Howard Stern: "I don't think I'm going to be re-signing"

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Posted by Listener on December 09, 2009 at 22:12:16:

Howard Stern Rethinks Radio Gig

Sirius CEO Also Wants New Contract Terms as Talks Loom

DECEMBER 9, 2009, 10:33 A.M. ET

Sirius XM Radio Inc. recently succeeded in reversing a troublesome decline in its subscribers. Now it is facing a possible decline in its star wattage.

"I don't think I'm going to be re-signing," said morning-show host Howard Stern on the air last month. "I know exactly what I want to do here," he said, in terms of a less time-consuming schedule, "and I don't know if it would interest them," meaning his bosses. That leaves open the question of what Mr. Stern will do once his contract with Sirius expires at the end of next year. Pre-negotiating posturing is already well under way.

On the same show where he questioned his prospects, Mr. Stern pronounced his current gig on satellite "the best job in radio I've ever had." But it could also be true that he is angling for a change.

Mr. Stern signed up with Sirius in late 2004, but he didn't join the company until 15 months later. His contract gave him $500 million in cash and stock over five years. In early 2006, he got a bonus of 34.4 million shares of Sirius stock, then valued at $225.8 million, for exceeding subscriber goals.

At the time he signed, it appeared to be money well spent. Sirius badly trailed erstwhile rival XM, which then had four times the number of customers. Hiring Mr. Stern instantly put Sirius in the public eye and helped bring the company millions of subscribers.

Now, Sirius is gearing up to start negotiations with Mr. Stern again, chief executive Mel Karmazin said in an interview last month. "It is my strong desire that we keep Howard in satellite radio on terms that are in the best interest of our shareholders," said Mr. Karmazin in the interview. He declined to elaborate on what those terms might be. Don Buchwald, Mr. Stern's agent, didn't respond to requests for comment.

But Sirius doesn't need Mr. Stern in the way it did five years ago. Its brand is established -- in no small part thanks to Mr. Stern's rocket-fueled on-air persona -- and its one-time competitor, XM, is now merged into Sirius. Sirius has other star performers -- including its latest addition, comedian Rosie O'Donnell -- who draw fewer subscribers than Mr. Stern but also help establish buzz. As of Sept. 30, the combined companies have 18.5 million subscribers, up slightly from the prior quarter but down from a high of 19 million at the end of 2007.

While Sirius likely would lose some subscribers if Mr. Stern left, over the past year Mr. Karmazin has placed more of an emphasis on achieving operating profitability than on growth. And Mr. Stern's compensation represents a significant expense for a company that reported operating income of $100 million for the first nine months of the year on revenue of $1.8 billion.

Moreover, Sirius's stock price, which was trading at $3.67 the day Mr. Stern signed, has fallen sharply since then, to around 60 cents. The decline means signing Mr. Stern at a similar rate of compensation would significantlydilute shareholders' stakes, cut into cash, or both. Without Mr. Stern, "you might lose subscribers, but would you lose profitability?" asked David Bank, an analyst at RBC Capital Markets. "I think they would be willing to let him go."

And Mr. Stern doesn't need Sirius as much as before, either. Five years ago, his formula of bawdy, envelope-pushing entertainment ran against the prevailing national zeitgeist, as public indignation over indecency ran high. The year kicked off with singer Janet Jackson's infamous wardrobe malfunction at the Super Bowl and continued with the Federal Communications Commission embarking on a binge of fines over indecent content. Moving off regulated airwaves and onto the freewheeling climate of satellite seemed like Mr. Stern's best option.

Now, if he wanted to, Mr. Stern likely could land a spot back on the traditional airwaves, where the indecency backlash has calmed. He might not have the reach he enjoyed in 2004, when he was on dozens of stations and was heard by more than 10 million people. But Mr. Stern is a proven ratings winner whose advertisers largely stuck with him throughout his indecency difficulties, and some radio company would find a way to put him back on the air. Mr. Stern would enjoy considerably more influence than he has on satellite radio

Mr. Karmazin provided some insight into how the negotiating process might unfold. Mr. Stern's side will say Sirius needs "to figure out a way for him to work less and get more" money, said Mr. Karmazin. "Our company will say, 'We love Howard, we want Howard to continue... But we want to pay him less and have him work more." Mr. Bank, the analyst, said the most likely scenario involves Mr. Stern staying on but with a more limited schedule than his current 16 hours a week. On off days, Sirius would play "best-of" shows, he said.

(Wall Street Journal)

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