Howard Stern's move to SIRIUS will boost subscriptions to the satellite radio station, but will it be enough to cover the cost of the show?
Howard Stern is not the first radio host to make the jump from terrestrial radio to satellite radio, but as the star of one of the country's highest-rated morning shows, he is the biggest radio personality to make the journey. Stern will find a familiar face at SIRIUS: Mel Karmazin, former president at Viacom and the architect of Infinity Broadcasting, Stern's employer on terrestrial radio. The $500 million question is, of course, what Stern's tenure on satellite radio will mean for his show, for SIRIUS and for satellite radio in general.
A similar terrestrial-to-satellite shift occurred in September 2004, when Opie & Anthony was launched on XM. The Opie & Anthony show attracted the same sort of listeners as Stern -- young to middle-aged men -- and both shows raised FCC hackles.
It's difficult to estimate the effect of the Opie & Anthony show on XM, as no ratings numbers have been released. XM did receive a boost in its subscriber additions in the fourth quarter of 2004, adding 713,101 new subscribers, the company's biggest single quarterly increase. But this might have been an effect of holiday shopping.
Stern's audience is much larger than the Opie & Anthony show's, and he is making a seamless transition from terrestrial to satellite, whereas Opie and Anthony were off the air for over two years before they came to XM. (Infinity Broadcasting cancelled their show after a controversial on-air incident, but kept them on contract until the fall of 2004.) When they made the move to satellite, it was somewhat abrupt, without the long lead-up Stern has enjoyed -- a period he has used to hype satellite on his terrestrial show. Stern also has the advantage of moving during the holiday season, allowing Sirius radios and subscriptions to be marketed as gift items.
Bridge Ratings polled over 3,000 current and former Stern listeners (those who can no longer hear his show) and found that almost one-quarter of Stern fans plan to subscribe to SIRIUS once he moves, with another 15 percent undecided. Interestingly, the percentage of undecided respondents has declined since July, but the segment intending to subscribe to Sirius has remained steady.
Based on its polling, Bridge Ratings projects that the move will bring SIRIUS over 750,000 new subscribers in the fourth quarter. NPD Group reported that Sirius accounted for 56 percent of satellite radio unit sales in September 2005, compared to 47 percent in August and 40 percent in July, a trend many attributed to the imminent arrival of Stern. eMarketer estimates that the Howard Stern factor and the traditional boost from holiday shopping will give SIRIUS over 3.2 million subscribers by the end of 2005.
SIRIUS has a lot riding on Stern's move. As Rick Aristotle Munarriz of Motley Fool notes, SIRIUS has a larger market cap than XM, and many investors are anticipating a boost from Stern's arrival. Disappointing subscriber numbers could put the company in a bind, as it has agreed to pay $100 million a year over five years for the program.
"They have more subscribers than us, but we have more unaided [consumer] awareness. Howard has definitely contributed to that. He's already brought a significant number of subscribers to us, and he will significantly jump-start our ad sales operation," reported Mel Karmazin, CEO of SIRIUS, in November 2005.
"We're focused on what we have to offer. We have our own unique content. We don't want to be Stern satellite radio," noted XM Spokesman Cliff Patterson in November 2005.
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