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Does Sirius XM Want to Make Howard Stern Angry?

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It's not all peaches and cream at Sirius XM Radio (Nasdaq: SIRI  ) . Howard Stern's production company and the popular morning radio show host's agent filed a lawsuit in Manhattan's New York State Supreme Court yesterday, alleging that the satellite radio giant reneged on performance-based stock awards.

The suit claims that Stern's camp received the stock bonuses as Sirius obliterated subscriber goals during the first two years of his five-year contract. CEO Mel Karmazin's company has failed to make any additional payments.

There are obviously two sides to every story, and we've yet to hear from Sirius XM. It's probably not a coincidence that the stock grants were nixed after Sirius announced its plans to merge with XM four years ago. Did that event alter the language of the original deal, or is Sirius XM cocky enough to cheat its biggest star?

It's undeniable that Stern's arrival put Sirius on the map. However, XM still had more subscribers than Sirius by the time the two companies ultimately merged several years later. In other words, despite Stern's appeal, XM still managed to stay on top because both companies were landing new accounts hand over fist.

XM's broader audience was more about automaker connections than content deals. Its deal to have its receivers installed in General Motors, Honda, and Toyota helped it stay ahead in the market share battle. However, it's also undeniable that Sirius wouldn't have been the one with the upper hand in this merger of equals if it had been the overpriced small-fry competitor to XM that it was pre-Stern.

The broader question may be why it took this long to publicly surface. Were both parties just waiting until Stern's new five-year deal was inked three months ago before breaking out the boxing gloves?

Stern purists will argue that it doesn't matter. Stern's been at his best through his radio career when he's slinging venom at his boss, and now he has fresh arrows in his quiver. It will create some entertaining skewering for listeners, but what about investors?

Sirius XM has had no problem diluting investors over the years, so why didn't it just issue the stock if it has been rightfully earned? There's a fine line between good radio and bad business practices, and this can have larger ramifications than any on-air drama.

What do you think will happen the next time a major terrestrial radio or television star brokers a deal with Sirius XM? The radio giant has some serious leverage since its merger. It is the only game in town when it comes to satellite radio. However, desirable talent that could have been wooed by performance-based stock incentives will point to Stern's fallout and argue for more upfront cash instead. This isn't what Sirius XM -- a company that has done a good job over the past year in reining in its programming costs -- wants to necessarily do.

It also isn't what investors may want to necessarily see.

What do you think of the legal tussle between Howard Stern's camp and Sirius XM Radio? Share your thoughts in the comment box below.

General Motors is a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.

Read/Post Comments (37) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On March 23, 2011, at 11:44 AM, siriuslyrick wrote:

    Stern had no class, has no class, and never will have any class. It's long past time to get rid of him and let the class acts at Sirius (which is practically everyone else) do their thing.

    I've never listened to him, and never will, and I get the feeling that I'm not alone among the subscribers.

  • Report this Comment On March 23, 2011, at 11:48 AM, siriuslyrick wrote:

    Rick, you comment that desirable "talent" might want more upfront cash now. You're likely right, but at least it would be real talent.

  • Report this Comment On March 23, 2011, at 11:56 AM, Kuhnrod wrote:

    I'm not a lawyer, but, Howard Stern must have negotiated his new contract in bad faith. It's apparent he knew he had this issue when his contract came up for renewal, but waited until he inked the renewal contract before filing this suit. It makes me believe Stern was desperate and needed to keep his gig at Sirius.

  • Report this Comment On March 23, 2011, at 11:57 AM, bottomfisherman wrote:

    Here is what I think will happen next: Howard will have a big hissy fit. SIRI will cave in because they want to keep him for the term of the contract he just signed. At the end of this term they do not resign him.

  • Report this Comment On March 23, 2011, at 12:20 PM, rouben45 wrote:

    Howard Stern must go where Ghaddfi is soon going to go , to hell.

  • Report this Comment On March 23, 2011, at 12:21 PM, joso1027 wrote:

    WOW! some of these comments are unbelieveable! Whether you like him or not, he is a proven talent! As stated in the article, Sirius becoming the greater player over XM is a direct result of him signing with Sirius. Don't even listen to Howard, and just look at the timeline of subscriber growth from the time he announced his signing with Sirius to the time that he actually went on the air with them. This is a business situation, not a personal vendetta with regards to whether he is a "talent" or not, that isn't the question.

