Oct. 6 (Bloomberg) -- Howard Stern, host of the top-rated radio show for young men in New York and Los Angeles, will move to Sirius Satellite Radio Inc., abandoning Viacom Inc.'s Infinity radio unit and giving the satellite radio industry its biggest star. Sirius shares rose as much as 28 percent.
Sirius, the second-largest pay-radio service, signed Stern, 50, to a five-year agreement beginning Jan. 1, 2006, the company said in a statement. Sirius, which offers more than 120 channels for about $12.95 per month, gains a performer who's been accused of airing indecent material and spurred fines of more than $2 million by the U.S. Federal Communications Commission.
``Stern is going to put Sirius on the map,'' said John LaForge, a money manager with FA Asset Management Inc. in Sarasota, Florida, which owns Sirius shares among its $130 million in assets. ``People are going to think of Sirius as a legitimate competitor to XM.''
Sirius has 600,000 subscribers and has said it needs 2 million to break even. As many as 3 million of Stern's 12 million listeners may follow him to Sirius, April Horace, an analyst at Janco Partners Inc., said in an interview.
Sirius and XM Satellite Radio Holdings Inc., the largest pay- radio company with 2.1 million users, both are losing money as they try to lure enough subscribers to make a profit. Sirius is spending millions for programming attractions, hiring Stern and in December saying it would pay $220 million for the right to broadcast National Football League games. In August, Sirius agreed to air play-by-play sporting events of 23 U.S. universities.
In the second quarter, Sirius had a loss of $136.8 million, or 11 cents a share, on sales of $13.2 million. XM Satellite Radio said on Aug. 5 its second-quarter loss widened to $166.1 million as costs rose.
XM Customers
XM Satellite Radio negotiated with Stern about hiring him and passed, said spokesman Chance Patterson.
``We have been in discussions with Howard Stern over time,'' Patterson said in an interview. ``We feel this is a good deal for satellite radio and given the price a very good deal for Howard Stern.''
XM Satellite Radio also passed on an NFL contract, at the time describing Sirius's football contract as ``expensive.''
Sirius said today Stern's show needs to generate 1 million customers to pay for the $100 million annual cost to produce and broadcast the program. The contract includes stock-based incentive payments to Stern based on subscriber goals, the company said in a filing with the U.S. Securities and Exchange Commission, without being specific.
Raising Awareness
Sirius shares rose 16 percent, or 54 cents, to $3.89 at 2:29 p.m. in Nasdaq Stock Market composite trading, after earlier touching $4.29.
XM Satellite shares fell 2.5 percent, or 75 cents, to $28.73, after earlier declining 6.7 percent.
Stern said in a statement he was joining Sirius in part to ``bring my fans my show my way.''
Stern has criticized the FCC's fines against his program and on the air rails against a company censor who screens out material that may violate indecency rules. Sirius and XM Satellite Radio, like cable television networks such as Viacom's HBO, can feature more risqué content because they aren't subject to the same FCC rules as broadcast stations.
Cable TV shows such as ``The Sopranos'' and ``Sex in the City'' often include profanity and nudity.
Traditional Radio
Shares of traditional AM and FM radio broadcasters have fallen this year, with Clear Channel Communications Inc., the biggest radio company, losing 31 percent this year. Clear Channel in January said it would run fewer advertisements on its stations and this week asked advertisers to shorten their spots.
``Howard Stern will definitely raise the consumer awareness over the next 15 months of satellite radio,'' Horace said. ``The fact that he'll be exclusive to Sirius is good for satellite and will help capture the market of men.''
Viacom's Infinity unit is losing a performer whose show has attracted audiences with call-in confessions of incest and contests in which players tossed slices of baloney on girls wearing bathing suits. Segments like those spurred complaints to the FCC, which levied fines against companies carrying Stern's show.
In June, Clear Channel agreed to pay $1.75 million to settle a series of complaints about Stern and other radio hosts. In 1995, Infinity paid $1.7 million for bawdy remarks by Stern.
