The Homa Files

TakeAway:  In AMS, we discussed XM-Sirius’s strategy.  Now, it looks like XM Sirius is shifting its focus from growth to profitability … even if it means “trading down” its on air personalities.  Adios, Howard ?

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Excerpted from WSJ, “Howard Stern Rethinks Radio Gig,” By Sarah McBride, December 9 2009

Sirius XM Radio recently succeeded in reversing a troublesome decline in its subscribers. Now it is facing a possible decline in its star wattage.

“I don’t think I’m going to be re-signing,” said Howard Stern … 

At the time Stern signed, it appeared to be money well spent. Sirius trailed erstwhile rival XM, which then had four times the number of customers. Hiring Mr. Stern instantly put Sirius in the public eye and helped bring the company millions of subscribers …

But Sirius doesn’t need Mr. Stern in the way it did five years ago.

Its brand is established—in no small part thanks to Mr. Stern’s rocket-fueled on-air persona—and its one-time competitor, XM, is now merged into Sirius.

Sirius has other star performers—including its latest addition, comedian Rosie O’Donnell—who draw fewer subscribers than Mr. Stern but also help establish buzz. As of Sept. 30, the combined companies have 18.5 million subscribers, up slightly from the prior quarter but down from a high of 19 million at the end of 2007.

While Sirius likely would lose some subscribers if Mr. Stern left, over the past year XM has placed more of an emphasis on achieving operating profitability than on growth. And Mr. Stern’s compensation represents a significant expense …

Moreover, Sirius’s stock price, which was trading at $3.67 the day Mr. Stern signed, has fallen sharply since then, to around 60 cents. The decline means signing Mr. Stern at a similar rate of compensation would dilute shareholders’ stakes, cut into cash, or both …

And Mr. Stern doesn’t need Sirius as much as before, either. Five years ago, his formula of bawdy, envelope-pushing entertainment ran against the prevailing national zeitgeist, as public indignation over indecency ran high. Moving off regulated airwaves seemed like Mr. Stern’s best option.

Now, Mr. Stern likely could land a spot back on traditional airwaves. He is a proven ratings winner whose advertisers largely stuck with him throughout his difficulties, and some radio company would find a way to put him back on the air …

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Full Article
http://online.wsj.com/article/SB20001424052748704825504574584022873284710.html#mod=todays_us_section_b

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