I haven’t done one of these in awhile. I think I need to fisk this… Now, mind you, I won’t be contesting the whole thing, just clarifying point by point…

Stern’s move to Sirius is big bucks, but no big deal
By Jeffrey M. McCall

To observe the deluge of television and newspaper coverage in recent weeks, one would think that shock DJ Howard Stern’s move to satellite radio is a big deal. It isn’t. If subscription-based satellite radio ever takes a profitable place alongside free over-the-air radio, it will be because of factors much more important than Stern.

Agreed. I don’t think Stern is going to provide the influx of cash or the clout that Sirius is hoping for.

Stern has made a career with his anti-establishment persona, taking on the Federal Communications Commission, media management and corporate America. But his marketing blitz ahead of his Monday debut on Sirius satellite radio has been establishment all the way. His $500 million contract with Sirius over the next five years can do that to a guy.

Stern has been all over television talk shows recently and the subject of countless newspaper reports. He’s even been on CBS’ “60 Minutes” and Fox News’ “O’Reilly Factor.” He rang the NASDAQ opening bell in early January. How’s that for establishment? Stern’s loyal listeners, meanwhile, will have to pay $12.95 per month, plus the cost of a receiver, to follow the talented but edgy Stern to his new Sirius home.

This is spot-on accurate. Well, all except for the “edgy” part. Howard Stern hasn’t been edgy in a very long time, which is why around 1998 or so I stopped listening to him altogether. I got tired of B-list celebrities, strippers, porn stars, and lesbians. It was as if his creative juices just dried up. When he finally announced his move to Sirius, Howard admitted on his show in his own voice that he had been “doing subpar radio” for the last ten years.

Problem is, everyone noticed.

And seeing him hawking his show on all these “mainstream” outlets was quite funny. The very people he made a living making fun of were sitting across the table from him and smiling at him while he hurled niceties at them. It was fun, actually, watching him sell out.

Sirius is hoping Stern and the attention he brings can jump-start the struggling satellite radio operation that has lost money each year. Sirius trails satellite competitor, XM, which also has failed to make a profit in its five years. Sirius has now topped the 3 million mark for subscribers, still about half of XM’s subscriptions. Even if all 3 million Sirius subscribers listen to Stern, he still reaches only about a fourth of the estimated audience he held with his free radio offering over traditional broadcast outlets.

Very few startups turn a profit right away. It’s not unreasonable for it to take a long time for XM or Sirius to start turning a profit, considering the huge amount of money that needs to be invested to start the network, sign talent, syndicate other shows, build studios, hire staff, etc. The interesting number, though, is subscribers. Sirius and XM started roughly at the same time, and XM is just slaughtering Sirius on subscribers. That’s a major testimonial to Sirius’ appeal to customers.

Sirius is taking a big risk by making Stern the face of its venture. This is like Barnes & Noble promoting that it has Playboy in the magazine rack. One advertisement during the holidays featured a wife getting her grateful husband a Sirius subscription so he could hear Stern. Oh, right, most wives want their husbands to hear jokes about strippers and bodily functions.

I’d hazard to say most women don’t care what their husbands listen to on the radio. The idea that wives control what husbands listen to is so Honeymooners-esque it’s stupid.

Sirius offers many fine music, sports and information channels that are more likely to draw listeners than Stern, most of which get overlooked when the marketing is designed to reach the Stern demographic. There’s also the prospect of Stern backlash, as satellite radio buyers who might not appreciate Stern’s cultural stances look to XM instead. Not that XM is so clean either, as evidenced by Opie and Anthony, a couple of other refugees from regular radio.

I’m so tired of the Stern / Opie and Anthony comparisons. There are no comparisons. They do completely different shows. Actually, it depends on who you ask. If you ask one of Hoo Hoo Howie’s fans, you’ll likely hear that O&A rip him off. Whatever, ass. Sirius is marketing to the Stern demographic because marketing to everyone else is failing miserably. If Stern fails, Sirius is done. Period. $500m in gold and trinkets plus $200m in stock? Stern practically owns Sirius at this point. If he falls flat on his face, there’s no way in the world Sirius will be able to recover.

