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THE HITS INTERVIEW

A MEDIA VISIONARY DROPS A WHOLE LOTTA SCIENCE ON BUD SCOPPA
Name a game-changing media moment during the last 35 years, and chances are Bob Pittman’s fingerprints were all over it. The son of a Methodist minister, Pittman became a radio announcer at the age of 15 on a 250-watt AM station in his native Mississippi; by the time he turned 23, he was programming WNBC, the network’s New York flagship station. From radio, he moved to television as a founder of MTV, which not only became the first profitable cable network but also reenergized the record business. Pittman was on hand when Warner Bros. Merged with Time Inc., and after serving as CEO of Six Flags and Century 21, he became COO of AOL and held the same post following the 2000 mega-merger that created AOL Time Warner. Since 2010, Pittman has become ever more deeply involved with Clear Channel. His duties as Chairman/CEO have notably included overseeing the development of the iHeartRadio online platform, the iHeart Music Festival and the inaugural iHeartRadio Music Awards, airing this Thursday night (5/1) on NBC. The 60-year-old visionary/entrepreneur recently fielded questions from Bud Scoppa on the nuances of his current gig and how his past experiences prepared him for it.
The iHeartRadio Music Awards on NBC are your first foray into prime-time major-network TV. Can we expect to see Clear Channel expand its presence in this high-end real estate?
We think of ourselves as a multiplatform company, and clearly we’re based in broadcast radio, but the lines between all this stuff have gotten very blurry. And since we don’t own a TV network, we then partner with others that do. We certainly think NBC is a killer partner on this project, and we’re excited to be in business with them.

What are the parallels between creating and developing the original MTV playbook in the early ’80s and what you and John Sykes are building with the iHeartRadio franchise? What are the differences?
With MTV, we found an opening; we saw a consumer change. You had the generation that had grown up with music and TV, but the two had never come together on a content basis. With iHeartRadio, what really is going on is that consumers love radio. Interestingly enough, although you might not gather this from reading the general press, the consumer uses radio like they’ve always used it: 92% of the people listened to the radio every week in 1970; 92% listened in 2013. It is this remarkably stable medium. What has changed is that, although the majority are listening on the billion radios in the United States, there are 160 million smart phones and 160 million PCs, so they have opportunities to use the radio from new devices. So we’ve had to build the platform to allow them to do that.

“This is another one of those moments where the technology allows us to reach and deal with our consumer in new ways.”


If you watched people five or 10 years ago, they may have been listening to a bit—let’s say from Elvis Duran—they drive to work, the bit isn’t finished, they actually sit in their car until the bit’s over and then they run into the office and turn the radio on again. Now they don’t sit in their car, they just switch over to iHeartRadio, listen to it on their phone, walk into the office and there you go. Or my wife takes the train in from Westchester, and she used to be without a radio. Now she’s not—she has her phone. So we’re getting extra instances of usage, and for Clear Channel it probably adds two or three percent to our listening overall. We also made the strategic decision to share our platform with others selectively, because all radio is in this together. The similarity is that there was a consumer need that wasn’t being served, so we built a product to serve it. But in neither instance did we set out to build a new product; we set out to serve the consumer.
 
What caused you to handpick Sykes and Tom Poleman as your key players, and what skills does each of them bring to Clear Channel overall and iHeart in particular?
Tom has been a masterful programmer in radio for years and years. He’s certainly proven he’s a winner. And Tom is also a fantastic collaborator. He builds teams, works with teams, spots talent, is always looking for new ideas, he’s willing to listen to ideas from others, is adaptable, moves with a sense of urgency. And as we extend and expand our offerings to the consumer, it’s logical that our chief programmer and our #1 creative would be at the front and center of that.

John brings great experience with the music business, having been a manager, a label head, a music publisher, a music network executive a few times, TV producer, etc. He has great relationships with talent; he really understands what they need, because he’s been an artist manager. And he actually plays the drums; we won’t say how well—I’m not looking to create a band here [laughs]. He’s able to figure out how we can amplify all of this through television, other media. He understands how the artists have to be taken care of from a manager/record company viewpoint. We add that to the dimension of what we do when we partner with the artist. And that’s why the artists are so happy with our collaborations—because we’re widely focused on them, and we have experts who cover the ground all the way from broadcast radio to digital radio, on into TV, live events, etc. And at the end of it, we are gonna make sure we take care of every artist we get involved with.
 
You and Sykes have quite a shared history, but how are you and Poleman connected?
I met Tom when I came aboard here, and I wanted to give him more and more responsibilities. John Hogan was a fan of Tom’s as well, and he also had a lot of support from the other programmers as someone who could represent them well and bring them in. As opposed to feeling shut out by Tom, they felt very included by him, and those were great attributes.

