The Business of Howard Stern According to the Wall Street Journal

Excellent piece in the Wall Street Journal on Howard Stern's options going into his new contract negotiations with Sirius. Boy, the editorial page might be full of right wing nuts, but the WSJ really does good reporting. This is about the only real news story about the topic yet.

Wall Street Journal on Howard

What's nice about the story is it doesn't pound on the same myths about Howard having to take a pay cut and it includes some real numbers to make it's points. Let's look at some of those key points:

1. Howard's original deal with Sirius was a big success for Sirius. As the WSJ reports, Sirius was a "fledgling" satellite radio company and desperately needed a big name to build the brand. Howard paid off big by bringing in millions of subscribers. The WSJ reports that Howard added 2 million subscribers. At $13 a month per subscriber that's $312 million in yearly revenue directly due to Howard, more than covering Howard's 100 million dollar a year salary and production costs. The 2 million number is actually conservative. It represents subscribers who got Sirius primarily for Howard. Sirius actually went from 300,000 subscribers before Howard announced he was going to it, to 8 million before it merged with XM. Many of the additional six million subscribers probably choose Sirius over XM because they wanted the opportunity to check out Howard. Moreover, without Howard, Sirius would have quickly collapsed. XM had better deals with automakers. So Howard kept them in business long enough to collect 8 million subscribers.

2. Most of Howard's Sirius fans ONLY listen to Howard. The WJS reports that 72% of Howard's listeners say they almost never switch off to other Sirius XM channels according to an independent research firm. This polling figure is not particularly accurate because it's targeted to self identified Howard Stern fans. Sirius XM's internal numbers indicate there is actually a very large percentage of casual Howard listeners among it's subscribers. (Many of wouldn't admit they were a Howard Stern "fan" on a poll.) Over 50% of Sirius XM subscribers occasionally check out Howard. However, among self identified Howard Stern fans, which number over 3 million subscribers listening daily, the majority simply listen to Howard and nothing else. So these people are very likely to cancel immediately if Howard doesn't return at the end of the year. That would be a massive blow to Sirius revenue. $300 million plus revenue could disappear overnight. And Sirius can't "afford" to pay Howard a $100 million a year?

3. Howard has many options other than Sirius, including television and film where he has already had success as a star and a producer. He could also return to traditional radio or shake things up by moving to the internet where his pirated shows already bring him millions of additional fans. What WSJ doesn't say is that Howard has the option of doing all of this at the same time. He could have a censored show on traditional broadcast and a uncensored show as an internet podcast. He could make money both with subscribers and from ad sales. It isn't hard to put together a very plausible business plan that could make him even more than 100 million a year by building a network outside of Sirius.

My one quibble with the story is that it repeats the myth that Howard has less wide exposure than he used to when he was on traditional radio. The fact is, the number of world wide daily Howard Stern listeners, when you combine Sirius satellite, internet and pirated internet, is larger than it ever was. It's only in New York and Los Angeles, and a few key cities, where there number of daily listeners has been smaller because Howard isn't on the major stations. The great thing about satellite radio is that it has made Howard available from coast to coast, where before he was limited to pockets of the country. Because New York and Los Angeles are where the media industry lives, it might seem like he has less exposure. But in the midwest, and around the world, new fans are able to tune in and the old fans can listen for longer.

One of the sticking points of Howard's current deal is that he doesn't allow Sirius to broadcast him on it's iPhone app. If the new deal allows for that, Howard's fan base could increase over night by another couple million. And now with the merger complete, if Howard put his considerable PR skills into really promoting Sirius/XM like he did when he first signed up, the exposure could bring million's more to the subscriber base.