Stern And Sirius Are Taking Over Satellite Radio.
Stern, now 52, left his estimated 12 million loyal viewers for freer air waves, and a 5 year, $500 million contract to join Sirius Satellite Radio (The best Radio on Radio). The commercial free, censor free Satellite Radio was an easy way for Stern to take his off color humor elsewhere, and no longer have to deal with the commissioner of the FCC waiting for him to make an explicit comment or an act of indecency on his program.
Currently, the satellite radio market has two players, Sirius and XM. At the end of September 2005 Sirius had about 2.2 million subscribers, while XM boasted over 5 million. While both were looking to land high profile talent to take them into the land of profitability, landed Howard Stern. The King of all media, in essence is the $500 million dollar gamble for investors of Sirius Satellite Radio.
As, neither Sirius or XM have profited one cent to date, both plan to break even within the next few years. With Sirius paying Stern a $100 million annual contract, and a one time $225 million bonus in Sirius stock in 2006, Sirius suffered an enormous first quarter loss. Stern used his last few months of airtime with CBS Radio to promote his future destination, attracting over 1.1 million new subscribers, in the 4th quarter of 2005, which of course prompted a breach of contract lawsuit.
Now, almost a year after signing Stern, Sirius Satellite has about 5.1 million subscribers and even with slower retail sales from a year ago, Sirius CEO Mel Karmazin, anticipates year-end subscriber-ship will increase to 6.3 million. This would represent 80% - 85% year over year subscriber growth, which may lead to the company's first quarter of positive free cash flow, after capital expenditures, this 4th quarter of 2006.
His critics said that Sirius was crazy for paying Stern all that money, however, the way Sirius' subscriber base as expanded, and their costs per subscriber has decreased, if not a merger in the future, don't be surprised to see Sirius take over as the industry leader in the next few years.
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