The Game Changer for Sirius XM?

How can Sirius XM (Nasdaq: SIRI  ) get more respect on Wall Street? Does the satellite radio company need some additional big-name talent? And can Sirius XM really afford to re-sign Howard Stern? I recently asked Ryan Saghir, managing editor of Orbitcast, a website that covers the latest news on Sirius XM and competing industries. Orbitcast is not affiliated with Sirius XM, and Ryan doesn't own shares of Sirius XM.

Mac Greer: What is the single biggest game changer that would really take that stock from the $1 range? What's the biggest game changer for Sirius XM?

Ryan Saghir: There are two options. One is to go with the content side. Sign on a big-name personality in an exclusive fashion that has a huge following on the radio --- moving over from terrestrial radio to satellite radio, following the same exact Howard model. And to execute that in a wonder, flawlessly perfect way. That's one technique. And the other would be to really revolutionize how they do distribution, whether it be online, whether it be mobile, something that is really, really going against the grain in terms of their traditional way of thinking. My gut feeling says they'll probably go with the latter because it's safer, but I think the former has the most impact.

Greer: And in talking about the former, I mean what other personalities pack the same punch? Is it a Glenn Beck, a Sean Hannity, a Rush Limbaugh? I'm trying to think of someone who could have the same reach as a Howard Stern.

Saghir: Rush Limbaugh would be the gold prize. He's obviously very polarizing. He's hated by many, loved by many, and he has listeners. That sounds just like Howard Stern, and that's exactly the type of person that they should bring on board. Rush Limbaugh in an uncensored fashion would be amazing for a lot of their listeners, and I think a lot of people would pay to hear that.

Greer: But I'm guessing they would have to pay Rush more than they paid Howard.

Saghir: (Laughs). Of course, I don't think Rush would ever go in with anything less than Howard. And that's the conundrum. I think the issue is they paid Howard so much that it's almost impossible to beat that deal. And any self-respecting radio host who is very, very profitable and has a good listener reach wouldn't want to demote themselves below Howard because they would always be compared to Howard.

Greer: Can Sirius XM afford Howard Stern once his contract comes up at the end of the year?

Saghir: I hope so. I mean I think it would be a big hit toward the reputation of the company without Howard Stern. I think Howard Stern really is the standard-bearer for them. Aside from bringing in subscribers, Howard Stern brings in a lot of his own equity when it comes to an advertising potential. And the average consumer who may not have Sirius XM still looks at Sirius XM as having Howard Stern. And without Howard Stern, they lose a lot in terms of that exposure. ... But I mean, let's face it, XM survived just fine without Howard Stern. You know, XM did a very good job, but ultimately, XM ended up being bought by Sirius. So that's telling as it is. And I think Howard definitely holds a lot of value, and I think Sirius XM should do everything they possibly can do to keep him on board.

Greer: Any sense of how many listeners would leave with him?

Saghir: I think that depends on whether he decides to retire or if he decides to move on to a competing service. If he decides to retire, then he'll ride off into the distance and everyone will hang their heads in sadness, but if he decides to start up something competitively, there could be a significant hit. What that number would be, it just all depends on how he decides to execute it. If there's one thing we do know, Howard executes flawlessly. So if he decides to do something competitively, watch out.

Greer: And do you want to hazard a guess as to what he's going to do?

Saghir: I'm willing to wager a good guess that he's going to re-sign with Sirius XM, that it's going to be less days a week, it's going to be a lower-priced contract, probably not too far off what he's currently making. But it's going to be less, and it's going to be less days a week as a result. He's going to have a less strenuous schedule, but less money as a result.

Greer: And a final question. Three years from now, Sirius XM, is it a stand-alone company still, or does it get acquired by Liberty (Nasdaq: LCAPA  ) , one of its stakeholders, or Google, or Apple, or some other company?

Saghir: I don't think a Google, Apple, or any of the tech companies; I don't think they want to do anything with that. I think Sirius XM will remain stand-alone. They'll continue to chug along and really fine-tune those dials to make sure they remain profitable as much as possible. And that's, I think they're just going to put their heads down and work as hard as they can toward true attainable goals. So three years from now, they're still a stand-alone company and they'll be growing still.

Motley Fool co-founder Tom Gardner thinks Sirius needs to Get Sirius About a Split. What do you think the game-changer for Sirius is? Post your thoughts below.

Mac Greer doesn't have a position in any of the companies listed. He is a Sirius XM subscriber. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 24, 2010, at 8:24 PM, pucku19 wrote:

    Maybe I'm missing something here, but how can Saghir make this comment, "...let's face it, XM survived just fine without Howard Stern"?

    It's because of Howard that XM became a non-entity. Before Howard, XM had millions of subscribers and Sirius had something like 600K. As soon as Howard signed with Sirius, XM lost everything and was swallowed up by Sirius, so how exactly did they survive?

    As I understand it, the only reason XM is still around is because it's too expensive to reprogram the XM satellites.

  • Report this Comment On July 26, 2010, at 1:35 AM, Haystack65 wrote:

    If Sirius is around in 3 years it won't be as a stand alone company... all you have to do is look at the debt load vs. the income to see this company can't last in its present form. Either someone else will have to come in with a massive capital infusion (which Liberty can't do, they're carrying too much debt now too) or this company will quickly be heading toward .10 cent shares and bankruptcy again.

  • Report this Comment On July 26, 2010, at 8:39 AM, wolfwuf wrote:

    There are millions of sirius subscribers that couldn't care less about Howard Stern. And Haystack65, I guess you've been too busy to look at the debt that has been retired and the free cash flow this next quarter>

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