By now you’ve heard it said by several analysts that it makes no difference whether Sirius XM re-signs Howard Stern or not. Most of them however know little about Stern except that his compensation package seems extraordinarily high. I would venture a guess that they do not know or understand what Stern’s $500 million package includes, nor are they considering the breakeven point that Sirius XM had to reach to break even on its investment in Howard Stern.
After crunching some numbers, it is clear to me that Sirius XM must retain Howard Stern at just about any cost, but not without condition. First, let’s be clear on the terms of the original agreement between Sirius and Stern, as reported in this filing from October 2004:
Our financial obligations under our agreement with Howard Stern are material, and consist of both fixed and incentive payments. These obligations are payable partly in cash and partly in shares of our common stock. Our aggregate fixed obligations under the agreement are approximately $100 million per year. These costs include production and operating costs for the show, including compensation of show cast and staff, overhead, construction costs for a dedicated studio, a budget for the development of additional programming and marketing concepts, and payments to Stern and his agent.
Now that we’ve abolished the notion that Stern is raking in $100 million per year to line his own pockets as has been wrongly reported in the media for the last five years, let’s take a look at what the breakeven point on Sirius’ investment actually is. ...
10 Comments
Great breakdown Brandon. Thanks for bringing this discussion beyond the surface level thoughts that Howard got paid too much…..which you have shown is total rubbish.
Say what you like, Howard is getting paid very well indeed. I would have but one wish and that is that the stock holder could receive as good a deal as Howard has gotten. Keeping the share price at or near the dollar level is a crime considering what the powers to be are raking in. IMHO
I dont like the guy…. sorry Hillbilly
again lol, but hes as important as oxygen to Siri and without this oxygen Siri will choke and die, i said it DIE, Mel u better sign him up.
The company and its content/business model are much more powerful than any one person. Although Howard is worth a lot – and did great things toward assuring a major increase in subscribers during the initial stages of turnaround following the merger – it is far from certain that a majority of those new subscribers would choose to give up all the advantages of Satellite radio if – as appears unlikely – Howard chooses to leave. It seems it is in everyone’s best interest – including Howard’s – to make a reasonable deal based upon sustainable metrics – and this is probably what will occur. No matter what the outcome – Sirius XM is here to stay and well on its way to becoming the dominant player in the radio industry. SIRI is undervalued at 1.00 for all of these reasons.
Thanks BM for the breakdown. I did and so does many others I spoke with thought he get $500M all to himself.
“the growth attributable to stern has stalled”
Two things:
1. What – really – what has the company done to re-brand THE COMPANY? Oh yeah, that little home-made clip that aired last year…whatever.
The biggest reason that people have given me – for NOT having Sirius – is that they don’t like Stern.
2. Merger completed – what, August 2008? Stock began it’s plummet (to a friggin’ nickel).
Who the hell is going to spend several hundred dollars for a radio and then several hundred more on a service that – at the time – wasn’t guaranteed to be around in the next month, much less several years down the road.
3. As for HoSte followers – whatever – they’re loyal. Should Mel *not* jump the shark, HoSte will lead the charge & I predict that we will see a surge of 5m+ additional subs in 2011!
I’m with you on a resurgance of Subs due to him staying and continuing to solidify to the mainstream that Sirius is here to stay but 5M+ Subs……Now that’s generous. Would love to see it though Hill.
I’m not as sure the impact of Howard leaving would be as big as most think…
XM still has more subscribers than siri…. Less than 1m of XM subs have the “Best of”, and not all that do do it for Stern. If he was still a big draw I would expect a higher number of Best Of’s.
did Relmor Demitrius of king of all trades site Brandon as a source!
NOT! Read the two columns — I think we all know that Relmor got his idea for the column from Brandon
Honestly, now that you suckered me into reading that, i don’t know how anyone can make heads or tails of it. Fact is, if he stole from me, that measn either he or someone close to him is a subscriber here. If other websites use SatwavesPro for their information, so should all of their readers. It will save a lot of time, and time is money.
It seems little more than rebuttle to my own article, posted on his website. He states things as facts but gives no credit anywhere. For instance…his assumption that only 300,000 people have opted for the best of package. where is the source? It’s hyper pumping of Sirius which is what I’ve come to expect of them.
We have more paid members here, than they have overall visitors for free for a reason. Credibility…..Relmor has none. He wants to ride my coattails just as Opie & Anthony rode Howard Sterns. He wants google ad clicks….so don’t give him any. It will make a statement that that kind of garbage won’t be tolerated by Sirius XM investors.