What’s Next For Howard Stern and Sirius XM Radio
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 31st, 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 their 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 Rhome 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. So if Howard does work less and comes in later, SiriusXM would benefit in one regard because it will ease the transition from Howard to eventually no Howard with no ill feeling toward the company. This would be Howard Stern’s 100% decision to do this, because Sirius XM wants Howard to work the same amount and arrive to work at the same time his loyal fans are used to. Howard claimed yesterday Sirius XM should be called “Howard Radio”. More like Lazy Radio, in actuality. Factually, that is a much better name. Or Howardless Radio, or Howard Lite. Or Half Howard. Discount Howard. Whatever works. All are more accurate and make more sense than “Howard Radio” considering his stated new demands on the company. As my last article proved, the OEM market transition and XM subscriber base being still higher than Sirius’s proves he is not the end all for satellite radio. If you did not catch yesterday’s article, it can be found here( http://www.kingofalltrades.com/2010/09/02/how-much-of-sirius-xms-success-is-howard-stern/). He has overstated his value and I believe Mel Karmazin being in the business almost all his life and being very intelligent is well aware of this. At the time he was announced in 2004 the new platform needed the popularity and publicity of signing a huge name like Howard Stern. Today that is not the case at all. The content offering is so vast one talent does not define the service. Remember, Mel did not sign Howard to this huge and expensive contract. Ex Sirius CEO Joe Clayton did. Howard also received millions in stock options as well in this deal.
The best case scenario is Howard re-signs for the same money and works the same amount of time, but gets another channel to groom his replacement. He mentioned today on air that he might get a third channel. His budget might go up if this happened. This would be ideal for Stern and his fans, as they would still get him the same amount of time at the same start time, and good for the company because his replacement would be created by maybe a still part owner of the company, Stern himself.
Howard Stern could take his talents to South Beach…. Ok just kidding. Stern can offer his own platform, utilizing internet technology. I am not an expert in exactly how this would work, but I do know it’s something Howard has never done before and would be completely out of the ordinary for a radio personality. Internet service only is inferior exposure, as is offering it directly to smart phones. Howard would be narrowing his audience greatly if he did this. The delay from being off the air to back on would also be a large gap. People might consider this confusing and lose interest in him and his cast of characters all together. They may feel its too complicated or Howard has now insufficient avenues of communicating access to his service and loses the ability to generate new listeners (New Sirius XM customers signing up for the NFL, etc.. wouldn’t be exposed to his content). Plus he would have to set up his own billing or hire someone to do that, handle customer service, and maintain the network. This is more work and more costly than what he is doing now. Sirius XM can possible one day offer a global distribution network, with the help of part owner, Liberty Media. Anyone in the world might one day be able to hear Howard Stern anywhere. Would he pass up the chance to be a part of this future? Howard also already has 100% freedom on this channels. He left terrestrial radio because he was being censored and the money was so much better on satellite radio. Leaving for his new platform might net him less money, less listeners, and possible higher stress levels. Howard Stern isn’t the type of personality to enter this phase of his career into an unknown entity and possible find out there aren’t that many people willing to directly pay to access him alone as he thought there was. Howard Stern sees Sirius XM and satellite radio as part of him, and has pride in its success. On the verge of breaking out and making it putting all the naysayers to bed and shoving it in the face of the FCC and terrestrial radio is too much to pass up. I don’t see Howard doing this new platform scenario right now. This is the least likely scenario happening.
Howard Stern could retire. He is still a relatively young man. He is only 56 years old. Speaking into a microphone for three hours a day, four days a week (even three days a week if he has his way) isn’t exactly taxing. He has supporting writers, hundreds of on air personalities, bits and a busy interview schedule. It is not like he has to write a three hour Academy award winning cinematic event every day. I would think this world we live in can provide endless material for someone as smart and clever as Stern. I believe he has the energy for another full contract. Five years wouldn’t surprise me, but I feel three or four might be in the cards this time.