You pioneered music broadcasting at MTV and online platforming at Clear Channel. Now you appear to be combining the two. Would you agree with that assessment, and if so, can you describe how you’re connecting the two?
All these things have similarities, but they have great differences as well. There’s a pattern to all this: I was there when FM took over from AM, and when we invented the narrowcast cable TV networks as a new business, back when ESPN was running Little League Baseball, when we were trying to eke out a profit at MTV and CNN was not being taken seriously—who was going to watch news 24 hours a day? All the insults they heard. And this is another one of those moments where the technology allows us to reach and deal with our consumer in new ways. We’re extending it in interesting ways, and we know what we are and what we’re not.

“The reason record companies spend so much of their fixed overhead on radio promotion is because they’re spending the money to get, in essence, that free advertising and to get us aboard.” 


You hear some people talk about audio streams and audio; I promise you, the consumer never calls it audio—they either call it my music or radio, and they have favorite radio stations. But the two are very different. When you deal with Spotify, iTunes, Pandora, Amazon, what you’re really dealing with is the replacement for CDs and cassettes and LPs and, way back when, 45s. But it’s still the same thing. It’s that music collection that you curate just for yourself, at just the right moment, for just the right mood. And radio is really the mirror image of that. Radio is the community social experience when you want to engage the world. It’s like walking into your favorite bar, all your friends are there and you go, "Hey," and they go, "Hey, Bob, let me tell you what’s going on." That’s what we do on the radio.

There’s a piece of research that showed that even Pandora and Spotify users reported that the main way to discover new music was FM radio—about 70%, almost exactly the same as the general population. Why? Because that’s what radio does. It’s the job of radio to tell you everything going on in the world that you need to know, including listening to the new music and telling you what you might like. And the reason we break down the stations by formats is because the people on Z100 are going to have different tastes than the people on Q104, Lite FM or Alt 97. They all have different audiences, different tribes, and we listen for the tribe. Those things really have not changed much. So I think it’s a different business; it’s an extension of radio. And the truth is, if I’m listening to Z100 on my mobile phone, if I’m listening on an FM chip, it’s considered broadcasting. I’m listening on exactly the same phone to exactly the same station, but I’m listening on iHeartRadio, that’s considered digital. Well, that’s a little silly. So we’re trying to just deal with it from a consumer’s perspective and not get caught up in industry analyses of what we are or aren’t.
 
Who are your primary competitors, what are your advantages over your rivals, and can more than one music-focused multimedia platform flourish in this day and age?
This might surprise you, but I think anybody who’s doing radio or music is probably more our friend than our competitor. Our competitors are the people who are using the consumer’s time for things that don’t relate to us. If they’re listening to music, or listening to radio, we’ll get our fair share of usage. But if they’re spending their time on videogames, or watching TV, or are outside jumping on a trampoline, or going to a baseball game, or watching football, I don’t know if there’s much of a chance of sharing that time. So in a funny way we actually look to everybody who touches music as a friend, and obviously we’re competitive for that last mile, but we’re all working together to get people interested in this sector.

Veteran major label execs continually express their regrets about providing MTV with its content free of charge, although they benefited greatly from the arrangement. During the Internet age, the majors have demanded and consistently received top dollar for licensing their content. How does that aggressive stance impact your approach to deriving content from them?
First of all, we paid them, actually, at MTV after the first year and a half. We had a deal with every major record company to pay them in cash and advertising for their product on the air. So I’m always a believer in the idea that we’re in this together; let’s all figure out how we share it together. It’s funny, but I’ve not found the record companies to be that aggressive. In digital, we’re all still trying to figure out what’s there, and we’re all trying to figure out how we blend it all. We’ve had agreements with a number of record companies. Probably about half of the indie marketplace has direct deals with us, and we have Warner Music Group on a direct deal as well. But that doesn’t mean we have any less relationship with the people who aren’t direct-deal; we have a different relationship. In most of the businesses I’ve been in, if I identify somebody as a major strategic partner, I’d like to have a contractual relationship and be more than ad hoc, catch-as-catch-can. And the deals are less about how we’re splitting up money, and more about what can we expect from each other? So that they can plan with us in their plans, and we can plan with them in our plans. But at the end of the day, we’re all about with the record companies making sure we break a lot of new big hits. And if we do that, I don’t think any of us are too worried about finding some economic solution. I’m optimistic that that will happen, and we’re getting closer and closer. So I view these people as my friends and my strategic partners, not as enemies or adversaries.