Estimates are that Sirius added about a million subscribers in the last quarter, about the same as XM. Sirius will surely proclaim this increase is thanks to Stern, but surely NFL and NBA exclusives at Sirius have lured many of the adult males that Stern was supposed to attract. Stern himself would have to attract and keep about 650,000 subscribers just to pay for his own contract.

He hasn’t done that yet, and he goes on the air today. Not exactly a rousing kick-off for the self-proclaimed oppressed one. Of course, the NFL and NBA are no big deal because if I’m a fan of a team, I just watch the games. If I’m a hardcore NBA or NFL fan, I’ll buy the satellite TV or cable package that’ll get the whole thing into my living room and DVR a game I can’t watch. Who actually listens to NFL or NBA games on the radio? In fact, who listens to any sports on the radio aside from baseball anymore? And how many of the folks who do (old people, mostly, I’m sure) are gonna pony up $13 a month to hear it anyway? If they have a local team, they’ll listen to it on local radio.

A bigger factor than Stern in the satellite radio wars is likely the deals being cut with automobile manufacturers. In this arena, XM is clearly winning, with deals signed to place XM in GM, Honda and Toyota cars, many more than the contract Sirius has for Ford and DaimlerChrylser.

Not to mention the fact that Sirius counts any radios bought by a car manufacturer to be put in a car as a sale, while XM doesn’t count them as sales until the units are actually turned on. Sirius’ numbers, while lagging behind XM, are probably even worse than they appear when you consider that most people will never even activate their receivers.

Stern says his move to satellite radio is not just to avoid Federal Communications Commission indecency rules, which currently aren’t applied to satellite programming. In a recent report, Stern said, “It’s about ideas. This is a free-speech issue.” Of course, hearing the speech won’t be free anymore. And, absent a particular word or two, Stern’s ideas, like interviewing crack-addicted hookers and having a drunk undergo live psychoanalysis, would have easily escaped FCC sanction over regular radio.

Oh yeah, a free-speech issue. It’s always the bigger issues. It had nothing to do with control or money. I wonder if Viacom moving to the FREE FM format was decided before or after Hoo Hoo decided he was moving. I mean, if you think about it, what if Viacom went to Hoo Hoo and said, “Hey, our music ratings suck, we’re going all talk” and that’s why he bolted? Didn’t wanna be the lynchpin in a wheel falling apart? We’ll never know, but it’s pretty interesting to speculate about.

The National Association of Broadcasters is fighting back against satellite with a campaign to promote free radio. The NAB has musicians doing announcements claiming that free radio better promotes new music. The NAB is also lobbying Congress, with NAB Chairman Bruce Reese telling a Senate panel last fall that satellite radio is a “haven for edgy content.” He either wants the FCC to regulate satellite content or unleash regular broadcasters from oversight. There’s no principle involved, just that Reese wants to correct “an uneven playing field.”

Just ’cause something’s free doesn’t mean it’s worth it. Just think of it this way, guys. Most of you have cable television at this point. Does anyone remember the anti-cable ads that were run in the oldern days? How it was bad to pay for cable television, and how television should be free? And isn’t it odd that, since the hosts on Sirius and XM aren’t members of the NAB (necessarily), how the NAB wants to level the playing fields? Kinda makes sense because if the talent moves to satellite, no one would be left in the “union.”

When announcing the eventual Stern move to Sirius more than a year ago, Sirius Chairman Joseph Clayton hailed it as “the most exciting and transformational event in the history of radio.” If history is to be made with Stern, Sirius is going to need many more than 3 million potential listeners.

Clayton’s experience is not even in broadcasting. It’s in telecommunications (he worked for Frontier in Rochester) and consumer electronics (for Thomson). I think what Clayton thinks is the future of radio should be examined with a fine-toothed comb, seeing as he has no real experience in the industry, and Sirius’ antiquated technology isn’t exactly flying out of retail outlets.

This will transform the satellite radio industry.

It’ll eliminate XM’s only competitor.

Technorati Tags: sirius, stern, opie and anthony, o&a, clayton

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