DETHRONED


Why is the “King of All Media”

giving away his show?


By: Evan Hessel

FORBES -


* * * * * * *


Howard Stern Audience Graph

 

W HEN HOWARD STERN SIGNED ON WITH SIRIUS SATELLITE RADIO IN 2004, THE SHOCK JOCK SWORE OFF FREE RADIO AND ITS FEDERALLY MANDATED DECENCY STANDARDS — FOR LIFE.


LAST MONTH (OCTOBER 2006) HE FOUND HIMSELF SUDDENLY BROADCASTING FREE OF CHARGE ONCE AGAIN.


For two days Sirius let listeners tap its Web site and listen to Stern for free, for the first time since his satellite debut in January. It touted Sirius’ new move to let Internet users get 75 channels, without having to buy a Sirius satellite radio, for $12.95 a month; satellite listeners pay the same price for 130 channels. Stern also started temporarily selling episodes of his on-demand cable TV show for a penny apiece, instead of $7.95.


Acts of desperation—


or savvy moves to reignite his realm in digital radio?


Disconnected from his huge daily audience in the old broadcast world, Stem has slipped as a cultural force . His media mentions are down 23% year-to-date compared with 2004. Sirius has 5.1 million subscribers—up 4.4 million since it first signed the self-proclaimed King of All Media—but only a portion of that total tunes in to Stern. Yet on old radio he had a daily audience of 12 million.



Howard Stern Audience Graph


In April, 2006, Stern griped to Entertainment Weekly: “It’s insulting to me that everyone hasn’t come with me. I take it personally---~’ (Stern later claimed on air the quote was taken out of context.)


Sirius posted a record $853 million loss last year on sales of $242 million. Programming costs are up 167 % this year, owing in part to the $80 million Sirius will spend producing Howard’s show. Since Stern’s satellite debut, Sirius shares are down 44% to $3.72. The star himself may have taken a hit In January. Sirius handed him 31.3 million shares, then worth $236 million, as part of his five-year contract, valued at $500 million in cash and stock. The stock would be worth $116 million today; Sirius doesn’t know whether he has dumped any shares.



Howard Stern Audience Graph


The losses and stock slide, however, obscure Stern’s masterful performance in drawing new customers. After he signed the Sirius deal, he immediately took to shilling for his future employer, talking up Sirius on his old show and drawing a lawsuit from ex-employer CBS in February , 2006. The antics helped Sirius add 2.2 million subscribers in 2005. In January Stern debuted on Sirius, opening his show with the theme song from 2001: A Space Odyssey—accompanied by flatulence . Out from under the Federal Communications Commission’s stern eye, the host has delighted his dwindling fan base with raunchy new bits. He coaxes porn stars and actresses to straddle a vibrating, saddle-shaped chair, called the Sybian, during interviews. A clip of Stern’s chat with starlet Carmen Electra in the saddle generated 400,000 views on YouTube.


Stern left his old radio franchise in ruins. His replacement in New York, former Van Halen, singer David Lee Roth, was canned after the morning show dropped to 22nd place locally from 2nd. The Stern station in Los Angeles dropped from 7th to 31st under anchor Adam Carolla, of The Man Show fame.


Since Stern’s first show, Sirius has added 1.8 million new customer, a 55 % rise, and new revenue flow of $280 million a year; but archrival XM has gained 1.2 million—sans Stern and his huge pay package.



Sirius Chief Mel Karmazin vows to lift revenue twelvefold to $3 billion in five years, producing free cash flow of $1 billion a year (up from a deficit of $814 million in 2005).


But Sirius spends $131 signing up each new subscriber, whether it’s a Stem fan or not, double the cost at XM. And so far Sirius hasn’t projected when it will actually book a profit.


SOURCE:

FORBES Magazine

November 27, 2006. (Pg. 50)

www.FORBES.COM



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