one entity may have an attributable interest in up to eight stations, of which no more than five are in the same radio service (AM or FM). In markets with 30-44 stations, one entity may have an attributable interest in up to seven stations, of which no more than four are in the same service. In markets with 15-29 stations, one entity may have an attributable interest in up to six stations, of which no more than four are in the same service. In markets with 14 or fewer stations, one entity may have an attributable interest in up to five stations, of which no more than three are in the same service, so long as the entity does not have an interest in more than 50 percent of all stations in the market. To apply these ownership tiers, the FCC relies on Nielsen Metro Survey Areas, where they exist, and a signal contour‑overlap methodology where they do not exist.
• Cross-Ownership Rules . The newspaper/broadcast cross-ownership rule prohibits an individual or entity from having an attributable interest in either a radio or television station and a daily newspaper located in the same market, subject to certain exceptions and with waivers available in particular cases. The radio/television cross-ownership rule limits an individual or entity to having an attributable interest in only one or two television stations and varying number of radio stations within a single market.
The Communications Act requires the FCC to periodically review its media ownership rules, and those reviews have been and continue to be the subject of litigation and follow-on regulatory proceedings. In November 2019, the United States Court of Appeals for the Third Circuit issued a decision that resulted in reinstatement of the cross-ownership rules, which the FCC had previously eliminated. There may be future litigation regarding this decision. The Supreme Court of the United States granted petitions for certiorari seeking review of the Third Circuit decision and heard argument on January 19, 2021. The case remains pending.
In December 2018, the FCC commenced its 2018 quadrennial review of its media ownership regulations. Among other things, the FCC is seeking comment on all aspects of the local radio ownership rule including whether the current version of the rule remains necessary in the public interest. We cannot predict the outcome of the FCC’s media ownership proceedings or their effects on our business in the future.
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Irrespective of the FCC’s media ownership rules, the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the U.S. Federal Trade Commission (“FTC”) have the authority to determine that a particular transaction presents antitrust concerns. See “Item 1. Business – Antitrust and Market Concentration Considerations.”
Alien Ownership Restrictions
The Communications Act and FCC regulations prohibit foreign entities or individuals from indirectly (i.e., through a parent company) owning or voting more than 25 percent of the equity in a corporation controlling the licensee of a radio broadcast station, unless the FCC determines that greater indirect foreign ownership is in the public interest. The FCC generally will not make such a determination absent favorable executive branch review.
To the extent that our aggregate foreign ownership or voting percentages exceeds 25 percent, any foreign holder or “group” of holders, defined pursuant to FCC regulations, of our common stock whose ownership or voting percentage would exceed 5 percent or 10 percent (with the applicable percentage determined pursuant to FCC rules) must also obtain the FCC’s “specific approval.”
On November 5, 2020, the FCC issued a declaratory ruling (“Declaratory Ruling”) authorizing us to have aggregate foreign ownership and voting percentages of up to 100 percent and specifically approving certain of our stockholders that are deemed to be foreign under FCC rules, subject to certain conditions. Among those conditions is a requirement that we comply with a Letter of Agreement (“LOA”) with the DOJ. The Declaratory Ruling also requires us to take our Special Warrants into account in determining our foreign ownership compliance. On February 5, 2021, Honeycomb Investments Limited, a company organized under the laws of the Bahamas, and certain related foreign persons (collectively “Honeycomb”) filed a Schedule 13D with the Securities and Exchange Commission (“SEC”) reporting ownership of more than 5% of our voting stock and equity. Honeycomb acquired its interest without our knowledge or control, and we are fulfilling our obligations under the Declaratory Ruling and the FCC rules with respect to Honeycomb’s interest. See “Item 3. Legal Proceedings- Alien Ownership Restrictions and FCC Declaratory Ruling.”
Programming and Content Regulation
The Communications Act requires broadcasters to serve the “public interest.” A licensee must present programming that responds to issues in the station’s community of license and maintain records demonstrating this responsiveness. Federal law also regulates the broadcast of obscene, indecent or profane material. The FCC has authority to impose fines exceeding $400,000 per utterance with a cap exceeding $3.75 million for a continuing violation. In June 2012, the U.S. Supreme Court ruled on appeals of several FCC indecency actions, but declined to rule on the constitutionality of the FCC’s indecency policies. The FCC has since solicited public comment on those policies in a proceeding which remains pending. In addition, the FCC regulates the conduct of on-air station contests, requiring in general that the material rules and terms of the contest be broadcast periodically or posted online and that the contest be conducted substantially as announced. The FCC also regulates, among other things, political advertising, sponsorship identification, and the advertisement of contests and lotteries.
