The Second Coming Of Howard Stern
It was a bit over six years ago when The King Of All Media signed a blockbuster deal with Sirius Satellite Radio. At that time, the economy was on good footing and Sirius and XM were competing for content deals as if their companies depended on it. Stern negotiated a $500 million deal that brought two channels worth of content including Scott Ferrall, Bubba The Love Sponge, and more. The move was an instant success for Sirius, and delivered subscriber records for the next year while Stern wrapped up his contract with terrestrial radio.
The five year deal is set to expire at the end of this year and the question on everyone’s mind is whether or not Stern will sign a new deal. A lot has transpired since the original deal. The economy is not in good shape, Sirius and XM have merged, and the competitive landscape looks much more different now than it did years ago. With all of that being said, I think Stern will sign again with satellite radio. Now the question is what that will mean.
Sterns second coming will deliver stability to Sirius XM, and has a real potential to once again deliver subscriber numbers that will boost the company to levels that should pass 20 million with ease and by a healthy margin. By signing with satellite again, Stern will be giving his confirmation that the medium is here to stay, and all seeds of doubt about the viability of satellite radio. It is one thing for an upstart company to sign a talent like Stern once, it is a more significant event to sign him to a second deal. When that happens it will tell all of the detractors left that satellite radio is not only here to stay, but can keep and even bring in the type of content that differentiates satellite from any other media company.
Over the past week Mel Karmazin has been meeting with Sterns agent Don Buchwald. Buchwald is the cream of the crop when it comes to the world of media. He does not waste time with face to face meetings unless negotiations have progressed to a point that merit going over the final details. Combine this with the fact that Stern is on vacation this week, and it seems like a good bet that Sirius XM and Stern could be putting the final touches on a new deal. Some speculate that a deal is already done, but if that were the case, an 8K would have been filed announcing the news. The likely situation is that Stern, Buchwald and Karmazin are hammering out details now, and that we could see an announcement earlier than most anticipate. Karmazin stated at the Q2 conference call that the company hoped to have news on the deal prior to the Q3 conference call (early November).
Stern signing is validation, and could be the impetus for not only a second wave of subscribers, but also an event that will let the street know that the stability of this company is rock solid. With Sirius XM revisiting the sub $1.00 range, news of the second coming of Stern may be just the event needed to boost the stock. Yet another reason an announcement may come sooner rather than later is that retailers are preparing their orders right now for the holiday season. Most retailers main question in figuring out how many satellite radios they want is whether or not Stern will stay with the company. That question is coming up more and more often. By getting Stern signed now, and announcing it, a good fall selling season can be assured.
Will Stern sign again? My belief is that he will, and the deal will allow for availability of Stern on mobile devices. That will drive Sirius XM Internet Radio into a new realm that will boost revenue. The Sirius XM Internet Radio option costs $2.99 per month. many Stern fans that have held back from grabbing the Sirius XM Internet Radio option could well come on board now, meaning better ARPU.
The second coming of Stern means more to Sirius XM than most people realize. Love him or hate him, he has cache, and keeping him on satellite would be a coupe. Watch for news soon.
Position – Long Sirius XM Radio
I always felt that it was Howard who wouldn’t let his channels on the iPhone app. B/C of his contract, Sirius would have had to pay him more to broadcast it. But why couldn’t he have just done it for a dollar … for the fans.
Spencer,
Good Article. I love Stern and the sat radio music/news/sports/comedy/etc selections. Interestingly, I found out a colleague of mine was a subscriber to Sirius. He informed me that if stern leaves, he would cancel his sub. The second signing is important…
This will boost the share price simply because it means that SIRIUS is here to stay and that the future looks great, and that the best place to be in if you are in the radio business is SIRIUS
Wouldn’t it be great to not only sign Howard but also announce a return of Artie? It also seems unlikely, after gaining his freedom in ’06, that Howard would walk away after only 4 yrs. On the other hand, maybe Howard has a new definition of freedom in ’10. There’s no doubt that Howard helps deferentiate sat. radio from other radio sources and there’s no doubt that sirius/xm needs more talent like him and not depend on one horse. I’m sure it’s a budget thing.
