16 September 2010

Howard Stern vs. Sirius

I have enjoyed listening to Howard Stern for many years on terrestrial and satellite radio. For me, the Stern Show is a guilty pleasure like Scotch Whisky- something I enjoy but am not really sure is good for me. While many people dismiss Stern as nothing more than a foul-mouthed boor, you start to realize over time what a genius the guy is when you listen to him every morning (or it just might be a media version of the Stockholm Syndrome.) Putting aside the locker room humor, fart jokes, midgets and strippers for a moment, I truly believe that Stern conducts the best interviews in media- period. He has an uncanny ability to disarm and get more out of his guests than any other show host on radio or television. Throw in his dysfunctional cast of characters and you have a mix of entertainment that I happily pay for with my Sirius subscription.

Over the past few weeks, Stern has begun the rumblings that many of us heard before his switch to satellite radio. His 5 year deal with Sirius ends in January 2011 and he has made it pretty clear that he isn't enjoying the treatment he has received of late in terms of negotiating a new deal. Stern has an enormous ego, and a loyal legion of fans, and has only half jokingly proposed that Sirius change its name to Stern. He has made dark hints about taking his show elsewhere by leveraging the new technologies that have emerged over the past few years. These technologies effectively eliminate the middle man (i.e. Sirius) between the provider of content (Stern) and the consumers of that content (his audience.) If I owned shares in Sirius, I would be seriously be preparing to sell my position- fast.

Sirius stock has been dead money for years. Despite the merger with XM, and the rapid increase in subscriptions (due to Stern and free trials of the service in new vehicles) the company has yet to post a profit. When Stern joined the company in 2006, revenues for the year were $ 637 million. By 2009, revenues had increased to $ 2.47 billion- and the company still managed to post a net loss of $ 343 million. Still, for some reason hope still springs eternal. S&P put out a "Buy" rating on the shares on September 11th, 2010 while citing "uncertainties with Howard Stern's contract negotiations" as a potential risk to the shares. I think a better sentence would have read- "Howard Stern has Sirius by the short and curlies- and he knows it. If he leaves, this boat sinks."

To put it simply, Sirius needs Stern far more than Stern needs Sirius. In a matter of a few weeks, Stern could simply build an alternate location for his show to broadcast from and distribute the content via live internet streams, podcasts, pay per view and whatever else becomes available over the coming years. Instead of needing the massive capital investment that Sirius had to make in terms of satellites and equipment, he could probably be up and running on a relative shoestring. His fans, including myself, would happily pay $ 5 or $ 10 bucks a month for this type of content and Stern could probably do something in 30 days that Sirius never could- earn a profit.

New technologies are killing the old dogs of media and although satellite radio seems like the future, it could just be another victim on the list that includes newspapers, radio stations and magazines. All of these sources were merely the vehicles through which media content flowed- now that the channels for this information have become quicker, better and more personalized, the big dinosaurs of yesterday are essentially doomed. Consumers are becoming more discerning and demanding content that is customized to them, not the other way around. Why would I put myself through 30 minutes of Katie Couric, including commercials, when I can get my news on my I phone from the sources that I like and trust ? For me, Couric's inane babbling is content that has no value to me- I wouldn't even take it if it was free. Other people might pay for it, who knows ? The new media will ruthlessly expose companies and individuals that have rested on their laurels and reputations for far too long.

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