Infinity
Viacom's Infinity unit said in a statement today the company has ``enjoyed our years with Howard. We wish him well in his new foray into the world of pay subscription radio.''
Stern's departure comes as Infinity is lagging Viacom's other media units. Sales at the division rose 2 percent to $1.02 billion during the first six months of 2004, the smallest rise among Viacom's media units such as CBS television and the MTV Networks.
Stern was pulled off the air in six cities by Clear Channel in February after the company announced a new policy to prevent airing indecent content.
U.S. Congress has been seeking to toughen penalties for indecency following listener complaints. Stern has said the actions are part of a broad attack by the Bush administration on individual liberties.
`Talented and Controversial'
Stern has said he might leave Viacom when his contract was up. His Web site includes a countdown to the end of his contract and he has said he was unhappy Viacom President Mel Karmazin left the company in June after four years of tension with Chief Executive Sumner Redstone.
Stern said at the time he was ``shocked'' over the departure and described Karmazin's exit as ``a coup d'etat.''
Sirius Chief Executive Officer Joseph Clayton said the agreement with Stern ``is capable of changing the face of satellite radio and generating huge numbers of subscribers'' for the company.
``We realize that Howard Stern is both talented and controversial,'' Clayton said. Subscribers to the service will be able to block Stern programming if they want to, he said.
The company's radios are mainly distributed through retailers including Best Buy Co. and Circuit City Stores Inc., as well as automakers such as Ford Motor Co. and DaimlerChrysler AG, which include them in some vehicles. The radios are also in about 25,000 Hertz rental cars. Sirius generates about $10.54 a month in revenue from each subscriber.
``This is a bet on the future,'' said Tom Taylor, editor of Inside Radio, a trade publication owned by Clear Channel. ``Howard Stern clearly has ambitions to shape satellite radio. He's leaving a proven medium that has been very good for him.''
To contact the reporter on this story:
Jonathan Berr in Princeton at [email protected].
To contact the editor responsible for this story:
Greg Baumann at [email protected].
Last Updated: October 6, 2004 15:03 EDT
Sirius, the second-largest pay-radio service, signed Stern, 50, to a five-year agreement beginning Jan. 1, 2006, the company said in a statement. Sirius, which offers more than 120 channels for about $12.95 per month, gains a performer who's been accused of airing indecent material and spurred fines of more than $2 million by the U.S. Federal Communications Commission.
``Stern is going to put Sirius on the map,'' said John LaForge, a money manager with FA Asset Management Inc. in Sarasota, Florida, which owns Sirius shares among its $130 million in assets. ``People are going to think of Sirius as a legitimate competitor to XM.''
Sirius has 600,000 subscribers and has said it needs 2 million to break even. As many as 3 million of Stern's 12 million listeners may follow him to Sirius, April Horace, an analyst at Janco Partners Inc., said in an interview.
Sirius and XM Satellite Radio Holdings Inc., the largest pay- radio company with 2.1 million users, both are losing money as they try to lure enough subscribers to make a profit. Sirius is spending millions for programming attractions, hiring Stern and in December saying it would pay $220 million for the right to broadcast National Football League games. In August, Sirius agreed to air play-by-play sporting events of 23 U.S. universities.
In the second quarter, Sirius had a loss of $136.8 million, or 11 cents a share, on sales of $13.2 million. XM Satellite Radio said on Aug. 5 its second-quarter loss widened to $166.1 million as costs rose.
XM Customers
XM Satellite Radio negotiated with Stern about hiring him and passed, said spokesman Chance Patterson.
``We have been in discussions with Howard Stern over time,'' Patterson said in an interview. ``We feel this is a good deal for satellite radio and given the price a very good deal for Howard Stern.''
XM Satellite Radio also passed on an NFL contract, at the time describing Sirius's football contract as ``expensive.''