Equal Employment Opportunity
The FCC’s rules require broadcasters to engage in broad equal employment opportunity recruitment efforts, retain data concerning such efforts and report much of this data to the FCC and to the public via periodic reports filed with the FCC or placed in stations’ public files and websites. Broadcasters could be sanctioned for noncompliance.
Technical Rules
Numerous FCC rules govern the technical operating parameters of radio stations, including permissible operating frequency, power and antenna height and interference protections between stations. Changes to these rules could negatively affect the operation of our stations.
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Content, Licenses and Royalties
We must pay royalties to copyright owners of musical compositions (typically, songwriters and publishers) whenever we broadcast or stream musical compositions. Copyright owners of musical compositions most often rely on intermediaries known as performing rights organizations (“PROs”) to negotiate licenses with copyright users for the public performance of their compositions, collect royalties under such licenses and distribute them to copyright owners. We have obtained public performance licenses from, and pay license fees to, the four major PROs in the U.S., which are the American Society of Composers, Authors and Publishers (“ASCAP”), Broadcast Music, Inc. (“BMI”), SESAC LLC ("SESAC") and Global Music Rights LLC (“GMR”). There is no guarantee that additional PROs will not emerge, which could impact, and in some circumstances increase, our royalty rates and negotiation costs.
To secure the rights to stream music content over the Internet, we also must obtain performance rights licenses and pay public performance royalties to copyright owners of sound recordings (typically, performing artists and record companies). Under Federal statutory licenses, we are permitted to stream any lawfully released sound recordings and to make ephemeral reproductions of these recordings on our computer servers without having to separately negotiate and obtain direct licenses with each individual copyright owner as long as we operate in compliance with the rules of those statutory licenses and pay the applicable royalty rates to SoundExchange, the organization designated by the Copyright Royalty Board (“CRB”) to collect and distribute royalties under these statutory licenses. From time to time, SoundExchange notifies us that certain calendar years are subject to routine audits of our royalty payments. The results of such audits could result in higher royalty payments for the subject years. Sound recordings fixed on or after February 15, 1972 are protected by federal copyright law. Sound recording copyright owners have asserted that state law historically provided copyright protection for recordings fixed before that date (“pre-72 recordings”). Sound recording copyright owners have sued radio broadcasters and digital audio transmission services (including us) for unauthorized public performances and reproductions of pre-72 recordings under various state laws. In October 2018, federal legislation was signed into law that applies a statutory licensing regime to pre-72 recordings similar to that which governs post-72 recordings. Among other things, the new law extends remedies for copyright infringement to owners of pre-72 recordings when recordings are used without authorization. The new law creates a public performance right for pre-72 recordings streamed online that may increase our licensing costs. It also preempts state law infringement claims both prospectively and, in certain circumstances, retrospectively.
The rates at which we pay royalties to copyright owners are privately negotiated or set pursuant to a regulatory process. In addition, we have business arrangements directly with some copyright owners to receive deliveries of and, in some cases, to directly license their sound recordings for use in our Internet operations. There is no guarantee that the licenses and associated royalty rates that currently are available to us will be available to us in the future. In addition, congress may consider and adopt legislation that would require us to pay royalties to sound recording copyright owners for broadcasting those recordings on our terrestrial radio stations. The CRB has issued a final determination establishing copyright royalty rates for the public performance and ephemeral reproduction of sound recordings by various non‑interactive webcasters, including radio broadcasters that simulcast their terrestrial programming online, to apply to the period January 1, 2016‑December 31, 2020 under the so‑called webcasting statutory license. A proceeding to establish the rates for 2021‑2025 began in 2019, with a final, retroactively applicable determination expected on or before April 15, 2021. Increased royalty rates could significantly increase our expenses, which could adversely affect our business. Additionally, there are conditions applicable to the webcasting statutory license. Some, but not all, record companies have agreed to waive or provide limited relief from certain of these conditions under certain circumstances for set periods of time. Some of these conditions may be inconsistent with customary radio broadcasting practices.
