Howard Stern Gets Sirius

By Evan Derkacz, AlterNet. Posted October 31, 2005.

Given free-rein to say "fuck," not to mention a guaranteed $500 million over five years, it isn't difficult to see why Howard Stern is making the move from FM to satellite radio.

What's unclear is whether this marks a watershed in satellite broadcasting and whether the gambit will pay off for Sirius, the satellite radio company that lured him from his cozy digs at Infinity. Satellite radio, if you're unfamiliar, is just what it sounds like: rather than beaming a signal from a terrestrial transmitter, the signal is sent from the company's private satellites orbiting the Earth. Sirius equipment costs anywhere from $100-$600 (and up -- though a series of contracts with auto makers mean that new cars increasingly come equipped) and $12.95 per month for the service thereafter.

The next cable TV or the next Betamax tape

When the self-proclaimed King of All Media migrates to the Sirius "dial" in January, it'll be far from the beginning of the story. To hear Stern tell it, the move follows a period of intense dissatisfaction and frustration under heightened FCC scrutiny and jacked up fines: "I literally can't be funny the way I want to be ... I can't even get a thought out," he told the Washington Post last October.

Believe what you will about Stern's ability to get a thought out, but he was dropped from Clear Channel's roster after the broadcasting giant faced a number of indecency charges -- only some of which involved Stern's program directly. The parting was anything but sweet sorrow, with Stern snarling: "I just want to bury Clear Channel. I want to make every one of their radio stations worth 3 cents. ... I will bury you." And that's the question. Will Stern, and satellite radio, bury Clear Channel and the traditional format? Or, considering the way corporate entities gobble each other up these days, will it even matter?

For Stern, this is biblical. The well-compensated shift of venue provides both liberation narrative and a chance to play messiah. He's at once delivered from the tyranny of FCC-controlled "terrestrial radio" (satellite is unregulated) while being hailed as something of a savior to a company perpetually overshadowed and out-marketed by its competitor, XM Radio. Before the announcement of Stern's arrival, XM had 2.5 million listeners to Sirius' 600,000. Since then, Sirius has shot up to over 1.5 million.

The gravy would seem to be that Stern's nemesis, Clear Channel, just happens to be a minor investor in, and a "strategic partner" of, XM. Two birds, one stone, right? Only if you ignore the fact that Stern had, at one time, reportedly been in negotiations with Clear Channel's "strategic partner" before getting with Sirius [This paragraph has been corrected. The first sentence originally, and incorrectly, identified Clear Channel as a "major" investor. In fact, they've largely divested and currently own somewhere in the neighborhood of 2% of XM -- ed.].

Stern's "sound and fury" aside, the real questions surround Sirius' decision to cover the volatile star's astronomical price tag. Was it a good move? Can they make the money back? Is satellite radio the future? Media veteran Rory O'Connor says no: "Satellite isn't the future -- it's (at least part of) the present, and growing rapidly."

Noting that the resume of Sirius' CEO Mel Karmazin includes having "essentially created an entire business -- Infinity Broadcasting -- on the back of Stern alone," O'Connor believes that, "Whether or not they actually recoup [the money] is basically immaterial." He insists that "they will get some actual return," but that the attention and the free promotion will compensate for the rest.

It's important to point out that Stern isn't the only major addition to the Sirius family; he's just the most high-profile. Over the past year or so, Sirius has also added NASCAR broadcasts, NFL, and Martha Stewart in an aggressive bid to become the premier satellite broadcaster.

As others have commented, the size of Stern's price tag (not to mention his mouth) has surely netted the struggling Sirius many millions in free advertising. From the moment speculation began as to whether Sirius would recover the money, whether the fans would follow, or whether this marks a new era for satellite radio, the ticker started. This article that you're reading right now, in fact, could conceivably be considered part of the payback for Stern's acquisition.

A good but desperate move

Rather than ask whether or not acquiring Stern was, as Infinity CEO Joel Hollander says, "fiscally irresponsible," the better question may be whether Sirius even had a choice. Though most analysts agree that Stern is destined to be a profitable pickup, some, like Paul Porter, co-founder of Industry Ears, think of today's satellite radio as "parallel to cable in 1980: it's gonna happen but I think it's gonna happen later than sooner."

If Sirius' pot of gold lies at the end of a particularly long rainbow now, things were even worse before Stern's arrival. Porter notes that, "Sirius was in a serious hole, which was why they went over the top with Howard Stern."

The media landscape looked quite a bit different when the satelliters first hatched their plans. Beginning in the '80s, rapidly increasing media consolidation led to bloodless, homogenized radio. By the late '90s when Sirius and XM received their FCC licenses, radio was a stagnant and rigidly formulaic medium. Little has changed of course but other challengers have moved into the neighborhood.

Evan Derkacz is AlterNet's associate editor and writer of Peek, the blog of blogs.

Liked this story? Get top stories in your inbox each week from AlterNet! Sign up now »