An XM Sirius (SIRI) Without Stern?
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Shock jock Howard Stern recently made comments on his XM Sirius (NASDAQ: SIRI) radio show that he may not re-sign with the satellite radio broadcaster when his contract expires at the end of next year. "I don't think I'm going to be re-signing," Stern said. Stern apparently wants a less grueling schedule.
Stern signed with Sirius in late 2004, but didn't start until early 2006. He initially received $500 million in cash and stock, and earned 34.4 million bonus shares, then valued at $225.8 million, in 2006 for meeting and exceeding subscription goals, according to the Wall Street Journal.
Sirius lagged behind then rival XM five years ago, having only one-quarter of the subscribers. Landing Stern immediately put Sirius on the map, and the price seemed reasonable at the time. However, now that Sirius and XM have become one with the tepid development of the satellite radio market, Stern may not be as key as he once was.
Sirius CEO Mel Karmazin said that he would like to keep Stern on satellite radio on terms that are best for their shareholders.
Dropping Stern would lose some subscribers, but free up significant cash.
Sirius now has to answer the following questions, among others: How many subscribers really only listen to Stern, and are paying $10 or so per month for that privilege? Would that many subscribers cancel their subscriptions outright if Stern left, or does Sirius offer enough variety and new programs to retain many of them? What would the cost savings be if he left?
Investors need to pray that Sirius has the wherewithal to answer these questions and make an smart decision about the future of their company, with or without Stern - which will ultimately influence the direction of the stock.
Stern is a great asset, but the past deal has been a noose around the company's neck. They need to get great terms with Stern or be willing to drop him.
Stern signed with Sirius in late 2004, but didn't start until early 2006. He initially received $500 million in cash and stock, and earned 34.4 million bonus shares, then valued at $225.8 million, in 2006 for meeting and exceeding subscription goals, according to the Wall Street Journal.
Sirius lagged behind then rival XM five years ago, having only one-quarter of the subscribers. Landing Stern immediately put Sirius on the map, and the price seemed reasonable at the time. However, now that Sirius and XM have become one with the tepid development of the satellite radio market, Stern may not be as key as he once was.
Sirius CEO Mel Karmazin said that he would like to keep Stern on satellite radio on terms that are best for their shareholders.
Dropping Stern would lose some subscribers, but free up significant cash.
Sirius now has to answer the following questions, among others: How many subscribers really only listen to Stern, and are paying $10 or so per month for that privilege? Would that many subscribers cancel their subscriptions outright if Stern left, or does Sirius offer enough variety and new programs to retain many of them? What would the cost savings be if he left?
Investors need to pray that Sirius has the wherewithal to answer these questions and make an smart decision about the future of their company, with or without Stern - which will ultimately influence the direction of the stock.
Stern is a great asset, but the past deal has been a noose around the company's neck. They need to get great terms with Stern or be willing to drop him.
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