September 7, 2010 | 9:45 pm
Posted by Rob Eshman
Howard has been hinting that things aren’t working out between him and Sirius. In four months, his contract is up, and there’s a good chance, judging by his comments, he won’t renew. But he doesn’t seem particularly upset: He seems to have an option under wraps that will allow him to do his uncensored show through a different delivery system.
People keep talking about about why or whether Howard would leave Sirius, but what’s happening of course is that Sirius is leaving Howard. As ar as his fans are concerned, Sirius is guilty until proven innocent. One day it might come out that as part of his new contract, Howard stipulated that he would work only from home, nude, in pantomime, but Howard doesn’t strike me as a prima donna or a kook. He knows what he’s worth, and he knows what he has to do to be worth it.
I’m trying to figure out, if Howard wants to stay at Sirius, why in the world Sirius would let him walk. Sirius is in the radio business, and he’s still the most innovative and original voice in radio. I’m trying to look at this from management’s perspective, because, as a fan, I can’t quite believe it.
Let me be clear, the day Howard Stern leaves Sirius, I leave Sirius. If I want to hear standup, I can TiVO Comedy Central. If I want to hear uninterrupted music, they’ve invented something called an MP3 player that you only pay for once, not every month. If I want to hear Nancy Sinatra talking about her dad, I can go down to the Museum of Television and Radio and watch some old Mike Douglas segments. I don’t know why the company would let Howard go, but I’ve narrowed it down to five reasons:
1. He’ll cost more than he’ll bring in.
2. They think they can retain the subscribers he brought in without him. Put Howard in the window, attract a lot of PR and subscribers, then move him out and move in some cheaper model. This is my Howard as a Loss Leader Theory.
3. Howard’s contract demands are unreasonable, would set a bad precedent, would give him too much control over the company, would hurt the bottom line or investor confidence.
4. Somebody important at Sirius just doesn’t like him.
5. The company has figured out a new revenue model that doesn’t depend on brilliant, original content. Maybe there’s more money in the actual hardware business. Maybe they want to just be a conduit, renting out satellite and radio technology, not a content provider.
Those are the rational reasons. But we live in a world where serious companies make the dumbest , most self-destructive decisions imaginable, dragging down whole business sectors, whole countries, in a wake of short-sightedeness and arrogance. GM, AIG, Goldman Sachs, Merrill, Bear Stearns, Nationwide. So maybe that’s what’s going on.
Whatever it is, I’ll just click off my subscription and follow Howard. Because he isn’t a Loss Leader, he’s a leader. Plain and simple. Radio will follow where he goes.
Yes, he’s 50 something. But no one younger is doing anything more cutting edge or interesting. Maybe he’s a little cranky sometimes, and maybe close to burnout—but he’s not there yet. He has a good 5 years in him, especially energized by his almost frightening need to prove himself, to win. Sirius, watch out, you’ve awoken a sleeping, giant, needy, brilliant, Jewish overachiever.
How many others beside me will leave? That would be a great book to make in Vegas. Howard claims he signed a million listeners. Let’s say he’s wrong by half. And let’s say of the 500,000 he signed, only half cancel their subscriptions. That’s 250,000 subscribers at 13 bucks a month times 12 months. $39,000,000 sucked out of a company that’s still hooked up to a respirator, and whose share price could be posted over a lemonade stand.
But I’m no financial analyst. Others, much smarter than me, have written that Sirius, with its billion-plus revenue, will experience Howard’s departure as a blip, maybe a bad year, but it is sufficiently diverse that it will recover. Writing on his blog Seeking Alpha, Relmor Demetrius says that Sirus has already proven it can get millions of subscribers for reasons other than Howard:
The facts are quite clear on this. Sirius XM added more than 1 million customers this year alone. That would offset losing Howard Stern right there. Their growth would probably cover any cancellations and they wouldn’t miss a beat. The company that hired Stern 5 years ago is vastly different in 2010.
Maybe, but Demetrius neglects one huge factor: competition. What if Howard or someone else develops a radio delivery system that’s better and cheaper? What if Sirius is susceptible to bad press, or the defection of another top talent? I think even Mel Karmazin would admit that Howard was the cornerstone of Sirius’ success. When you pull out the cornerstone, a lot of unpredictable things start to happen. Radio, like newspapers and TV and film, always come back to content, and content always comes back to talent. Neglect talent, and you pay a price. Ask Clear Channel.
Granted, Sirius is not going to disappear all at once, and maybe it’s only $30 million, or $20 million or, as Demetrius says, even $100 million that Howard’s departure will cost the company (after accounting for savings). But you’re talking about a company that makes its dough 13 bucks at a time. In any subscription business (here;’s something I know a little about) the key thing is retention—retaining subscribers. That’s steady income, money you can build next year’s budget around. Without it, you better be able to tell the friggin future.
Anyway, once Howard leaves, I don’t give a crap about Sirius. I hope it thrives—I was one of the shmucks who bought the stock. But in my radio life, I can go back to listening to NPR and all my iBooks and finally stop bringing cocktail party conversations to a dead halt by interjecting, “You’ll never believe what Howard Stern did today…”
More likely, I’ll pay whatever Howard asks in order to hear him through his next medium. The most plausible is a podcast, like the one Adam Carolla does. I listen to that when Teresa Strasser hosts it, because Teresa is just so damn good and quick, and funny and bright. I don’t know if a pay model can work for podcasts, but if Howard can get a million people to pay 120 bucks a year, and he spends half on overhead, he can still do pretty well—and own the company he creates. That, and a Howard Stern web site and event division that is as much lifestyle as Stern Show, and he will go into his dotage creating a brand that can live on long after The Howard Stern Show, and Sirius Satellite Radio, are gone. .
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