Life without Stern isn't pretty... (1 Viewer)

[Dave Lindhorst]

500 million for Howard Stern. Boy has the price of garbage gone up or what. Pure unadulterated crap. I find it hard to beleive adults would go out of their way to tune to a station that has him on it. But I guess a lot of people watched similar stuff on TV.

Gives me a sense of what the world is coming to. I for one will not be paying any money to any organization or company that would pay 500 million of subscibers dollars for that crap. I guess Sirius is out for me then.

 

[Ronald Epstein]

Douglas and Dave,

Very good posts.

Sirius really put themselves in a
volatile situation by paying $500
million for a washed-up shock jock.

The story, as Opie and Anthony tell it,
is that Sirius originally wanted them.
Back in early 2004, the boys visited
with Sirius and were not impressed by
what they saw. When O&A decided XM was
the better opportunity, Sirius put out
some ficticious press stating that the
company was not interested in O&A.

It seems the reason Sirius ante'd up
for Stern was because they could not
get O&A who they knew were hotter property.

I listen to O&A daily on XM. There's
no argument that they are far more talented
than Howard Stern. Douglas is right on when
he says that Anthony carries that show with
his sharp tongue and masterful impersonations.

Now that O&A are part of the standard line-up
it is my hope that more people tune on to them.

 

[TheLongshot]

I think wether or not Stern is washed up is beside the point.

The fact is, Stern has millions of fans, and Sirius is trying to get at least a fraction of those. It is probably more effective than any marketing campaign Sirius can do.

XM doesn't need the people nearly as much, so going with O&A makes more sense. Having proven talk talent is always a good thing, and O&A will probably be around longer than Stern.

Jason

 

[Ronald Epstein]

Agreed, Jason!

I just wonder if Sirius is going to go
belly-up because of this Stern deal.

 

[Dave Lindhorst]

I doubt it. I am certain that they probably have the right to cancel his contract if things don't pan out. Either way he won't get paid if they belly up and he won't get paid if he doesn't pay off.

Over how long a period does he have this contract anyway.

 

[Chris]

The deal is $500M/Five Years, No incentives, with SIRI keeping all the advertisement royalties.

In the end, it could work out to be a very good deal for them; because SIRI will obviously sell ads during the Stern show, which will be a net gain (as well as customers) as well as any potential new subscriptions (SIRI is over 1.5M right now, which is more then 4 times its size at this point last year) it's not as "mindboggling" as you think; no more mindboggling then XM's 3 year, $680M MLB baseball deal (to which they do not have full rights to commercial time during broadcast)

XM needs to hit 3.6M to break even on the MLB deal (which they should breeze to this year) SIRI's situation is more complex.. because of the ad revenue stream, no one is really sure.. but most figure they need, on top of current expenses, about 2.2M customers to hit the Break even, though some analysts place it lower dependant on how well SIRI can do in negotiating ad time during Stern (which will also largely depend on size of audience, the more audience, the more lucrative the ad money, and the cycle continues)

I think both products have just went after audiences in a different way. I've tried both, and am very happy where I am. I think most of us look for different things. I've discovered over the last year that the most valuable program SIRI offers me (outside of football in the fall) is CarTalk and talk radio in general.. I almost went back and popped up a XM when Dr. Laura went to XM Radio, but will probably stay put through other programming (thus, O&A and Stern basically mean nothing to me, as I won't listen to either)

However, from a marketing viewpoint, they were both good deals; for SIRI having Stern got them immediate media attention and coverage, as well as incited market interest. For XM, landing O&A etc. did a good job of filling the talk market for them and building their appeal.

Competition between the two is good for all of us in the end

 

[TheLongshot]

That's basically what I said. XM doesn't really need the people Stern would bring in, considering that for XM, the benefit wouldn't be as high as it would be for Sirius. I do think the Stern deal was good for Sirius. They needed to make big splashes to survive.

Jason

 

[MarkMel]

From a college educated adult that listens to Stern;

"Lightning Bolt, Lightning Bolt, Lightning Bolt"

 

[BrianAe]

I think your wrong. Both Sirius and XM are on very similar growth paths. Both of them have strong investments backing them. However, neither is doing well enough at this point to show that they will be successful.

 

[TheLongshot]

True, neither is in the black, but Sirius was in a far more desperate situation, and needed the subscribers far more than XM did. XM is still working from a position of strength, and is thinking beyond just the need for more subscribers by signing O&A rather than Stern. Stern isn't a long term solution.

Jason

 

[Chris]

I think to use the term desperate situation with either of these companies is a bit of a stretch right now. Neither is at risk of folding tomorrow

SIRI ended FY 2004 with $760M onhand; XM with $718M onhand.
XM is expected to spend $280M in the first half of this year, with the thought that XM will "break even" against initial investment sometime in the 2nd half of '04.

SIRI is expected to spend from restricted cash $355M this year, $318M next year. Right now, SIRI expects to hit Break even in 2nd half '06 or 1st half '07.

Both right now, with financing in place, are pretty much viable through 1st half '07. This is the measurement of burn rate vs. income vs. outside debt.

So, neither is 'desperate' to pull off a last second miracle In October '04, analysts figured SIRI would not be able to hit break even until '08.. that would have been a serious difficulty.. but since then, that's been revised twice, in their favor, based on a good influx of subscribers and partner deals. The big ? that will drive this for SIRI is their advertising value of Stern (ad rate sale value) which is hard to calculate until he goes on the air, because it's all guesses.

SIRI needed the boom of Stern, because had their projections stayed in '08, it would have been a major negative against their stock outlook.

 

[Ralph B]

sat radio , whoever is winning is the future. FM is a thing of the past and I will never go back.

as for stern..... I have been watching for a long time and I am 37. I still watch it at night and dont usually get bored with his show. one thing for sure he is funny and thats all you have to be , to be successful in show business.

 

[Stu Rosen]

Well, Ron, that's a little strong. Without worshipping him, I think that Stern at his best is still terrific, and the talent of O&A is, let's say, debatable.

As much as I enjoy Stern, I won't be leaving behind my 4 XMs to go to what I see as an inferior service. So I don't count myself as a Stern fanatic.

Having said that, I think there are plenty of cultural facts against which there is no reasonable argument. This isn't one of them.