What’s your pitch to UMG and Sony as to why they should do a deal with you?
Well, look, I’m not trying to persuade anybody, really. I’m just trying to lay out the strategic relationships we all have. Remember, radio started as a business where you could only own seven markets and 14 stations total—one AM and one FM in each market—so it was a very fragmented ma-and-pa industry. It’s very hard to have a strategic relationship with a hundred companies. This business, like most businesses, finally got to a point where it was somewhat consolidated. So we are a rather large company with a pretty good reach. Our view is that we need to treat this like real business, and again, move from ad hoc relationships where they have to call every one of our 850 radio stations to have a discussion, to being able to have a discussion with the company about where they’re going, what we’re looking for, what they prioritize, where they’re spending the money, information they and we have, because we’re all in this together. If we find new hits, that’s good for our consumer; if they find new hits, they can make money. So once we figure that out, then we figure out that we’re better off with a contractual relationship and a carefully defined relationship so that they can plan out the next year or two about what we can do for them and what assets we will deploy for them, versus every time they have something they come and talk to us. It works either way, but I happen to think it’s a whole lot easier, and it’s certainly easier from the planning standpoint, if we have something locked up. But I’m not twisting anybody’s arms, and if they see it another way, that’s fine with us, and certainly we’re happy with what we’ve got.

Scott Borchetta
was the first one to recognize this and help us figure what the structure would look like, which was good for the music industry and record companies, as well as working for us. We did the same with a number of companies—Danny Glass, who stepped in next, all the way to the Warner Music Group. So we’re happy with it at this point. If others want to do more and make it more formalized and institutionalized, we’re certainly willing to do that. But I don’t think we have an imperative that it has to be done. At the end of the day, it’s all about the fact that the record companies have a magnificent business model. I hate to turn it into this, but they are in essence a packaged-goods business, and every packaged-goods business, like Unilever or Proctor and Gamble, spends an enormous amount of money advertising. If you look at the music industry, you say, "How did Katy Perry go from unknown to everybody knows who Katy Perry is?" I actually looked it up. She got, based on rate card, about a billion dollars of advertising on the radio. If we put a billion dollars behind Dove soap, everybody would know Dove soap, too. A billion dollars in advertising works miracles. So they have a great model, and we understand our place in the model; they understand their place in the model. The reason record companies spend so much of their fixed overhead on radio promotion is because they’re spending the money to get, in essence, that free advertising and to get us aboard. So there’s a model that works, and there is more than one way to skin a cat, and we’re open to them all.

Do you anticipate Congress setting a standard performance-royalty rate at some point, and if so will it supersede the rates you’ve set?
Well, look, our view is that everything in business is better being set on a market basis than having the government do anything for us in that regard. We look to the government to protect us against onerous or criminal behavior. Central planning did not work in the Soviet Union. I would be surprised that the government knows a better rate than two companies that are doing business with each other. That defies logic. So I just tell people it’s absolutely about free markets, and we’ll figure out a solution together. We’re not the kind of company that runs itself on what we think rates will be with the government. We run it based on our consumers, and running what we think is the right business and the right economics in the business with partners.

Tell us a bit about some of the new initiatives that have grown out of your partnerships with the labels, both over the air and online.
We started many programs. We’ve got the artist integration program, which has been wildly successful, which is really free advertising. We’ve probably at this point put up $80-to-100 million for free advertising for the music business, because we think we should be investing in breaking new artists. And the music industry has really figured out how to do it. The iHeart Music Festival began as, and still is, a major promotional touchstone. The last iHeartRadio Music Festival had 2.5 billion social impressions. Anything that sells music and makes it more appealing, more popular and more in front of the consumer is good for us all. And I think, again, we’ve worked carefully with them about who, when and where, and coordinated when albums are released and the right moment for the artist and their career. We’re doing the iHeart Music Theaters, where we’re doing 30-to-60-minute streaming concerts and events out of there. We’re doing the album release parties now. Interestingly, the two best-selling physical album sellers probably in the last five or six years have been Taylor Swift and Justin Timberlake, and we had album release parties for both of them. We’re trying to act like grown-up, mature, smart marketers, and sit down and actually plan the marketing of an artist for our listeners to benefit most. And it obviously has great benefits to the record companies as well.

“Anything that sells music and makes it more appealing, more popular, and more in front of the consumer is good for us all.”

It sounds synergistic, at least on paper.
If you look at the results, it is. Look what’s happened to the artists we’ve done this with—it’s been pretty remarkable. A few years ago, we did a presentation at the Four Ace for the advertising business of the up-and-coming artists, the ones we thought were gonna be big. As I recall, it was fun., The Wanted, Karmin and K'naan. Not bad. But again, that’s working closely with the music industry trying to align our information and our understanding of the consumer, music and the opportunities.

