Howard Stern's Endgame and Pandora's Future

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Joel Hollander is the former chairman and CEO of CBS (NYSE: CBS  ) Radio Network (formerly Infinity Broadcasting). Hollander succeeded the legendary Mel Karmazin at Infinity/CBS, the longtime home of Howard Stern. Previously, Hollander served as CEO of Westwood One, and is currently the President of 264 Echo Place Partners. Along with his wife, Hollander is the founder of the CJ Foundation for SIDS.

I recently had an opportunity to talk with Joel about the future of Howard Stern and the future of radio. This transcript has been edited for clarity.

Mac Greer: Sirius XM (Nasdaq: SIRI  ) CEO Mel Karmazin recently said that he is very confident that Howard Stern will stay at Sirius XM. Do you think Stern is staying?

Joel Hollander: The only person that really knows what Howard is going to do is Howard. And he is always taking it down to the end of his contracts. But I assume that they have a long-lasting relationship that has been very, very good for whatever company Mel has been running and has been very good for Howard. They have had a very good marriage for years. So you would think he would stay. But Howard is very talented. He could do many things, whether he took his own brand and made his own app, made his own online radio station. He has been successful with books and the movies. He is truly one of the great media icons of the last 50 years for sure. I am hard pressed to come up with one individual that has made more money for the companies he has worked for and himself.

Greer: A Motley Fool article written by one of our writers, Rick Munarriz, was entitled Who Killed Terrestrial Radio? Rick says that the final blow will come from online and Internet radio. You seem to be saying it is premature to write off terrestrial radio.

Hollander: Listen, it is premature to write off terrestrial radio just like it is premature to write off network television. How many people have been writing the last five years that network television is eroding? Why does CBS spend all this money to promote Hawaii Five-O? They are probably going to get a number one show. You can amass big audiences with good content and compelling content. There is just more choice and you are living in an on-demand world.

Greer: And when it comes to adapting to the competition and adapting to new technologies, is there a terrestrial radio company out there that you think is ahead of the curve?

Hollander: No, unfortunately the terrestrial radio stations are trying to catch up. It is very difficult. You're trying to invest money in new platforms and are coming out of a recession when most of the media companies just got done laying off people. And you're having the worst advertising economic cycle of the last 50 years over the last 18 months. The radio business is not the growth business that network television is or cable television is. As an example, network television and local TV stations are probably anywhere from 15-25% ahead for the year. Some of that is driven by political, and radio is doing OK. It is probably going to finish up 7-10%, which is not bad.

The one company that I think is doing extremely well digitally is Turner. David Levy is doing a wonderful job of aggregating those assets over there. I think out of all the networks, ESPN obviously has done a very good job, but I think he has done an exceptional job over there of trying to marry their digital platform with their cable platform.

The digital portion of revenue at all these media companies is still miniscule. It is going to grow. There is no question. And there is no question we are living in an on-demand world and you have a million apps. I have an i-Pad and I sit on my couch and I could read newspapers from around the country. At the end of the day, there are more choices for consumers than ever before and there are more choices for advertisers than ever before. And by the way, more content on more devices doesn't necessarily mean more revenue. It means a shift.

Greer: Let's talk about the mobile market and the U.S. smart phone market. Research In Motion (Nasdaq: RIMM  ) and its BlackBerry still have the top spot. Apple (Nasdaq: AAPL  ) and iPhone are second, but Google (Nasdaq: GOOG  ) and Android are third, but gaining ground. How is the mobile market, and the smart phone market in particular, changing the business of radio?

Hollander: I think it is going to change every business, but again, it is in its infancy stages. Mobile advertising is a minuscule number so far, so where is it going? There is certainly going to be more as the technology gets better and it is easier to use and to see. The Apple iPhone obviously is doing unbelievable and I am sure they will come out with another gadget in the next year and it will be even that much better than the present one.

It is going to be a huge business because we are a mobile society and everybody wants everything that second, on demand. But there are only so many advertising dollars and only so much discretionary income. So at the end of the day, there will be a sifting out of these smaller companies over the next five years.

Greer: And what is your take on Pandora and the future of Pandora?

Hollander: Pandora is pretty hot. They are in a great spot. I think they have about 60 million users last time I read and I think they were actually cash flow positive now on about, I am hearing $120 million in revenue or so, is what has been written. So they have a big jump-start on everybody, but again, there is a lot of competition in that space too, but they are the leader and their founder is very smart, very passionate about what they do, so I think that is going to be a big business.

