MediaFile

Liberty: Stern is safe — for now

February 17, 2009

So after two weeks of following all the twists and turns of Sirius XM’s attempts to avoid bankruptcy, CEO Mel Karmazin decided on John Malone, founder of Liberty Media, to come in as Sirius XM’s white knight with a $530 million loan . The loan will cover the satellite radio provider’s looming debt and help it avoid bankruptcy. As part of the deal Liberty will eventually take a 40 percent stake in Sirius’ equity.

But does this mean the big money deals that Karmazin signed with the likes of Howard Stern, Oprah Winfrey and Major League Baseball will get re-worked at a more favorable rate for the company now that there’s a new major stakeholder?

No, says Liberty Media CEO Greg Maffei in an interview with Reuters.

You can look and say some of these content deals were cut at a time when there were two guys (Sirius and XM) bidding against each other in a relative frenzy. Having said that, a lot of these content relationships like Howard Stern are very valuable to this company, have been important in building the company, and are likely to be important in sustaining it.

But Stern isn’t quite out of the woods.

I’ll rely on Mel and his team to think about how those content relationships look going forward and make the right decisions,” said Mafffei. “All those content (deals) have some term and they’ll get renegotiated or reset at that time for the value that they’re then creating.

With Sirius generating net operating losses which hit $217 million in the third quarter, it would make sense that Liberty might suggest that Karmazin looks at trimming one of its biggest outgoing cashflows: talent costs. But Mafffei seems not to agree.

I don’t think you look and say the way to build profitable business is to hammer the content deal here…as deals rooll-off you can appropriately look at those that are which are adding value and those that are not.

Comments
8 comments so far | RSS Comments RSS

Fine news!

 

Ba-ba-booey, ba-ba-booey.

Posted by Adam Shrug | Report as abusive
 

I think give the trouble Sirius is in its going to be necessary
to do the following:
Cut salary of FoxNews people such as Brian and the Judge,John Gibson and Bill O’Reilly to change their compensation to
a more realistic level. That would be $50 per show without
benefits, for the benefit of the survival of the company,
like GM auto workers taking pay cuts.
Also Lynn Samuels be dropped from Sirius Left entirely for
lying on her employment application…and presenting a show
that is worse than water torcher.

 

“But does this mean the big money deals that Karmazin signed with the likes of Howard Stern…”

Some fact checking is in order here. Mel Karmazin did not sign Howard Stern. Howard Stern signed with Sirius before Karmazin was hired as CEO.

Posted by Dan Carver | Report as abusive
 

just to do some quick math on the Stern investment. not pure finance math but just basic math to start out and get ballpark figure: Stern is paid $100 Million a year (actually not Stern. that figure is the budget to run the show, including paying everyone else on the show and having the Sybian cleaned every couple weeks, but I digress..), average subscription is ~$13 per month. there are 12 months in a year. in order for Stern to pay for himself he would have had to brought on about 641k listeners. let’s round to 700k just for fun. Prior to Stern’s announcement of going over to Sirius they had 662k subscribers. A year later they had 3 Million. beginning of 2008 they had over 8million. Now obviously you can’t attribute all of this to Stern, but I know it is fairly obvious that Stern either directly brought in at least a couple million of those, as well as brought such a large awareness of Sirius to the general public that people signed on for other content that they were made aware of. So while that contract number may look big I do believe that Sirius as a company would have gone belly up had the ‘Stern Effect’ not been in place

 

Howard Stern is the ONLY reason that I am a subscriber to SiriusXM. If he leaves, I leave.

Posted by Fafa Fluey | Report as abusive
 

I’m with that last guy! I only listen to 100-101…and I even got the best of XM just so they have more revenue! Stern is as bad as can! I’m gone if he’s gone!

Posted by Beetlejuice | Report as abusive
 

I too would probably dump SiriusXM without Stern. That said, I do love the music channels and also tuning into Foxnews during breaking news. It would be harder without Stern.

 

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