Is Howard Stern Really Worth the $670 Million he Costs?

Sirius Satellite Radio and Howard Stern Go Ear to Ear with XM: I’ve often wondered about the $500 million gambit to get Howard Stern on Sirius. I’m a Howard Stern listener that didn’t make the jump over to Sirius with him.

I’d feel differently if I could get his broadcasts on my Media Center PC and even more significantly downloaded to my phone, but you do have to wonder about the wisdom of paying him all that money. And total price tag for the Stern show now would appear to be closer to $670 million.

“While it’s still early to determine how the Stern story will ultimately play out — the radio personality began his first Sirius broadcast on January 9, 2006 — a few key issues will tell the tale. Can the Stern effect last beyond his first few months of airtime? Will Sirius be able to close the gap with XM Satellite Radio, which ended the year with more than six million subscribers? And will the buzz generated by Sirius’s grab for shows like Stern’s and the broadcasting rights to the National Football League games help the company to eventually surpass XM’s subscriber base?

No matter how this saga unfolds, Stern won’t come cheap. Jonathan Jacoby, an analyst at Banc of America Securities, estimates that the true cost of Stern’s contract will be about $670 million, including non-cash compensation. Stern and his agent, Don Buchwald, were awarded 34 million shares valued at about $200 million last month for bringing in more subscribers than expected. Fader finds it hard to defend Stern’s compensation. While it’s possible to cook up metrics to justify the deal, what remains to be seen is whether Stern’s fans stick with Sirius. “A lot of them bought Sirius just for Stern, but there could be lower retention rates. It’s very hard to imagine that the acquisition of one person, even if it is someone as popular as Howard Stern, will be enough to keep Sirius afloat for long,” he says. “

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  1. Me thinks it’s a lot more complicated.

    Sirius needed something to deliver a big spike in subscribers, now they have some momentum and if they don’t screw it up may be able to leverage that to grow further.

    More importantly is that in all likelihood part of the reason they felt the need to get him is that if they didnn’t XM probably would have and that would NOT have been good for Sirius.

  2. In answer to your question, Tom: No.

  3. Anonymous says:

    The answer to you question is yes. Sirius needed a million subscribers inorder for the Howard Stern deal to pay for itself. Since they annouced Howard Sirius got more than 2 million plus new subscribers. This is why they gave him millions of shares of stocks as a bonus.

  4. Mike Calhoun says:

    Hey “anonymous”…it doesn’t work like that. Sirius needs a lot more then 1 million subscribers to cover his cost. I guess you don’t realize that a single subscriber cost gets split up in many ways and goes to a bunch of different sections of Sirius. In other words, where does the money come to pay the many Sirius off-air employees? Oh, and those “1 million” subscribers that you were talking about have to subscribe for the next 5 years…

    Also…Stern brought 2 million plus new subscribers? Umm no…It’s just the natural growth of a young company. If you think that every single new Sirius subscriber that joined after Stern’s announcement was joining just for him, well, then your an idiot.

    And on a side note. XM’s baseball deal is much better then the Sirius’s NFL deal and here is why. Sunday IS the day for football. Most people that like football will make plans to WATCH football on Sunday. Baseball on the other hand, has many games a day at different hours. Which user (XM or Sirius) do you think is going to miss “their” game more often and therefore want to constantly be connected?