Howard Stern’s impending defection to
Sirius Satellite Radio will certainly be a turning point in the history of satellite
radio, greatly advancing its cause as a mainstream medium.
But it also spells big trouble for traditional radio, and at a time it least
needs more trouble.
That's the buzz among radio industry executives following Stern’s surprise
announcement yesterday that he will leave Infinity Broadcasting and ad-supported
radio to join subscriber-supported Sirius in January 2006.
The word: It's going to hurt Infinity and it's going to hurt all radio, costing
it
listeners, which in turn will hurt ad revenues. The concern is that not only will Stern
fans switch to Sirius but that casual Stern listeners will simply find fewer reasons to
turn on their radios.
Stern is perceived as a magnet in his own right, but he's also an icon, for
better or worse, of the rise of controversial talk shows, whether it's sex or politics. In
promoting himself, which he's done relentlessly and often brilliantly through the years,
Stern has promoted radio as an exciting medium. He's also
promoted radio as an industry, bringing it glamour as a counterpoint to the same-old
out-of-the-can DJs.
Michael Harrison, publisher of radio talk show magazine Talkers, tells CNN:
“There’s no question in my mind that satellite radio will take its
place in the evolution of radio and that Howard Stern is a catalyst for it happening
faster."
Fulcrum Global Partners analyst Richard Greenfield tells today's Wall Street
Journal that losing Stern will hurt long-term growth prospects of radio at a time when it
is already struggling with an oversupply of ad inventory, not to
mention image problems.
Greenfield believes Stern’s departure will also directly affect
Infinity. Infinity is a major player within Viacom, with the unit expected to contribute
at least 15 percent of Viacom’s operating income this year. Stern’s show alone
adds $100 million in revenue and $50 million in earnings to Infinity’s coffers.
With Stern gone, Greenfield predicts Viacom may well turn its back on radio,
perhaps dropping 30 to 40 stations from its nationwide total of 185. Viacom had already
indicated it planned to sell some of its radio holdings outside the top 20 markets,
reflecting its disappointment with ad revenues.
Meanwhile, the nascent medium of satellite radio should receive a
much-needed boost from Stern’s announcement, with Sirius CEO Joseph Clayton saying in
an analyst call yesterday, “This is a watershed event for the industry.”
Other fairly high-profile radio
personalities, including NPR’s Bob Edwards and former Infinity shock jocks Greg
“Opie” Hughes and Anthony Cumia, have already made the jump to satellite. But
Stern is by far the best-known and highest-paid personality to express confidence in the
medium.
Stern, whose show costs $100
million a year to produce, won’t come cheap for the fledgling Sirius. The satellite
service, which currently boasts around 600,000 subscribers, estimates it will need 1
million new subscribers to simply break even on its deal with Stern.
But Clayton says he is confident
that such a milestone should be easy to achieve considering Stern’s celebrity.
Stern's deal is for five years and is valued at $500 million, taking effect when his
current contract with Infinity is up in a year and several months.
Stern spent much of
yesterday talking to listeners about the deal, and as listeners might expect much of this
chatter was attacking the Federal Communications Commission and its chairman, Michael
Powell, who he believed was part of a plot by the Bush White House to drive him off of
radio.
"This marks the death of AM and FM radio, I guarantee
it," he said yesterday. "I put my money where my mouth is."
When Stern's longtime protector, Mel Karmazin, left Viacom in June, pushed
out by chairman Sumner Redstone, Stern railed over the airwaves, threatening to quit
unless the his new bosses affirmed their support. But few took Stern's threats as more
than posturing. And of course all that changed yesterday.
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