Sirius said today Stern's show needs to generate 1 million customers to pay for the $100 million annual cost to produce and broadcast the program. The contract includes stock-based incentive payments to Stern based on subscriber goals, the company said in a filing with the U.S. Securities and Exchange Commission, without being specific.
Raising Awareness
Sirius shares rose 16 percent, or 54 cents, to $3.89 at 2:29 p.m. in Nasdaq Stock Market composite trading, after earlier touching $4.29.
XM Satellite shares fell 2.5 percent, or 75 cents, to $28.73, after earlier declining 6.7 percent.
Stern said in a statement he was joining Sirius in part to ``bring my fans my show my way.''
Stern has criticized the FCC's fines against his program and on the air rails against a company censor who screens out material that may violate indecency rules. Sirius and XM Satellite Radio, like cable television networks such as Viacom's HBO, can feature more risqué content because they aren't subject to the same FCC rules as broadcast stations.
Cable TV shows such as ``The Sopranos'' and ``Sex in the City'' often include profanity and nudity.
Traditional Radio
Shares of traditional AM and FM radio broadcasters have fallen this year, with Clear Channel Communications Inc., the biggest radio company, losing 31 percent this year. Clear Channel in January said it would run fewer advertisements on its stations and this week asked advertisers to shorten their spots.
``Howard Stern will definitely raise the consumer awareness over the next 15 months of satellite radio,'' Horace said. ``The fact that he'll be exclusive to Sirius is good for satellite and will help capture the market of men.''
Viacom's Infinity unit is losing a performer whose show has attracted audiences with call-in confessions of incest and contests in which players tossed slices of baloney on girls wearing bathing suits. Segments like those spurred complaints to the FCC, which levied fines against companies carrying Stern's show.
In June, Clear Channel agreed to pay $1.75 million to settle a series of complaints about Stern and other radio hosts. In 1995, Infinity paid $1.7 million for bawdy remarks by Stern.
Infinity
Viacom's Infinity unit said in a statement today the company has ``enjoyed our years with Howard. We wish him well in his new foray into the world of pay subscription radio.''
Stern's departure comes as Infinity is lagging Viacom's other media units. Sales at the division rose 2 percent to $1.02 billion during the first six months of 2004, the smallest rise among Viacom's media units such as CBS television and the MTV Networks.
Stern was pulled off the air in six cities by Clear Channel in February after the company announced a new policy to prevent airing indecent content.
U.S. Congress has been seeking to toughen penalties for indecency following listener complaints. Stern has said the actions are part of a broad attack by the Bush administration on individual liberties.
`Talented and Controversial'
Stern has said he might leave Viacom when his contract was up. His Web site includes a countdown to the end of his contract and he has said he was unhappy Viacom President Mel Karmazin left the company in June after four years of tension with Chief Executive Sumner Redstone.
Stern said at the time he was ``shocked'' over the departure and described Karmazin's exit as ``a coup d'etat.''
Sirius Chief Executive Officer Joseph Clayton said the agreement with Stern ``is capable of changing the face of satellite radio and generating huge numbers of subscribers'' for the company.
``We realize that Howard Stern is both talented and controversial,'' Clayton said. Subscribers to the service will be able to block Stern programming if they want to, he said.
The company's radios are mainly distributed through retailers including Best Buy Co. and Circuit City Stores Inc., as well as automakers such as Ford Motor Co. and DaimlerChrysler AG, which include them in some vehicles. The radios are also in about 25,000 Hertz rental cars. Sirius generates about $10.54 a month in revenue from each subscriber.
``This is a bet on the future,'' said Tom Taylor, editor of Inside Radio, a trade publication owned by Clear Channel. ``Howard Stern clearly has ambitions to shape satellite radio. He's leaving a proven medium that has been very good for him.''
To contact the reporter on this story:
Jonathan Berr in Princeton at [email protected].
To contact the editor responsible for this story:
Greg Baumann at [email protected].
Last Updated: October 6, 2004 15:03 EDT