  • Report this Comment On March 23, 2011, at 12:28 PM, Forthstar wrote:

    Before the merger, it was deals like Stern's (half a billion bucks) that were sinking Sirius. Once the merger happened, Stern didn't attract any more subscribers to the XM side.

    He was available to XM only as an extra fee premium service. I for one wouldn't pay for that. However, since I'm a fan of Opie and Anthony, I could be considered part of the same demographic Sirius was trying to attract with Stern. O&A satisfy my rebel radio listening needs without charging me an extra worship fee.

  • Report this Comment On March 23, 2011, at 12:28 PM, catmandu88 wrote:

    Stern is a real P.O.S. I guess $900,000,000 over 9 years is not enough for this greedy bastard. Stern has cut his big nose off to spite his face. The old contract is null and void or better known as terminated with the new contract. What an idiot!Stern has cost SIRI stockholders like me millions.

  • Report this Comment On March 23, 2011, at 12:31 PM, siriuslyrick wrote:

    joso1027, it would be interesting to see your definition of "talent." I have some very different descriptions of what Stern does and is.

  • Report this Comment On March 23, 2011, at 12:38 PM, Brent2223 wrote:

    Howard must still have some buddies short SIRI. This is just noise to move the share price around, why would he renew his contract, obviously without ever raising these concerns, if he felt ripped off? I officially think Howard is not worth the hassle anymore, it's becoming a distraction. He must not of thought he could do it on his own a few months ago and doubt anything has changed.

  • Report this Comment On March 23, 2011, at 12:46 PM, Turfscape wrote:

    And here we see the SIRI principle in action: Mention SIRI in any blog, comment or article and all hope for rational discourse goes out the window immediately.

    I believe there is actually an addendum to Godwin's Law that states something like, 'the probability of Godwinization of a conversation or thread increases exponentially with the first mention of SIRI and every successor thereof'.

  • Report this Comment On March 23, 2011, at 12:55 PM, joso1027 wrote:

    siriuslyrick....I'm not going to lie! I have been a fan since about 1987. In the entertainment/radio medium, wouldn't a "talent" be defined by someone that has an audience/fan base that generates revenue in advertising? No, we're not talking about a "talent" as in a musician playing in the philharmonic, or your favorite professional athlete, but he is a proven talent nonetheless. By your statement that he lacks talent infers that Sirius didn't know what they were doing when they signed him in the first place. And we all know where Sirius is today because of him.

  • Report this Comment On March 23, 2011, at 1:01 PM, dan9812 wrote:

    well all this talk about the downgrade form wunderlich but s&p said they are keeping there buy rating will settle, wont cost sirius too much

  • Report this Comment On March 23, 2011, at 1:02 PM, pondee619 wrote:

    joso1027 & siriuslyrick:

    Let's equate "talent" with draw. Does anyone have the number of XM subscribers who pay the extra monthly charge to get Howard? Does SIRI charge extra per month to listen to howard and, if so, how many do? Talant makes no difference. Draw does. How much in extra subscritpion fees does Howard rake in? That is the only gauge of his "worth".

  • Report this Comment On March 23, 2011, at 1:09 PM, joso1027 wrote:


    I don't disagree with your statement here 1 bit. If I had been an XM subscriber prior to Stern, I probably wouldn't pay the extra to Sirius. What I would do, is convert from XM to Sirius when my XM subscription was due to expire. SIRI does not charge extra to listen to Stern, as a Sirius subscriber. And I'm not sure, but I don't believe that SIRI charges XM subscribers just for Stern. Correct me if I am wrong, but doesn't Stern only come with the best of Sirius package as an XM subscriber?

  • Report this Comment On March 23, 2011, at 1:23 PM, dubyaisafairy wrote:

    what a low life prick he is. last time around i lost thousands of bucks on stock options as soon as "howard" signed on. it's the same thing repeating itself. howard is obviously making money off the fall in stock price. he did it before and he's trying to do it now. well, dude, i hope you have a good lawyer and an even better doctor as we aren't gonna just sit back and take your childish potty mouth crap this time around!

  • Report this Comment On March 23, 2011, at 1:35 PM, dubyaisafairy wrote:

    when someone gives you unacceptable crap then it's time for an ass whoopin'! Stern is no better than anyone else in this regard. He better hide out in his room or face the music like a man. I'd say there are several thousand folks that would like a piece of his ass. bend over howard and beg for another. it's gonna be a very long paddlin session...