Mel can decide Howard is asking for too much money and simply refuse to pay him. Howard leaves bitter maybe even being fired for on air comments. His fans leave in mass exodus and his stations are immediately transitioned into another talent or some other product. Sirius XM losses 500,000 subscribers (about equal to what they gained last quarter). Within 1 year Sirius XM hasn’t missed a step and its business as usual. They save the 100 million dollars a year they paid Howard. They can now use this money to improve the product. Obviously, what’s being described here could also be done if he simply retired as well. Whether this is signing away Rush Limbaugh or Michael Savage who knows. I would expect Mel to make his first big splash if this money frees up. Don’t bet against Mel actually hiring someone or even two talents here for less money than Howard and capable of adding even more subs than left because Howard left. It might be one service, one content provider, one talk show host, or two, or a combination of all these. It would be fun to find out how Mel would do this. With all the added revenue since the business model in finally generating positive cash flow, Mel might be looking to make a big splash soon anyway, so this would definitely up the time table and necessity.
Howard can retire on good terms, at the end of his current deal. Howard’s contract expires on December 31st, 2010. After that he can do whatever he wants with his time. He may choose to decide its been a long career and wishes to spend the rest of his life with his family. His crew is well taken care of and he can help them with their careers from the sideline as well. This is an okay scenario also for Sirius XM because his fans are not angry with the company. In this scenario even less subscribers would cancel. Likely, a very small percentage would cancel in this situation. Now him leaving can be transitioned well, and Sirius XM can move on in strength.
Howard decides to go back to terrestrial radio….. Just kidding. Let the ignorant approach this subject with you. I won’t waste your time. This is next to an impossible scenario. Only reason I won’t say impossible is because it would be irresponsible for me in this setting to say such a thing. Anything is possible of course. Ask me in chat on kingofalltrades website, and I will tell you the real chances of this happening.
If Howard Stern did leave in any of those above scenarios, what exactly could Mel get for 100 million? I am not sure exactly about how their contracts would work but there is a long list of talent Sirius XM could go after if needed. They could afford more than one of these fine talents. Howard Stern makes more than double of any of them.
Rush Limbaugh. Has millions of listeners and loyal fans across the country. A perfect fit for satellite radio and a big draw for new customers.
Michael Savage. Has over 8 million listeners across the country and is widely respected. His is smart, funny, and intelligent. Conservative in some ways like Rush, but not myopic or a Republican apologist. Broader range of target audience.
Tom Leykis( The Sam Kinison of Radio). He still works and his show would work much better on a satellite radio uncensored national audience. This guy is smart, worldly, funny, and controversial.
Adam Corolla. Not a fan but some people find him funny. I however do not.
Russel Brand (already been reported talking with him).
Jim Rome. Huge sports audience across the country. An LA guy that has national appeal.
Colin Cowherd (Smartest Sports Talk Show Host in the Country).
Joe Rogan (Surprisingly intelligent funny and talented, a true sleeper. If you only know him from Fear Factor, you don’t know him).
Buy Pandora outright. Incorporate the service into theirs. This would be in effect like Mel shopping for steak and throwing in some bananas. The cost to buy Pandora would be very minimal. Wouldn’t take the entire first years salary of Howard Stern to do it. This company barely makes a penny and has a business model that is near impossible to monetize. But stripping their program down and using it in some way with their services might be beneficial. Same below with Slacker.
Buy Slacker outright.
Jesse Jackson. Enough said. This would be a huge channel.
Sarah Palin. Popular political figure with time on her hands.
Al Gore (Pollution Channel…)
Could you imagine the Bill Clinton Network….. “Cigar Hour” followed by The “Best Night Spots in Mexico”. It would be a national sensation. As ludicrous as that sounds, what satellite radio can offer is limited only by the imagination. If I was handed 100 million dollars and told to add subscribers and you could do anything you wanted to do, I would be like a kid in a candy store. Sirius XM is just now beginning to understand the amazing freedoms they enjoy and possibilities in the satellite radio format and distribution model. The future is bright for the company with or without Howard Stern.
Stay or go I see a nice future for satellite radio. They have enough income to maintain a large subscriber base by simply adding talent lost. Nobody is irreplaceable. And if Howard Stern leaves satellite radio he will find that out too. The age of the content provider and the platform and the model are more important than any one person or entity. Just ask Comcast or Apple how true that is.
Disclosure: Long SIRI
