If Howard Stern Leaves, Will Sirius XM Survive?

If Howard Stern follows through with his threats to leave or retire when his current Sirius XM (NASDAQ: SIRI  ) contract expires, his departure would be a crippling blow to the company. Even if he decides to sign on for a few more years, the extremely popular host just turned 60 and has often said he won't be like Don Imus or Larry King, clutching a microphone until he is dragged away from it. So, whether it's 2015 or a few years later, Sirius XM has a huge problem on its hands.

When Stern joined the then Sirius Satellite Radio in January 2006, the struggling company had 600,000 subscribers. Now, having merged with rival XM, the combined Sirius XM, in its fourth-quarter financials, claimed 25.56 million subscribers.

And though the company does not release ratings for any individual channel, a large amount of its paying customers listen to Stern primarily, if not exclusively. In fact, back when Stern was making news about leaving rather than take a pay cut from his rumored $100 million a year salary, Forbes reported that 60% of Sirius' audience listened exclusively to the controversial talker.

Even if that number was an overestimate or has fallen as Sirius XM has grown its subscriber base, the potential subscriber loss from a Stern departure could mean a stunning business hit. With a mid-priced Sirius XM subscription costing $14.99 a month, a loss of 1 million subscribers would mean $14.99 million a month or $178.8 million a year -- a huge loss even when you subtract Stern's salary.

If only a million subscribers leave with Stern, the blow is manageable. If the number were considerably higher -- and there are strong reasons to expect it would be -- the news could destabilize the company. Unlike in television, where the next hit is always potentially one pilot season away, there are no short-term solutions in radio.

Stern's current deal expires in December 2015 and, if you believe the radio hosts persistent on-air rants, he could go to a pure Internet play or simply retire. When the host took his show to Sirius from terrestrial radio, the stations he was on tried a number of alternatives, including David Lee Roth, Adam Carolla, and later, younger Stern knockoffs Opie and Anthony. None of those shows succeeded. The David Lee Roth Show earned a market share of 1.8% in January 2006, down from the 7.9% Stern attracted the prior month. Today, Roth is back fronting Van Halen, Carolla hosts a successful podcast, and Opie and Anthony have a dramatically lower profile than Stern's channel on Sirius XM.

The flagship terrestrial stations that aired Stern's show not only struggled to replace him, many of them had to change formats, in no small part due to his departure. Stern's flagship, New York's K-Rock even had to dump its rock format and move to Top 40. In Boston, Stern's station WBCN, one of the most iconic rock stations in the country, simply went away. 

The New York Daily News reported in 2009 that when he left for satellite in 2006, CBS Radio's (NYSE: CBS  ) then-CEO Joel Hollander estimated Stern generated an astonishing 10% of all CBS Radio revenue. According to the same Daily News article, that number was even higher at K-Rock -- the last couple of years Stern was there, the station collected more than $50 million in ad revenue, and finance people said about 75% was from Stern.

Will people cancel?

One of Sirius' strongest attributes is that it has had a very low monthly churn -- losing just 1.9% of subscribers per month in 2012, the last full year for which results are available. That number is especially impressive when you consider it takes into account people who get a free subscription with a new vehicle and must choose to stay a customer and pay after the trial period.

Still, with so many of its customers fans of Stern more than of Sirius XM, you have to imagine there will be a large migration if he leaves. That number would likely be much greater if Stern decided to stay on the air, but move his show elsewhere. Both Yahoo  (NASDAQ: YHOO  ) and Apple's (NASDAQ: AAPL  ) iTunes were rumored destinations when his contract was last up. It's also possible that Stern, who has famously butted head with his bosses at pretty much every stop on his career, will simply partner with a company on the technical side and take his show to the Internet under his own flag.

Alternative hosts

Sirius has thrown money at a number of celebrities including Oprah Winfrey, who Stern famously ranted about as she received $18 million a year (according to The Hollywood Reporter) for a deal where she appeared on the channel in an original show for just half an hour a week. Martha Stewart also got millions for her now defunct channel. And channels branded to Maxim and Cosmopolitan magazines have come and gone.