Proposed Changes
Congress, the FCC and other government agencies and regulatory bodies may in the future adopt new laws, regulations and policies that could affect, directly or indirectly, the operation, profitability and ownership of our broadcast stations and Internet‑based audio music services. In addition to the regulations, proceedings and procedures noted above, such matters may include, for example: proposals to impose spectrum use or other fees on FCC licensees; changes to the political broadcasting rules, including the adoption of proposals to provide free air time to candidates; restrictions on the advertising of certain products, such as beer and wine; spectrum reallocations and changes in technical rules; and the adoption of significant new programming and operational requirements designed to increase local community‑responsive programming and enhance public interest reporting requirements.
Antitrust and Market Concentration Considerations
Beyond compliance with FCC rules governing media ownership, our acquisition of additional radio stations or other businesses could receive scrutiny or challenge under the federal antitrust laws. Transactions that meet specified size thresholds
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are subject to applicable waiting periods and possible review under the Hart‑Scott‑Rodino Act (the “HSR Act”) by the DOJ or the FTC Whether or not an acquisition is required to be reported under the HSR Act, the antitrust authorities may investigate the transaction and may take such action under the antitrust laws as they deem necessary, including seeking to enjoin the acquisition or requiring divestiture of the acquired assets or certain of our other assets. Any future iHeart acquisition could be the subject of review and/or remedial action by antitrust authorities, particularly if it involves businesses or markets in which we already hold a significant market share.
Privacy and Data Protection
Privacy and data protection legislation and regulation play a significant role in our business. We obtain information from users of our technology platforms, including, without limitation, our websites, web pages, interactive features, digital survey panels, applications, social media pages, and mobile application (“Platforms”), in accordance with the privacy policies and terms of use posted on the applicable Platform. We collect personally identifiable information directly from Platform users in several ways, including when a user uses or purchases our products or services, registers to use our services, fills out a listener profile, posts comments, uses our social networking features, participates in polls and contests and signs up to receive email newsletters. We also may obtain information about our listeners from other listeners and third parties. Outside our consumer-facing businesses, we collect personally identifiable information from our employees and our business partners. We use and share this information for a variety of business purposes including for analytics, attribution and to manage and execute digital advertising campaigns in a variety of ways, including delivering advertisements to Internet users based on their geographic locations, the type of device they are using, their interests as inferred from their web browsing or app usage activity. In addition, we obtain anonymous and aggregated audience behavior information from third‑party data providers who represent to us that they are compliant with applicable laws.
We are subject to a number of laws and regulations relating to consumer protection, information security, data protection and privacy. Many of these laws and regulations are still evolving and could be interpreted in ways that could harm our business or limit the services we are able to offer. In the area of information security and data protection, the laws in several states in the United States and most countries require companies to implement specific information security controls and legal protections to protect certain types of personally identifiable information. Likewise, most states in the United States and most countries have laws in place requiring companies to notify users if there is a security breach that compromises certain categories of their personally identifiable information. Any failure on our part to comply with these laws may subject us to significant liabilities. For example, the California Consumer Privacy Act (“CCPA”) establishes a new privacy framework that expands the definition of personal information, establishes new data privacy rights for consumers residing in the State of California, imposes special rules on the collection of consumer data from minors, creates new notice obligations and new limits on the sale of personal information, and creates a new and potentially severe statutory damages framework for (i) violations of the CCPA and (ii) businesses that fail to implement reasonable security procedures and practices to prevent data breaches.
We regularly review and implement commercially reasonable organizational and technical physical and electronic security measures that are designed to protect against the loss, misuse, and alteration of our listeners’, employees’, clients’ and customers’ personally identifiable information and to protect our proprietary business information. Despite our best efforts, no security measures are perfect or impenetrable. Any failure or perceived failure by us to protect our information or information about our listeners, employees, clients and customers or to comply with our policies or applicable regulatory requirements could result in damage to our business and loss of confidence in us, damage to our brands, the loss of users of our services, including listeners, consumers, business partners and advertisers, as well as proceedings against us by governmental authorities or others, which could harm our business.
Available Information
You can find more information about us at our Internet website located at www.iheartmedia.com. Our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to those reports are available free of charge through our Internet website as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission (“SEC”). The contents of our websites are not deemed to be part of this Annual Report on Form 10-K or any of our other filings with the SEC.
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