Liberty: Stern is safe — for now
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.