  • Report this Comment On March 23, 2011, at 1:54 PM, siriuslyrick wrote:

    Since when is talent equated to making money? Stern may have a fan base, but that has nothing whatsoever to do with talent. Stern has an ability to shock people with crudity, and people with no class seem to like that, but ability and talent have nothing to do with each other. I suspect that there are many, many others who could do exactly what Stern does. And that of course is quite different from the Sirius model, where they have a monopoly on satellite radio and are quickly elbowing out the players in Internet radio too. That, in my opinion, has virtually nothing to do with Stern, and everything to do with quality, classy content almost everywhere else. Send Stern over to Pandorka, where he can die a natural death along with their IPO.

  • Report this Comment On March 23, 2011, at 2:38 PM, siriuslyrick wrote:

    joso1027 wrote "And we all know where Sirius is today because of him."

    Really. I thought Sirius is where it is today because of Liberty's help, because of excellent management, because of the wide variety of content, because of portability, because of the unique delivery model, and because of many other things that have nothing to do with Stern. It would be interesting to be able to go back and remove Stern completely from the picture to see how Sirius would be doing without him. Saying that he somehow "saved" Sirius seems to me to be a fabrication based upon a coincidence -- just like Stern's claim about adding to the subscriber base.

  • Report this Comment On March 23, 2011, at 2:39 PM, FM5 wrote:

    Replace him with Charley Sheen

  • Report this Comment On March 23, 2011, at 2:54 PM, joso1027 wrote:


    WOW!!! you really get tweaked by Stern! Coincidence? Maybe....just a lot of stars aligning all at the same time. And again, feel free to correct me if I'm worng, but was Liberty there during the Sirius/XM merger? I remember Liberty getting involved long AFTER the merger. Prior to the merger and prior to Stern actually coming on the air, what was Sirius' subscriber base? Then after Stern announced his signing with Sirius, what was it leading up to him being on the Sirius air? Again, coincidence? Maybe...with the amount of subscribers that XM had over Sirius prior to the merger, why did Sirius end up on top? Oprah Winfrey? There's $50 million down the drain. NFL radio? Most arguments that I have heard for Sirius vs XM was more for MLB and XM, not NFL and Sirius. So again, there really was only one common denomonator iin Sirius vs XM.........

  • Report this Comment On March 23, 2011, at 3:07 PM, siriuslyrick wrote:

    Yes, what was it? You didn't provide any numbers, and didn't give any rationale for your claim. So, exactly how many new subscribers signed up for Sirius DIRECTLY AND ONLY because of Stern?

    Tweaked by Stern? I couldn't care less about him in particular. There are much bigger issues.

    Given your "WOW!!!" above, I suspect that someone else here is "tweaked."

  • Report this Comment On March 23, 2011, at 3:09 PM, siriuslyrick wrote:

    And, to add to that, I have heard claims that some people deliberately do NOT subscribe to Sirius because of Stern. Can you quantify that at the same time, please? Thanks.

  • Report this Comment On March 23, 2011, at 3:21 PM, joso1027 wrote:

    is there a way to quantify Non-subscribers? And as far as people not subscribing because of Stern, that's just silly! With ALL of the content that Sirius has to offer, does that even make a bit of sense? As far as subscriber numbers, you are correct! I haven't given a single number to support my claim. I'm not really trying to do the research with regards to this debate. We could both do (or re-do) the research for that matter to see that there is some validity to my point. I'm not trying to sway anyone to see it my way, just stating how I see it with regards to Stern. At the end of the day, my point is very simple. Whether you are a fan of Howard Stern or not, he deserves some credit for the success of Sirius. I'm not trying to make you a fan.

    By the your original statement, you state "Stern had no class, has no class, and never will have any class....I've never listened to him, and never will..."

    Just out of curiosity, if this statement is true, how do you have ANY opinion about him without having ever heard him?

  • Report this Comment On March 23, 2011, at 6:12 PM, siriuslyrick wrote:

    People not subscribing because of Stern is silly? Really. Just as silly as saying that Stern is responsible for a huge increase in subscribers?

    Stern is a no-class no-talent dolt. I've never listened to Abe Lincoln either, but have managed to formulate an opinion about him. Guess how?

    Your little attempt at ad hominems failed.

  • Report this Comment On March 23, 2011, at 6:13 PM, snowpol wrote:

    I have 3 subs and smart phone app. I only listen to Stearn. I don't even like everything he does. I just put on my own music when there is some thing going on I don't care for. I can get everything I would want except Stearn from other ways. The couple people I know that have Sirius and say they hate Stearn, well I've caught them all listening to him. (several times) They were embarrassed to admit it for some reason. Average Stearn hater listens more than his fans. HAha Do you really think Sirius would have given him that much money if he wasn't worth it? Really? All you Stearn haters seem to be really angry people. Lighten up. He is the most honest person speaking on any media by far. Than more than anything is what the world needs more of. Enjoy whatever you like!!

