Okay, back to the anti-Howard conspiracy. The second argument that Howard has to take a big pay cut or retire is:
2. Because of the merger, Howard doesn't have any competing satellite network to go to. Since Sirius absorbed XM it has been reducing "on-air talent costs."
This argument is based on the incorrect assumption that the only reason Howard got his reported 500 million dollar Sirius deal is that XM and Sirius were in some kind of crazy bidding war in the early days of satellite radio and Howard got overpaid.
The truth is, XM was never that hot on Howard to begin with, and never would have paid Howard anything close to what he got at Sirius. As I pointed out in my previous post, back in 2004 XM was in the drivers seat, with millions more subscribers than Sirius and better car deals. No one could have predicted at the time (even the most rapid Howard Stern fan) that Howard's move to Sirius would bring millions of subscribers over night and end up with XM having to merge under Sirius. Howard basically wiped out XM's lead in a few short years.
But doesn't the merger still mean one less potential buyer? Not really. What Howard proved in his move to Sirius is that he is a new media game changer. His fan base is so strong, his exclusive presence is enough to kickstart a delivery platform, in this case Sirius satellite subscriber radio.
The biggest problem satellite radio has right now is that because of rapid advances in technology satellite radio isn't such an amazing thing anymore. It's kind of nice, but not really the must have it was supposed to be. The reason the government allowed the merger was because there are many new delivery platforms rising to compete with it. In particular, car iPods and car equipped wi-fi. Moreover, coming up on the horizon is wi-max, which has even broader uses than wi-fi. It's hard to imagine why anyone with a car with complete internet access would need satellite radio in addition. Other than to get exclusive content like Howard Stern. Stern is actually more important now to Sirius BECAUSE OF THE MERGER. Because the merger was only allowed because of the competition looming on the horizon.
Back in 2004, Howard really had only three options: traditional broadcast radio, that wanted to censor him, XM that didn't really want him badly, and Sirius that wanted him very badly. Howard made the correct choice. But thanks to that deal, Howard proved what an incredible draw he is by allowing Sirius to rapidly grow a huge paid subscriber base.
Today, Howard still has the choice to go back to traditional radio, he has the choice to stay at Sirius, but, having proven his value, he could launch any variety of new broadcast channels, over the internet, over cell phones, X-Box, over wi-fi and wi-max networks. He has more choices today than ever, and unlike years ago, a proven track record of bringing in paid subscribers.
Remember, the big story five years ago was "will people pay for Howard?" The answer, without a doubt now, is yes. Sirius originally paid for Howard as a kind of lost leader. He was supposed to deliver a million subscribers and drum up publicity. He instead turned out to be a cash cow, delivering at least four million listeners over a five year period. Those listeners would follow him to almost any new media platform.
Just a quick example: Microsoft's Zune has not been able to crack any market share compared to the iPod. Yet there's nothing really wrong with it's technology, people just prefer the iPod. If Microsoft was to offer a deal where Zune users could get exclusive free Howard Stern, it would be huge. They could also get it on their X-Box's. Such a deal could put the Zune in business. And Microsoft has deep pockets.
Those kinds of choices, and there are many of them, give Howard huge leverage in any new Sirius deal. Even if Howard didn't have the choice of breaking out new technology, the real competition for the original Sirius deal, traditional broadcast radio, still needs and wants Howard. Sirius paid Howard a lot of money because he was already making a lot of money in broadcast radio. Howard still has that option too, as we'll explore in our next post on Lie #3:
3. Free stations are also financially struggling and can't pay Howard Stern much. "The recession has compounded problems…" "radio advertising revenue fell…" "big station owners are wrestling with debts…"
This argument is also complete bullshit. Stay tuned…
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