Realistically, as was proven when Stern left terrestrial radio, there is no one person or even group of hosts who can fill his seat. The best bet for Sirius, if Stern were to retire, would likely be to keep his two channels -- Howard 100 and Howard 101 -- on the air with a mix of repeats (the company will own more than 30 years of shows by 2015) and new programs featuring various Stern sidekicks.

If Stern stays on the air, it's unlikely his audience would stick around for the Gary "Baba Booey" Dell'Abate show or even for sidekick Robin Quivers, and it's unlikely any of Stern's main cast would ever desert their boss.

But if Stern hangs up his mic, perhaps Sirius XM could entice him into an ongoing relationship by employing his crew (whose post-show futures he has often worried about on the air). Howard 100 and Howard 101 without new Stern shows would not be the same, but having the channels with new programs from familiar people in the Stern universe may very well stop the subscriber bleeding.

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Read/Post Comments (17) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On January 15, 2014, at 2:21 PM, indycolt17 wrote:

    It's gonna happen sooner or later. I'd be interested what the breakdown is for the different packages to at least guage how many will be impacted with his departure. My 'family premium' sub does not include Stern so I know at least a few of us will not feel any pain.

  • Report this Comment On January 15, 2014, at 3:00 PM, jojopuppyfish wrote:

    As a longtime fan, my guess is Sirus/XM would lose 3 million listeners.

    There is so much to offer on the other channels.

    Plus he alienated many listeners by going to 3 days a week.

    And when he goes, there will be no one to replace him.

  • Report this Comment On January 15, 2014, at 3:24 PM, gearhead305 wrote:

    Of course, who cares? With Liberty buying SIRI, by the time he leaves, we won't care.

    Gearhead

  • Report this Comment On January 15, 2014, at 3:29 PM, willi234 wrote:

    Stern's been like Don Imus for several years now... he just doesn't even know it. He's lost all relevance (and listener's) for a long time now with very few live shows and almost continuous vacations. (at least Imus manages to show up) His departure would be a boon to the Sirius-Xm bottom line, and also the shareholders. It would free up 2 wasted channels also. Most don't subscribe for Stern anymore and as long as the content keeps improving on the other channels the company should move ahead; possibly even faster.

  • Report this Comment On January 15, 2014, at 3:53 PM, Guggerpaul wrote:

    Creepy old man

  • Report this Comment On January 15, 2014, at 4:13 PM, Mgrana wrote:

    Howard Stern is bigger than the NFL and all the music channels combined. He forced XM to merge with Sirius. I will sell my shares when he leaves. No one can replace him.If he goes to Pandora or Apple bye bye Sirius.

  • Report this Comment On January 15, 2014, at 4:23 PM, swswanso wrote:

    Covino and Rich on Sirius 104 > Opie and Anthony...

  • Report this Comment On January 15, 2014, at 4:46 PM, fawazmn wrote:

    Get Rush Limbaugh on SIRIXM in 2016, we will add another 1Mil subscribers. His salary will pay by itself.

    Dont forget, before the SIRIUS XM merger, XM already had 8miliions subsribers and they didnt have access to Stern on SIRIUS.

    Stern is thing of the past. I hardly know anyone who listens to him. Let him go and bring in crazy Rush Limbaugh.

  • Report this Comment On January 15, 2014, at 6:06 PM, ddeleo wrote:

    It's hard for me to believe that of the 2 million subscribers gained last year and the 1.5 gained this year that so many did it because of Stern. Pandora and Apple itunes people are generally younger people who could care very little that Stern joined. On the swing side I'm 56 and don't know of anyway who listens to him. I suspect people who listen to Stern today have discovered since the time they signed up other cool channels on Sirius. Which is the whole point of Sirius, its not just one thing.

  • Report this Comment On January 15, 2014, at 6:15 PM, howiekap wrote:

    I am 62 years old and have been a Stern fan since he began in NY on WNBC. Lots of people I know around my age listen to him. I will continue to subscribe after he leaves - Sirius has a lot to offer - like the ability to listen across the country.