  • Report this Comment On March 23, 2011, at 6:19 PM, OrionNebula wrote:

    Sirius!!!! Hold on, I need to go grab a beer. I'll be back.

  • Report this Comment On March 23, 2011, at 6:37 PM, siriuslyrick wrote:

    Actually, snowpol, I'm very happy, in fact jumping for joy that I don't listen to Stearn (sic, sic, sic) and never have. I agree with you about honesty (not when it comes to Stern, though), but what this world really needs is more class, and more respect.

  • Report this Comment On March 23, 2011, at 6:55 PM, joso1027 wrote:

    Now I am just finding humor in this. I didn't think that I was making any attack on anything whatsoever other than the basis for your statements. So, using your analogy of Abe Lincoln and how you know anything about him, I'm only left to assume that you either read both of Stern's best selling books, watched his movie, or heard from your friends at church about him, that probably never listened to him either but believe they know something about him as well. Extremely weak analogy, but I would think that Howard Stern would be excited to be equated to Abe Lincoln. Again, as previously stated, there only appears to be 1 common denomonator that put Sirius ahead of XM. I am not making a guess, it's not my personal opinion. Quite honestly, whether you like him or not, it's quite obvious.

    And, as previously stated, I'm not trying to sway you to being a fan. I'm just asking that you look at the statistical data and the history of the SIRI stock and how it corelates price to Stern. I guess it was a coincidence that the stock price went up within the same week that he announced his new contract.........pure coincidence and absoultely nothing to do with him. Also, if it was a waste of $500 million for Sirius to sign Stern in the first place, why did they re-sign him at all? Do all of the Stern haters here honestly believe that Mel Karmazin is clueless and doesn't know what he has in Stern?

    Once again, this is the point! Love him or hate him, he had a hand in the success of Sirius. Maybe not ALL of it, but he did have some part in it. And any comments with regards to him being talentless by people that have NEVER heard him is just silly banter.

  • Report this Comment On March 23, 2011, at 7:06 PM, siriuslyrick wrote:

    Again I ask, what statistical data? Please quantify what you are saying. Thanks.

    Oh, and please deomonstrate clearly how what you're posting is not just an example of the "post hoc, ergo propter hoc" logical fallacy.

    And the silly banter is from those who have heard him and claim that he has some sort of talent. I suppose that if ear and mind pollution is a talent, I might be persuaded.

  • Report this Comment On March 23, 2011, at 7:09 PM, siriuslyrick wrote:

    Okay, for a better analogy, I haven't ever listened to Jack the Ripper either, but I have managed to form an opinion about him too.

  • Report this Comment On March 23, 2011, at 8:43 PM, motleymarty wrote:

    Cannot believe all these comments re one radio personalty. How boring. Howard himself is probably posting - wouldn't doubt it. Yawn.

  • Report this Comment On March 23, 2011, at 9:43 PM, siriuslyrick wrote:

    And you just added to the number of comments...

  • Report this Comment On March 24, 2011, at 9:06 AM, ru4pat21 wrote:

    siriuslyrick and joso1027- the real question is if you would spend any $ on sirius stock right now and if you don't own any now, you don't even have the right to be talking

  • Report this Comment On March 24, 2011, at 10:52 AM, siriuslyrick wrote:

    ru4pat21, that is complete nonsense. We might disagree (and I clearly disagree with the opinion that Stern has some sort of talent), but we can talk all we want. Freedom of opinion is a fundamental right, so deal with it.

  • Report this Comment On March 25, 2011, at 10:13 AM, ru4pat21 wrote:

    siriuslyrick- you must not be reading the topic- It is wheather or not- Sirius should make HS. mad.

    That is all about $-not talent!Perhaps you should slow down when reading so the topic does not elude you.

  • Report this Comment On March 25, 2011, at 11:37 AM, siriuslyrick wrote:

    Oh, I get the topic all right. I was just responding to all the off topic comments that some people are making in order to try to rationalize their own behaviours.

    Speaking of which, I couldn't care less if Sirius makes How-wierd mad. The sooner the no-class no-talent creep disappers, the quicker Sirius will move toward a completely classy lineup.

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