Contract Renegotiations Could be a Good Thing
In this guest post, Scott Spiegel shares his thoughts on the state of current high priced/low value contracts.
Some news outlets are reporting that a possible hostile takeover of SiriusXM could happen in the coming months. New owners (such as Echostar) would have the ability to renegotiate any existing contracts, once in control. To be honest, I don’t find this to be the least bit objectionable. It’s time for SiriusXM to trim some fat… whether because it’s forced to, or because it’s the right decision to make.
Many might say that the most obvious candidate for contract renegotiation is Howard Stern. They’d be wrong. Stern (despite his penchant for unfairly attributing ALL of the company’s success to himself) is still probably the most single-handedly responsible for Satellite Radio’s current viability, and there’s no other radio guy in the world that could solidify the existence of an entirely new media entity the way he did. However, the product was amazing before Stern (I had the service—and believe me, it was worth it before he came over or even announced his intentions, for that matter), but what he brought, was the realization that talented radio artists and good programming will bring loyal listeners. The Howard Stern Brand only got him so far; new subscribers only began to come over in droves months after his arrival because they found out how much great entertainment they had been missing.
The problem? SiriusXM is tied to too many contracts that are valuable because of the star-power of the channel names only. In reviewing a listening guide, three names immediately pop out to me. The Foxxhole, Shade 45, and Mad Dog Unleashed.
The channels themselves aren’t bad at all. My complaint is that millions were spent to secure these personalities–to be the faces of their own programming. If the Foxxhole were just a station (with a different name) that played comedy geared towards black audiences, it would be fine. But when millions are spent so that Jamie Foxx’s picture can be on the channel guide, it just seems wasteful. Jamie Foxx is an amazing talent, but you’d think that he’d do more than one show a week to get his own station.
When it comes to Shade 45, Eminem’s only real attachment to the station is by name only. New albums may debut on the channel, but when was the last time Eminem came out with new material? Three years? More? Even still, is debuting an album worth the cost? I have never even heard Eminem speak on his OWN channel. I’m no die-hard Shade 45 guy, but you’d think he’d have more of a presence.
With Mad Dog, I think SiriusXM did not drop the ball because of Mad Dog and his ability to program a channel. I question the signing mainly because of timing. If Sirius is struggling to make an upcoming debt payment, then why devote $3 million or more a year to a guy who won’t bring in that value in new subscribers. Mad Dog is great, but is he known beyond New York City? Not really.
Don’t even get me started on Oprah and Friends. This is a poor contract that Sirius had to absorb because of the merger. And much of the programming IS NOT EXCLUSIVE. To be frank, for the hundreds of millions of dollars she’s getting, SiriusXM could be doing a lot of better things.
If the company were in better shape, I’d have no problem with any of the previously mentioned channels. However, now is the time for SiriusXM to start to think about putting money into the content itself, rather than into cool channel names.
Scott Spiegel is a freelance writer based out of Houston, you can learn more about him at Scottyspiegel.com
Eminem has a new album coming this year also with dre, and 50 Cent
Who gives a flying F*(*! about Eminem.
He’s just another fine example of degenerate black ghetto hip-hop culture.
He brings NOTHING to the SiriusXM bottom line.
I don’t think anyone cares about Eminem’s name on the channel, but I do care about having the freedom to listen to exactly what the artist put on his record. Not some watered down version or the contiuous loop of their “radio play” garbage. He himself brings little to the bottom line, but having that music as another choice on the Sirius dial brings everything IMHO.
Sirius needs to get rid of Oprah’s channel, as well as Martha Stewart’s garbage. Why should Sirius keep paying for something that is more than accessible for free?
They grossly overpaid for Mad Dog Russo (solid guy, but not for $3mil per). Shade 45 is kickass.
Howard, Bubba, Ferrall… what else needs to be said? Outside of the music channels, they’re the highlights of Sirius programming, IMHO.
Howard Stern is the only Marquis Talent in the entire stable of on-air talent.
Without Howard Stern, there would be no SiriusXM.
He is worth every penny he was paid.
His position on Sirius is DIRECTLY responsible for leveraging roughly 500,000 subscribers into almost 20 million.
There is not a single other personality on satellite radio that brings in 1/20th the number of subscribers that Stern did and does.
Bubba was a hug part of Stern’s initial success with Sirius but he is NOT a valuable commodity but then he isn’t paid like one either.
Oprah, Martha Stewart, NFL, NASCAR, MLB, Jamie Foxx, Bruce Springsteen, etc. etc. are nothing more than the proverbial albatross around the neck of SiriusXM management.
Every other on-air person or channel is subject to renegotiation or elimination.
You are obviously the Sirius Buzz devil’s advocate. But you must realize that part of the synergies Karmazin is working through is contract re-negotiations. No one has more experience as a CEO with Artists than Karmazin. Let him get these debt obligations re-structured and you watch how he deals with the bloated talent contracts in the coming months. He is not shy about trimming the fat. Give the guy a chance, he is trying to orchestrate a friendly take-over, of sorts, and and navigate this company through a sick economy to make SiriusXM leaner and meaner. I still think he is our best shot at making the company viable and stronger and the merger is still young. He’s our best chance for long-term shareholders also, If we make it through the year.