  • Report this Comment On January 15, 2014, at 8:18 PM, talkjames wrote:

    So excited that "The Fool" posted a negative SIRI article today. This means SIRI will raise the roof tomorrow. GO SIRI!

  • Report this Comment On January 15, 2014, at 9:22 PM, BillFromNY wrote:

    "Will Sirius Survive?"

    So dramatic. It's been eight years since Howard came and almost two years more before he leaves.

    Getting most new subscribers through new car sales, and with more upscale new cars, I don't think Howard is much of a determining factor any more.

    It will cost them maybe a million existing subscribers, which will hit them at the top and bottom line, but certainly they'll survive. New subscribers shouldn't be affected much. By now all Howard fans are aboard.

  • Report this Comment On January 15, 2014, at 9:45 PM, djplong wrote:

    Stern leaving will deal a crippling blow? Talk about drinking the Stern Kool-Aid. I don't even think STERN thinks he's THAT important! Stern came on board almost 10 years ago. Those listeners who subscribed just for him did so almost 10 years ago. People who are subscribing now DON'T CARE about Stern. They care about over a HUNDRED commercial free music channels. They care about EVERY football, baseball, basketball and hockey game broadcast along with innumerable college games. All the talk, the news, the comedy.. Oh - and those music stations? How about genres that are not played over the air ANYWHERE in the country!

    There's not one iota of a statistic backing up the allegation that Stern's departure would deliver "a crippling blow".

  • Report this Comment On January 16, 2014, at 4:37 AM, zukerman wrote:

    It doesn't appear to be such a daunting task to find two channels that would appeal to the subscribers and sell ads on them. Back in the day it was amusing to listen to material that you couldn't get anywhere else, now that isn't the case. Those that threaten to leave wont kill Sirius, but his channels do bring revenue that will need to be replaced. Sirius will swing some kind of deal to keep him there for a few hours a week.

  • Report this Comment On January 17, 2014, at 5:33 PM, emannyc2002 wrote:

    do you just recycle this 'if howard leaves' article every time his contract comes up ??? or do you actually rewrite it?

  • Report this Comment On April 01, 2014, at 6:30 AM, markstomarks wrote:

    There really are foolish questions so back in College when professor told us no such thing as a dumb question he was wrong!

    If Stern leaves SIRI it would be two things; a huge mistake for him but great news for SIRI since SIRI is becoming the most powerful on earth and last it needs is Filthy and idiotic Howard. Just the fact the ugliest looking person in America leaves would help. No wonder he wears sunglasses in the dark, we all need blind folds if he came through and that voice! I heard it a few times in the 90s and was so turned off and by the black woman that was his backup that I almost threw-up.

    Seriously people; it does not matter who leaves and who comes on because SIRI has fox and CNN and the rest combine beat going forward and the stock is going to be a $50 stock in a year or two in my opinion based on the amount of money it is making and how the debt is long term and will easily be paid off and if not mistaking here, SIRI is doing stock buybacks which is going to squeeze shorts and cause value of shares to tripped quickly from current prices. The percentage increase in share price will not be from the 20 cents per share and lower I paid some years ago right away but it sure is going to near 10 bucks soon and in 2015 to $30 and the following year should hit 50 bucks in my opinion so to not buy for me would be foolish if not insane so I will be adding shares and am already long.

    JMO and one of someone with experience in stocks which is me of let's see, 1980 did my first trade in the markets so that is now 34 years experience and why I see AMD, ANR, and even ELNK doing well but AMD and ANR very well with ANR the best. AMD to 20, ANR to 40, ELNK to 12 with SIRI to 50 imo so will add to all of those and many others.

    Good luck everyone

  • Report this Comment On April 01, 2014, at 6:34 AM, markstomarks wrote:

    Really everyone, this article had dumb question.

    SIRI needs Howard like a leech imo. He wants too much money for his dumb shows and he is just getting losers to watch and creating more losers imo What can one learn from his show? What kind of entertainment is it when there is free porn with good looking guys and women? I don't watch porn since I do my own at bedtime with my spouse and last I need is to hear Howard the freak. I hope he leaves company I am invested in. He is problem of the States and part of the sign of our downfall in culture where people are sex crazed, violent and dumb.

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