Whether real or simply perceived, there seems to exist a stark difference in how business is conducted east and west of the Mississippi River. Eastern based businesses tend to more staunch and more conservative. Western based businesses seem to be more innovative and think more outside of the box. One is not necessarily better than the other, it just seems that there are differing mindsets based on geography.
Having lived on the west coast, as well as the east coast, and being a frequent traveller, I have a diverse and keen perspective how different things can be even in our own country. One thing is certain. The east coast has been hesitant to give up the suit, tie, and cuff links, while executives out west tend to be far more casual in their attire. The more easy going style out west is what brought us telecommuting, and flex-time. These innovations in business are not technical, but do lead to comfort levels for employees that make them take the extra steps for the company. In terms of synergy, the Liberty deal could be a virtual ying and yang of American business.
Sirius XM is an east coast company. They think more traditionally. Mel Karmazin recently said himself that he is not an innovator, but rather an operator. In a twist of events (or fate), Sirius XM found themselves with a heavy debt load that was due quickly. The company struggled in ever tightening credit markets to obtain reasonable financing, but were not having much luck. It was this circumstance that brought about the Liberty Media deal, and with it, a western thought process.
The Liberty deal can mean far more than an infusion of cash and financing of debt. There is potential that Liberty could bring an infusion of new thinking to Sirius XM. This likely has already started, but the real east/west synergy will begin when Liberty obtains the three seats (they can seek up to six) they are currently seeking on the Board of Directors. Over the next 2 years, there are many decisions that need to be made. From programming, to management, several key relationships are up for renewal. The insight and western thinking of Liberty could not have come at a better time. Some key moments in the next 24 months:
Mel Karmazin - His employment agreement expires in November of this year. Will Karmazin remain with Sirius XM, or will the company seek another direction. Karmazin has his fans and his critics, so the coming months will be interesting.
Scott Greestein - The Chief Content Officer has a deal that runs through July. Greenstein was instrumental in bringing content to Sirius during the time when XM was a competitor. Yes, the deals were expensive, but he did get them done. The question at this point is what Greenstein sees in the near future as some key deals are set to expire.
James Meyer - The president of sales and operations has an employment contract through April of 2010. He carries some interesting clauses that center around July 28th 2009. The Board will have decisions to make in only a few short months.
Patrick Donnelly - Like Meyer, Donnelly has an employment agreement that end next April
Howard Stern - The Stern Deal, which is oft misunderstood, expires December 31st 2010, a bit over 18 months from now. The contract is now at a stage where people are beginning to wonder if Stern will renew, and if so at what terms. Here is another area where Sirius XM's relationship with Liberty may come to play. Could Stern's Howard T.V. brand be headed for satellite television as a combined deal. While pure speculation, the fact of the matter is that with Liberty as a partner, Sirius XM now has far more to negotiate with than they did before.
NFL, MLB and NASCAR - These are all deals that have approaching expiration dates. Major League Baseball is the furthest out, but the company already needs to be strategizing about how to negotiate these deals going forward.
The bottom line is that there is a lot that is going to happen at Sirius XM in the next two years. Liberty Media will have some influence in how things pan out. Obviously the Liberty deal is already good for Liberty. Even without the preferred shares that convert to 40% of the common stock, Liberty makes healthy interest on their loan. However, I do not think the interest alone is what Liberty is after. They want to make those preferred shares even more valuable than they already are. With substantial skin in the game, and a western perspective on business, shareholders may see some great things coming from Sirius XM Radio because there is now a healthy mix of east and west.
Position - Long Sirius XM Radio, No Position Liberty Media