Bankers can only hope to be like Howard Stern

December 9, 2010

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Bankers can only hope to be like Howard Stern. The bawdy U.S. radio host agreed to stay with satellite broadcaster Sirius XM for another five years. The market initially added more than $300 million to the company’s value after the deal was announced on Thursday morning. Traders and other financial dealmakers like to think their presence has that kind of importance to their firms. After all, they often equate their pay to that of film and sports stars. But the truth is, few of them matter nearly as much.

Competitive hiring of investment bankers contributes to the sometimes irrational market for their services. “If you don’t pay them for their performance, you’ll lose them,” Goldman Sachs director and Harvard professor Bill George told the Big Think earlier this year. “It’s much like professional athletes and movie stars.” That mythology makes Stern’s case all the more stark a comparison.

Sirius XM did face the possibility the 56-year-old Stern would call it quits to lounge about in bed with his younger wife, as the host frequently discussed on his show. Such talk led to some nervous moments for shareholders. But in reality, Stern’s options were few. Returning to terrestrial radio or jumping to Apple’s iTunes, as had been rumored, both sounded implausible for the King of All Four-Letter Words.

Even without competitive tension, Stern’s worth probably hasn’t suffered much since Sirius first signed him in 2004, when the company  paid him and his cohorts $500 million in cash and shares for five years — though the terms of his new deal aren’t known. At the time, the fledgling satellite radio company boasted a mere $13 million of revenue and 600,000 subscribers. Since then, the company has merged with rival XM and swelled its subscriber base to 20 million. Analysts expect it to generate $3 billion of revenue in 2011.

Stern is responsible for about 10 percent of Sirius XM’s subscribers, an analyst at S&P reckons. However unlikely it is the company would have lost 2 million listeners had Stern defected, only a handful of bankers at best can realistically claim anything approaching such relevance — and even at smaller firms, few if any can claim Stern’s kind of impact on their employers’ stock prices. Stern’s ego may be huge, but at least he’s genuinely one of a kind.

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