Lies About Howard Stern Continue

Howard Stern triumphantly resigned with Sirius XM for another five year period, and by all estimates he's the highest paid radio personality on the planet. As I mentioned in my last post, Howard's new deal is even better than his last one. But I also mentioned that for a lot of reasons, the very favorable financial terms are not being played up, particularly by Howard.

Despite the fact it's a great deal, and proved that any talk of Howard taking a pay cut was bogus, a lot of people in the press still won't give Howard credit for all the success he has earned, particularly when it comes to bringing home the bacon for Sirius XM. Recently, the Hollywood Reporter tried to dismiss Howard's importance by saying that only 1 out of 10 Sirius XM subscribers listen to Howard. (Other pundits have cited similar unverified statistics saying that only 10% of Sirius subscribers listen to Howard.)

Sirius doesn't release details about its ratings, so these numbers are pretty much guesses and my sources tell me they are at best misleading and, at worse, flat out wrong.

For starters, even 10% would mean at least two million Sirius XM subscribers representing almost $300 million a year in revenue, far beyond the $80-100 million dollar cost of the show. Two million listeners is also far beyond the supposed one million subscribers some pundits claimed Sirius would lose if Howard Stern refused to sign a new deal. The claims that Sirius would "only" lose one million subscribers (making a deal with Howard Stern a wash) seemed to be based on the false assumption that at least half of Howard's listeners would keep subscribing even if he left.

That was something Sirius XM certainly didn't want to take a chance on. Because the real test of Howard's importance to subscriptions had already played out over several years in the pre-merger battle between Sirius and XM.  XM, despite having almost a ten million subscriber lead, and arguably better technology and unarguably better car deals, lost. When people had the choice of subscribing to a service with Howard, or without him, they chose the one with Howard. Even if they didn't end up listening to him, they liked having the option. That's why XM was forced to merge.

The "only 10%" number also ignores one of the harsh realities of satellite radio that "two million Howard Stern listeners" miss. The vast majority of new Sirius XM subscribers come from people who buy a new car, and choose the service as part of their car deal. Most often, they get a subscription for free. And unfortunately for Sirius XM, most often at the end of their free subscription, they don't renew. There are millions of cars equipped with satellite radio that don't work anymore because their owners stopped paying for subscriptions. Churn in satellite is quite high, not only for cars, but also amongst people who get special deals to buy radios with free subscriptions, but eventually drop the service.

The one bright spot for Sirius is Howard Stern listeners. People who regularly listen to his program continue to subscribe year after year. Many of those millions have been subscribing for over five years. So even a 10% base of loyal subscribers, augmented by a churning base of new subscribers who test out the service, is critically important.

But that 10% number isn't really accurate. The truth is, over half of all satellite subscribers, including those churning through free subscriptions, have listened to Howard at least once. So in any given year, the number of people who listen to Howard via satellite radio is about ten million, or 50%. Somewhere close to 30% of subscribers check Howard out at least once a month. Where the 10% number came from is unclear, at best it represents the number of Howard's regular daily listeners.

But Howard's day to day numbers change radically from week to week. Much more so then when he was on traditional radio. This is in a large part due to the fact that much of the audience is churning through free subscriptions (and might check him out for a while and then try other programs).  Also it's important to understand that there is a great deal more choices on satellite radio. On traditional radio, Howard's show was one of maybe 10 to 20 choices a car driver had of stations that would get a clear signal. On Sirius XM, there are are over 100 channels to choose from.  Howard's show has commercials, which the music channels (and many others) don't. So the danger that a subscriber might be listening to Howard, then change the channel because of a commercial, and not come back is greater than on traditional radio where all the choices had commercials.  But providing choices is what pay radio is all about.  If you don't have choices, why bother?  So if Howard were to leave, even people who don't listen regularly would feel they were missing something.

Here's the statistic that is most important for Sirius, and the reason Howard's deal was not only re-upped, but improved. What's the most popular show on Sirius XM?  HOWARD STERN.  By far.  Everyday, every week, every month, every year, more people listen to Howard Stern's show than ANY other program. What's the second most popular program? The number 1 music channel. (Meaning a lot of those free subscribers simply don't even bother to change the channel, or can't figure out how to find Howard.)

"Ratings" per se are not as important to Sirius as subscribers and don't translate as accurately as in traditional radio. But here's an important statistic: on average during "morning drive time hours" over one third of Sirius XM subscribers who are listening to their service, are listening to Howard Stern. The number sometimes goes as high as 50%.

The difference between the 30%-50% of Howard Stern morning listeners and the supposed 10% of daily Howard Stern listeners has to do with the fact that most of the time, a person's satellite radio is simply not turned on. People either aren't in their cars or listen to CDs or traditional radios (and troubling for Sirius XM, iPods and the internet). A lot of subscribers don't commute, and so being able to spend several hours listening to Howard isn't as compelling as spending a few minutes listening to commercial free music. But that doesn't mean they don't like having the option of listening to him if they decide to take a long drive somewhere.

During the height of his popularity on traditional radio New York, I'm sure less than 10% of New Yorkers listened to Howard Stern daily. But his influence on the radio market was much larger than 10%. On Sirius XM, his importance is even greater. Generally speaking, if someone turns on a Sirius XM radio, who has actually paid for a subscription, the single program they overwhelmingly turn on to listen to is Howard Stern.

Finally, it's important to understand that Howard's numbers go up radically whenever there is a controversy involving him (which there often is) and when he decides to do some promotion. For example, after a Letterman appearance, Howard's daily number of listeners will spike as some old subscribers remember how funny he is, or some new ones decide to check him out. This is why Sirius XM is constantly after Howard to do more promotion. But under Howard's old deal, all of his financial incentives kicked in after he reached his promised base of subscribers, which he did easily in his first year. He had no incentive to do more publicity.

Under Howard's new deal, that has changed. He has specific incentives based on how many listeners he gets off the internet, and thus he finally has a reason to try to boost his daily listenership. Based on that, this misleading 2 million listeners number is likely to be blown away. Howard has shown many times in the past, that he knows how to get people to listen to his program. I think that's what he meant when he said upon signing his new deal that he felt he wasn't finished. The next five years might see the Howard Stern publicity machine unleashed.