By Relmor Demitrius -

Howard Stern will soon announce his plans for beyond 2010.  His current five year, 100 million dollar per year contract with Sirius XM Radio (NASDAQ:SIRI) will expire on December 31^st, 2010.  Will he re-sign with the company that made him the highest paid radio or television performer in history or will he part ways?  His comments so far seem to indicate he is indeed staying.  Regardless of his decision, it is important to explore and weigh his options from his point of view and from Sirius XM’s.  Is any decision or path disastrous or a huge negative for either party?  Are there options best suited for both?  Here are the most logical choices and scenarios.  With each choice comes with its own set of consequences and effects for both parties.

The most obvious outcome is Howard gets his way and works less hours. He will probably try to work less hours while making the same salary as his current contract.  Since he got four days a week last time, I think this time he tries for three.  Current comments he has made in the last few months on air seem to indicate he is at least contemplating a three day work week.  What would happen if he re-signed and worked less days? His fans would care and the show would suffer.  Just too much away time.  Now this cast of characters is away from each other more than together.  Four days off, three days on.  If Mel Karmazin (CEO of Sirius XM Radio) allows this to occur, expect his audience to drop off even more.  Now you’re asking your fan base to “go find other entertainment” two days out of the work week rather than one.  Already he is away a lot of the time.  Jim Rome works 5 days a week.  Rush Limbaugh works a full week.  Michael Savage clocks in to put out a show every day.  Howard Stern apparently doesn’t feel it is necessary.  He is special.  That’s fine.  His listeners will learn to do without him more and more.  This is a positive for the company, as it directs frustration and malaise toward Howard and his show, and none at Sirius XM or management.  This scenario overall would be beneficial to the company but not ideal short term.  I think Mel gets some degree of a salary drop out of Howard if he wants to work less time.  He may also even let him start the show an hour later, as well.  Another huge mistake by Howard and disappointing to his fans.  It is a morning show after all on the east coast.  Half the country will be at lunch when the show is finally getting going.  This once again would direct frustration at Howard and not the service. (more…)

By Relmor Demitrius

Mel and Howard

There are many ways to identify and define success.  The same can be said about worth and value.  It is especially true when trying to apply these concepts to something intangible, as an artist or performer.  Take a talent like Howard Stern.  He’s not a hard asset that you can simply attach a known value to, or state exactly what he would mean to your company.  What is his actual value to Sirius XM Radio (NASDAQ:SIRI)?  When Greg Maffei (CEO of Liberty Media and Liberty Capital (NASDAQ:LCAPA) and 40% owners of Sirius XM, ask Mel Karmazin (CEO of Sirius XM) how much is Howard Stern worth to the company, what does he tell him?  This is the debate among bloggers to professional financial analysis that has been going on for years.  How do you evaluate Howard Stern’s actual value to the company?  He makes 100 million dollars a year, minus the cost to run his show.  Is he worth it?  Is he overpaid?  Is he underpaid?  Is he fairly paid?  How much of Sirius XM’s revenue can be attributed to him.  In this article I will go over the effect of signing Howard Stern to Sirius Satellite Radio and any effect overall he had on the satellite radio industry altogether.  First, let’s get some opinions out of the way.

Howard Stern is an amazing talent and still the best radio on radio.  No offense to Michael Savage fans, Rush Limbaugh, Opie and Anthony, or Larry King.  Whatever.  There is still no bigger celebrity in radio.  Rush is close, but I don’t think he even can match Howard still to this day.  Howard’s popularity may be waning but he is still the best.  That being said, let us leave the personal opinions and feelings at the door.

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Mel and Howard

By Relmor Demitrius

The day Howard Stern signed with Sirius Satellite Radio, the radio landscape was changed forever.  I think we can all agree that with this decision in 2005, to some degree at least, radio did indeed change.  To what degree and what lasting affect did it have might be debatable.  The biggest celebrity on radio and considered the most talented voice on radio, well, wasn’t on traditional radio anymore.  There was a new format in town.  Commercial free radio that could be heard anywhere in the country.  Satellite radio (SATRD) would change how people listened to the radio forever.  But how did Howard Stern change radio?  To what extent?  Is this a lasting change or a minor hiccup in the history of terrestrial radio?  Is the norm for radio soon to be satellite delivery?  Would more and more talent move from traditional outlets into this latest technology?  Five years later we can begin to answer these questions. 

On the tail end of Howard Sterns first contract with Sirius XM Radio (NASDAQ:SIRI) is a good place to stop and consider just what  the affect was of his signing and how the future looks  with or without Howard Stern.  In this first part of a three part series of articles I will delve into this topic and cover different angles to these questions.  I would like to first lay some groundwork on Howard Stern and present some facts that might improve our understanding of Stern, Sirius XM, radio in general and the relationships these three entities share.

How did Howard Stern even come to be on Satellite Radio?

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By Gino Lattarulo

Last week Maxim Group initiated coverage of Sirius / XM (NASDAQ:SIRI) with a “buy” rating and a 1.40 price target. It appears that most analysts share Maxim’s upbeat opinion — Reporting site Zacks shows four “strong buys,” two “holds” and zero “sells”. Hedge Fund mogul George Soros got in on the action as well by purchasing 29 million convertible notes ( valued at 28 million). With 5.6% of SIRI’s float being short interest I think that some squeezing will begin to take effect in the near future as the bearish trades begin to unwind.

For Sirius, the real confidence comes not only from its debt issue being resolved by Liberty Media, but from increased subscriber sales fueled by the ever important auto sector which is once again experiencing growth. Ford (NYSE:F) , Toyota (NYSE:TM), Honda (NYSE:HMC), and the newly minted GM have all reported solid quarterly numbers with encouraging forward guidance.

The satellite radio subscriber base at the end of the second quarter was 19.5 million which is an increase of 6% over 2009.  Sirius expects to add another 1.1 million subscribers by the end of  2010, has generated higher average revenue per user,  and lowered costs to help fuel net profit.  Subscribers paid  $11.81 per month (11 % from the same quarter in 2009) due to demand for the “Best Of” programming. These strong results also show that the negative impact from free services may not be as high as expected as the company reiterated its annual estimates of $2.8 billion in revenue. It was the third straight quarter that  Sirius reported better than expected results. (more…)

By Relmor Demitrius

Greg Maffei

Sirius XM Radio (NASDAQ:SIRI) is offered many opinions of what their shares are actually worth.  It just depends on who you listen too.  There seems to be a vastly different view of just how much one should pay for this equity and ultimately what is their appropriate market cap.  If readers know my style, they know I do not work with subjectives or opinions.  I like cold hard facts when I tackle a problem.  The pulse of the investor community seems to be right now on trying to understand how an equity so obviously undervalued is still priced at $1 a share.  What is Sirius XM’s real fair value?  Well why waste a second longer, let us begin.

Without boring anyone on just how dangerous it is to attempt to use the stock market current price at any one time to try to determine actual retail sale value of a company and hence what one share is actually worth in reality (meaning if every share were to be purchased at one time, at what price could they buy the company) might offer a little insight.  Here is a good example of this from 2008. (more…)