Great article! Build the internet platform with Howard as the anchor show of it all. Bury Pandora NOW! Thanks again for the article and to think it was free.
Spencer,
I ahve to agree with you that they are close. It crossed my mind also of why Howard was off this week and I also was thinking that they want to get this done before Labor Day.
Let’s say he signs for another $100 million per year. Sirius earned a nice ROI during the first contract based on the number of subscribers Stern attracted when they were in a battle with XM. A second contract will allow Sirius to continue to retain and acquire new subscribers while selling stand alone Howard applications on smart phones and over the internet. The current Sirius internet option would also justify and command a significant price increase if Stern were part of the package.
Would a million plus people pay $4 or $5 per month to have Stern on mobile/internet devices? That alone could pay for half of his contract each year.
If Mel signs him again, it will be at the right price or he won’t. I can’t wait for this to be put behind us.
The timing of all of this suddenly seems clearer…… Howard off this week AGAIN, confirmed meetings between Buchwald, Mel & Howard????? (i hope that’s true)…. The Artie comment is interesting, I just happen to turn on 100 tonight to see what they played today and I heard the the HUGE argument between Artie & Howard about the chicks that like fat guys segment (which by the way, made me hate Robin even more),,, why would they play that???? that’s extremely sensitive to what happen to Artie, especially if he’s not doing well….. I’ve always thought that Howard would stay with Sirius because he knows how successful they will be (with or without him) and he can seal his legacy as the number 1 reason Sirius will be as big as they will (whether it’s true or not)……
I hope we find out soon……….
Agree 100%. I didn’t think I could hate Robin more but I just happened to turn that fight on a couple minutes before she started jumping on Artie also. She brings absolutely nothing to the show accept her opinions (often misguided kind of like Jason Kaplans) on sh!t that just doesn’t matter.
Howard takes 10 weeks vacation per year. This is one of those weeks and he pretty much takes this week every year,negotiations have nothing to do with it. Howard being on Sirius will keep his fans there,but attract new listeners? Can’t say that’s a true statement as his fans are already there and anyone new would tire of his constant time off. Satellite radio will continue weather or not Howard stays,although they will take a subscriber hit if he leaves but how big of a hit is anyone’s guess.
I think he will stay as he will be paid pretty much what he wants,though less than before, but he will work even less days.
So he will be back next week and then off again for Labor Day week?
So when Howard renews we this move us to 1.05 or 1.06?
Howard has always had these days off during the summer months. I wouldn’t be surpised if he wants ALL summer off as part of his new contract. As well as the 3 days a week he keeps talking about. They need Artie or another comedian in there to mix it up. I would be surprised if he left for another company. He has everything he wants already in place. Him and Mel go way back, something will get done.
Great article…hope to see Howard re-signing soon. Just one bit of info. Howard is ALREADY on SIRI Internet Radio. I think you meant the mobile apps. Both Howard 100 and 101 are available online, but you cannot get Howard’s stations on the iPhone app or others…just an FYI.
It’s pretty nice to listen to Howard with my computer or my TTR1 Wireless Radio…keep on truckin Howard…but take a huge pay cut! Long SIRI
I think he’s going to stay however, I am concerned that he’s going to begin the weaning process with this contract. More vacations, more tapes-based stuff, etc – which is by the far the worst content on the Channels. I think he could really give a shit about the fans, but I do believe he feels obligated to his team and the families they support. Moreover, part of his fortune is based on Sirius/XM remaining an ongoing concern, so walking away now jeopardizes that. That being said – if he doesn’t start re-shaping the audience’s expectations during this contract (as mentioned above, by being away and convincing us that it’s ok?!?!),then he’s going to be facing the same pressures from Sirius and his team when this contract is up too.