Tuesday morning on his radio program Howard Stern reportedly discussed his ongoing contract negotiations with Sirius satellite radio, announcing that, “I am not taking a f—ing paycut.” His tirade was in response to comments made by Sirius CFO David Frear at a UBS investor conference where he hinted that a new contract with Stern might be for less money than his current $100 million a year. Frear also observed that the Stern contract happened in a climate where there were two competing satellite radio companies, whereas now there is only one. He said that as these contracts come up for renewal, “we’ll have the opportunity to get more favorable economic terms there.”
Last week a completely unsubstantiated rumor surfaced on Twitter claiming that Stern might get lured away by Apple, of all companies, in order to do an iTunes-exclusive show for even more money–$600 million. Despite the Columbia Journalism Review chiding journalists for reporting the completely anonymous tweet, the rumor took on a life of its own, with commentators left and right speculating about Stern’s next move, even if most doubt Apple would pony up that kind of cash for an exclusive deal with Stern. Nevertheless, even the Sirius CFO mentioned the possibility of Stern starting his own internet streaming channel.
The real question at hand is whether or not Stern and his power to draw listeners to Sirius is worth $100 million a year. I don’t doubt that Frear was testing the waters at the UBS conference to find out what investors might think of a Stern-less Sirius.
If Stern decides to walk away from Sirius I’m highly doubtful that he’ll find another company willing to pay him nearly as much to do his program, whether its online, on television or back on broadcast radio. He certainly could choose to go independent and online, but again, I’m doubtful he could gross anything close to $100 million anytime soon. Sirius’ gross income is only about eleven times Howard’s annual take, and the company’s got a couple of hundred other channels.
If Sirius decides that Stern isn’t worth $100 million annually, and Stern decides he won’t settle for less, it will be interesting to see if his departure costs the company. That $100 mil amounts to the price of
7.7 million monthly just over 641,000 annual subscriptions, about 39% 3.2% of the service’s current subscriber base. Are there really 7.7 million 641,000 Stern fans ready to dump Sirius if he goes? I really don’t know, and I’m sure that’s the question Sirius executives are trying hard to answer right now.
What we didn’t know last week when I last pondered the situation was if Howard was willing to accept less than his current salary. If one is to believe his tirade on Tuesday, the answer is, no, he won’t accept less. But Howard also trades in controversy and a willingness to bite the hand that feeds. So his on air comments might also be his way to stay in the news and stick it to Sirius.
Whatever happens may be a real test of both Stern’s star power and the value of Sirius’ entire slate of programming. It could also be a test of whatever medium Stern chooses after Sirius. The most boring thing that can happen is that he’ll sign that renewal.