P.s. This guy wants Gordon Gekko to take over Sirius- whatever…
Excellent analysis, Charles. Howard Stern’s contract paid for itself. Oprah and Jamie Foxx, on the other hand, do not provide any valuable content and suck important funds from genuine areas of concern.
I also believe that their business model is outdated. SiriusXM is trying to provide both content and hardware. Thats perfectly fine, since you need “Ready” radios in cars. However, the management of the company decided to ignore the reality that there are Billions of ipods sold, come empty and the smallest one is a GB. Why don’t they deliver content for the MP3 players? I know its available via dl services, but Sirius should have taken the control of its distribution.
Arthur, it is not Charles that had the article it is “Scott Spiegel”. While Charles sponsored it the thoughts are “Scott Spiegels”. I also agree with Scott. I have said when people were complaining about H. Stern and the amount he got. That was not half as much of a waste as Oprah.
According to a source with finacial times (www.ft.com) the offer is there but no decision has been made… a decision could come late mon or tues. It also says the deal is a friendly investment to partnership. Go figure still maybe a chance of chapter 11 protection if no deal is reached. FOR CRYING OUT LOUD MEL TAKE THE GOD DAMN DEAL!!! If anyone wants to see the article go to http://www.ft.com click on markets then click siri as ur quote in the top righthand corner
my bad http://www.ft.com click on markets then type in siri as ur quote in the top righthand corner then cick on news to see the article
As I have said before…
Renegotiate OR Remove These “SHOWS”
1-OPRAH
2-MARTHA
3-O&A (CBS VERSION-sucks + useless as teets on a bull)
4-ALL Foreign language channels.. (You are in America)
5-LOCAL? Traffic and Wthr? (Bandwidth user/loser)
6-Foxxhole (SUCKS.. see #5)
7-Stern’s contract: FIVE day’s a week dude (personal pet-peeve)
8- Eff BASEBALL… Yawn + BIG $$ + Roids = S.H.I.T product
Big money people.. numbers 1,2,and 6. These people are NOT broadcasters and work THIRTY MINUTES a WEEK..
-Good Job Mel. In the years to come the *FULL SPECTRUM of BANDWIDTH* will be seen and will prove the MERGER was the right decision. Either XM or Sirius was going to fall, maybe both. Thanks also to Liberty Media!!!
These are the “lean” years with many GROWING pains, and a HORRIBLE economy. Hang in there people… It will get much better. Personally I am going to buy $250 worth of this stock for pennies/share.
PS. Hartleib is an A$$hol*
Just as an FYI Oprahs contract and Martha Stewarts contracts would be running out within the year naturally. Or I think it’s safe to assume that. I went back and looked at their original contracts. Martha was $29 million for 4 years signed 2005, Oprah was 3 years $55 million signed 2006.
could there be a howard stern return to tv if-when a deal is made
their is a report out from the WSJ (Wall ST Journal) that if Mel makes the worong decision and decides to go to Chapter 11 Protection that a bunch of creditors r lookin to hang him and force him out of his job!!! MEL FOR CRYING OUT LOUD TAKE THE GOD DAMN DEAL FROM LIBERTY!!!
Question: Why would Mel choose BK over Liberty’s offer to help Sirius restructure? Can anybody explain this to me? Would this be in the Company’s best interest? Thanks
Total control over the spectrum and operating of the co, to screw Ergen and rework all the debt and contracts.
We don’t know what Malone wants in return for the cash infusion. We are hearing it is shareholder friendly, but don’t really know.
I hate to sound like a broken record here but we’ve all went over this a thousand times. I hate to be pessimistic sounding because I think that being positive and optimistic is a good thing in life. With investing however, you can lose a sh!tload of money keeping your head in the clouds.
It’s a $.10 stock people. We’ve all been ruined already. My $100k+ is worthless now.
I wanted to believe. I love the product. I’m still long worthless stock. I hope for the best in the unlikely event we make it out of this alive but let’s get real here.
Mel has led us, intentionally or unintentionally down this road we’re on. It would have been great but it is what it is.
The pie in the sky cheerleading B.S. gets old. Keep it real.
P.S. SCRF – you’re the man!
Hey GIS.
First as always, hello and good thoughts go to you and everything pertaining to you.
If I was the man, lol, I would have been buying aapl my entire investing life, and would be meeting several posters like you in Vegas on my dime,however, I too ended up in this “.10” stock as you say.
Honestly GIS, how did we get here. I mean Mel had 18 months to form a post merger strategy and “this” is the best he had to offer???? (head shake head shake head shake)..
Now we wait out an announcement that either takes out our remaining couple grand, or somehow adds additional miles to this journey.
No way will I ever stand up and congratulate, one Mel Karmazin. At this point he has a zero rating and It would take a miracle and at least a $2 share price to get the needle off zero.