Greer: Any chance we could see Howard Stern end up at Pandora?

Hollander: I have no idea. You know what? Howard can do almost anything he wants. Anything audio-wise. He probably has a ton of choices video-wise. Howard can do whatever he wants audio wise, whether it's his own app, his own online radio station, or staying at Sirius XM. Here is what I would never do, is bet against what Howard can do or bet against Mel. Everybody said 15-18 months ago that Sirius is going to be gone. Mel did a masterful job of rescuing that company from the abyss.

Greer: And I am curious, in terms of misconceptions, what do you think the biggest misconception is right now about the business of terrestrial radio?

Hollander: That nobody is listening, which is a joke because there was just Arbitron last week and their radar surveys. There are 225 million people a week in the United States that listen to radio.

Greer: That's not small potatoes.

Hollander: It's not. Unfortunately, the radio industry has done a very poor job of positioning themselves over the years. If you are a 40-to-50 year old male and you are getting into your car in the morning, you want to know about the traffic, you want to know about the local weather, you want to know if the world blew up overnight, and you want to know if your team won the night before. So you're going to get that information when you get in the car in a short burst. So it is still a great vehicle. They are just not as profitable as they used to be .

Greer: And what's the most important business lesson you learned from Mel Karmazin?

Hollander: The most important business lesson --- make quick, swift decisions. Don't look back, and work harder than the next guy.

Interested in reading more about Sirius XM? Add it to My Watchlist, which will find all of our Foolish analysis on this stock.

And check out why Fool contributor Rick Munarriz thinks Sirius XM might borrow a page from Netflix and Tivo.

Mac Greer doesn't own any of the stocks discussed. Apple is a Motley Fool Stock Advisor pick. The Fool owns shares of Apple. Google is a Motley Fool Inside Value recommendation. Google is a Motley Fool Rule Breakers selection. The Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.

Read/Post Comments (8) | Recommend This Article (14)

Comments from our Foolish Readers

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 September 22, 2010, at 12:51 PM, my2cents4u wrote:

    Double yawn. Gotta write about something I guess.

  • Report this Comment On September 22, 2010, at 1:16 PM, step69 wrote:

    The title of the article is "Howard Stern's Endgame and Pandora's Future", but doesn't answer/speculate either. The so-called answers to the questions couldn't be more generic.

  • Report this Comment On September 22, 2010, at 5:07 PM, cantbefoolish wrote:

    It's obvious Mac is trying to steer Howard towards Pandora, in order to put the kill on Sirius/XM. I really hope he and Motley Fool will fail.

  • Report this Comment On September 22, 2010, at 5:32 PM, TMFMac wrote:


    Thanks for reading the article and sharing your thoughts. I asked specifically about Pandora because it was mentioned as a potential destination in an earlier interview I did with Sirius Buzz writer Spencer Osborne, who thinks that Stern will stay at Sirius XM. See article below. cheers,


    a Sirius XM, terrestial radio, and Pandora listener

  • Report this Comment On September 22, 2010, at 6:23 PM, bighairydogcat wrote:

    Video killed the radio star...

    Digital will kill the terrestrial star.. eventually.

  • Report this Comment On September 22, 2010, at 6:39 PM, davemaxg wrote:


    He touched on all those points and posited which way it would go. Never heard Howard and Pandora mentioned together. An interesting idea.

    I love Pandora and I love Howard, but reception sucks in my car and on the Sirius Blackberry app. Oddly Pandora works great on my commute, so I'm considering saying goodbye to Sirius and Howard.

    Baba Booey!

  • Report this Comment On September 23, 2010, at 3:29 PM, Haystack65 wrote:

    To all of you complaining that you didn't get any "answers" from this article, GO BUY A CRYSTAL BALL.

  • Report this Comment On September 23, 2010, at 3:29 PM, a7amttime4me wrote:

    Why don't you write about something noteworthy instead of always trying to speculate and bash. Motley is always trying to grab me with their catchy "Latest News" tease but the articles ALWAYS leave me feeling like the FOOL for reading them. When are you guys going to actually do some research and publish something beneficial to the reader?

    As far as the forum, does anyone have any insight on why the big fluctuations this week? I've missed the trigger.

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