What do you see as the most important ways in which the Clear Channel and iHeart brands have evolved over the last several years?
The iHeartRadio brand has come out of nowhere to be a major brand. After the iHeart Music Festival, we were up to about 50% awareness. Of the brands today, Pandora is probably the biggest at about 75%, and iHeartRadio is about 70%, Spotify is another 10 points below that, and then everybody else is way down. So it’s three brands, and obviously iTunes Radio isn’t quite where all of us are. iTunes is a brand and is right up there at the top, too. So, you know, we’ve got a few players here. We all do something different. I mean, we’re really about radio, and then we do some custom radio as an add-on. iTunes is really about downloads, and then they do some custom radio as an add-on. Spotify really does on-demand service, but they do a custom radio as an add-on, and Pandora is free-standing custom radio. So we overlap in some areas, but the truth is, we probably all have our own particular strength and point that we’re doing this from.
Where do you envision the iHeart platform to be a year from now? Five years?
I’m not Nostradamus; I don’t really know where it’s going to be. I know what we’re pushing; we’re pushing it to stay responsive to the consumer. But you’ve got to be very careful about long-term plans. My view of the future is, you get ready for the future, and then, when it shows up, you respond to it. But look, I’ve been in the technical side of the business—AOL and all those things—for quite awhile, I did not see the iPad coming; I did not see music on phones coming as it did. The iPod was a much more logical extension of what we had seen. Today, mobile is probably 60% of the usage on iHeartRadio, and the PC is 40%; who would’ve thought that? So we just have to be nimble and ready, and respond quickly as these opportunities emerge.

Is there anything to the rumors that you’re planning for an IPO for iHeart?
Well, we haven’t announced anything yet, and I haven’t even heard the rumors. iHeart is intimately embedded with radio and us and the partners we have on the iHeartRadio platform. So that’s all I can tell you. But I like rumors.

With the growth of streaming—and iHeart having become a major player—how does terrestrial radio adapt to changing consumer demand? How do you strike a balance between the "customizable" station and the regional identity of individual markets?
Well, you first have to separate the two. When you go to the custom radio feature of iHeartRadio, which is a minority of the usage, or Pandora, Spotify, iTunes, or Amazon, that’s music collection, it’s replacement for CDs, LPs, 45s, cassette tapes, 8-tracks, whatever we used in the past. But it’s your music collection. Your music collection is when you want to escape the world, customizable for you one-on-one. Radio is where you go to discover new music; it’s where you want to find out what’s going on with music, and when you want to find out what’s going on in the world, find out what was on TV last night, what’s on TV tonight, who’s the big pop star? What’s the gossip? That’s the business, really, in radio. So those are actually two separate businesses. It’s interesting, there was a survey, and one of the questions on the survey was an agreement on a statement that says, "I listen to and like both radio and my music collection, but I use them for different purposes at different times." And 92% of consumers agreed with that. So it’s two different businesses, and we hear too much in the industry about audio, streams, whatever. Consumers don’t talk that way. It’s either radio or music collection. Now, if we add Pandora and all [the services] with all of broadcast radio, iHeart Radio and everything mixed together, broadcast radio is still 90% of all listening. So all of that digital is only 10% of listening. So it’s important; it’s great for our future. Most of it, by the way, happens to be incremental listening, so that’s good, because we’re increasing the number of people that listen to something out here. But it’s an add-on and we treat it that way, and broadcast radio, actually, has probably never been stronger. You know, there’s a 10% increase in listeners to broadcast radio over the last 10 years, and about 300% increase in digital listening over the last 10 years. So they’re both growing, and that’s good news for us.

You’re known as having great ears and impeccable taste dating back to your days at NBC Radio. What active artists, new or established, would you say have that ineffable something—the magic?
You know what? I’m 60 years old; I’d be a fool to throw out any artist that would be meaningful here. The good thing about getting old is to know that you don’t know anything anymore. I wouldn’t trust my ears for a second.

Which formats or genres are seeing the greatest growth, and why?
Country is probably bigger than it has been since Urban Cowboy. Not particularly in New York or L.A., but once you get out into the real world, the middle of the country, it’s huge. So that’s growing. We just did the iHeartRadio Country Festival in Austin, which was a smash. And Bobby Bones, who is our big morning man star in Country, got a welcome as big as any of the acts, which I think, again, speaks to the uniqueness of Country. We think there are some things that are growing slower but emerging, EDM being one of them. It smells a lot like underground radio did in about 1969, and most of that eventually became mainstream, but it was a slow growth. But other than that, most of the formats are holding strong, so we’re betting on them all. With 850 radio stations, we’ve got room to do every one of them.




 



 




 
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