I am staying positive that some good news will appear. I am hopeful. I have a deep bond with any and all that believed what we were told months and years ago, that led us to invest our money. I refuse to accept any bashing from those that said I should have known better. I am very thankful for anything I have, my family, friends, health and blessings, that are greater than finances.
Great to see you here GIS. Peace.
omantom,
Because he is out of his fucking mind, that’s why!
You could blame Mel, you could blame content deals, you can blame the economy and the credit markets.
At the end of the day, the FCC did this with the help of the NAB and I think Hartlieb had alot to do with the delay with his pressing the interoperable radio crap. And his website is called savesirius – what a piece of shit.
Without the extra 6 mo’s delay, all would have been refinanced before the credit markets crashed.
It will all be over latest tomorrow, maybe today.
I could be wrong here, but if a decision is made today, then I would have to believe it’s good news because if you were not accepting the Liberty offer, you would still have till the end of tomorrow to work things out with creditors or another investor. You wouldn’t throw in the towel a day early, I don’t think ?
Just in on the Yahoo Board.
http://online.wsj.com/home-page
Breaking news. Positive news.
just saw it now reading yahoo
So what does it mean when my etrade ASK price is at $2.10 right now and all the news is saying that a deal is done. Is the stock expected to spike to that level? I’m in good shape, I got 48000 shares for .12 cents. Am I going to get rich tomorrow?
Breaking news as of 5:23pm liberty near a deal of sirus for an investment and a major stake though the two sides are still working out details liberty is poised to take control from ergen!
1st Contract I would renegotiate were I in a capacity to do so at SiriusXM would be cancelling Mel Karmazin’s contract, eliminate his severance agreement, then, toss his office belonging out the door in a pile. This move alone would save tens-of-millions of dollars.
His handling of the investors capital to-date is abyssmal (sp). The entire economy is looking for leadership. This company is doing the same. Melvin’s window for providing that has come and gone. He sat on his hands as the youthful head of the FCC toyed with him. Then, he sucker-punched investors in August with financing which has brought the PPS down to a dime. Now, he thinks he’s “rescuing” the company from BK! Nice trick, Melvin, but its already cost too many fine folks too much capital for you to crow about anything.
So, to bring about the much needed change of direction for this company and its investors, Job 1 is to cut off the head of the beast.
Then, Oprah, Martha and the others that have been mentioned in this blog. Let’s face it, radio is primarily for Music and News. Stern and Limbaugh have the rest of the marketplace. Putting foreign channels and Nascar on Sat. Radio seems a bit wasteful.
In closing, replace the Little Man, take the gabbers off air and give the consumer MORE unique listening channels of Music! Then, when the time comes, negotiate from strength with Stern.
Finally, call the Russians and tell them to stop messing with old orbiting satellites, or the rest of this story will be filled with disasterous consequences for the birds of this company, and its future as space debris takes out countless Sats.
Max…………………
:0
Mel is as good as gone no matter what happens.
He has lost the faith of the creditors.
http://online.wsj.com/article/.....outset-box
He has lost the faith of customers and investors as well.
Shade 45 is the best hip-hop station on satellite radio before and post merger. Eminem has a huge fan base so I think you are under estimating his value and the respect his has in the hip hop world He also has 50 Cent with probably the second largest hip-hop fan base who has control over the weekend shows with his G-Unit radio which is very popular. I know you guys may not be hip hop fans but I bet Eminem has brought over more subscribers than Oparh, Foxx and Stewart.
Eminem is not the only musician with his own channel or name on the channel. This type of media is still new so you can’t be upset with the 2 companies for signing big names to get customers of different genres of music to come aboard.
You have to admit regardless of how feel about certain channels this is still better than regular radio(I have not listen to it for about 4yrs now).
I dont think anyone is questioning that… we just want to know where the hell he is? What does he do for those millions? If the programming stayed the same but his name were no longer, you would keep listening… correct? Its not the name, its the content that is great.
Eminem comes on the show live several times a year. He also does a lot of pre-recorded shows for the station.
Correct me if I am wrong but Eminem was the first celebrity or hip hop celebrity to attach his name to the sattelite radio world and because of that he has some of the biggest and best hip hop ‘mixtape’ DJ’s in the country on his station. They came because they felt if Em is attach why not me.
I understand with what you are saying Charles but we already have satellite radio. Once you have it you are hooked on it. Satellite radio still has to attract NEW customers. Sad to say in this world we live in you have to have clebs endorsement for certain stuff to sell.
Pure NONSENSE!
Shade45 brings NOTHING to the SiriusXM bottom line.
^^^^^^^
So I guess the channels you listen to do.
Being different from regular radio with celeb channels (E Street Radio, Grateful Dead, Elvis, etc…) brings nothing to SirXM bottom line too.
Oh, Mad Dog gets 3 mill a year to talk about sports on SirXM I know that brings nothing to the bottom line. There is already a ton of sports channels on this service
Denali,
You’re wrong