CBS Can't Be Sirius

Morning-show legend and Sirius (Nasdaq: SIRI  ) star Howard Stern is used to being sued. His legal clashes with the FCC ultimately drove him from terrestrial radio to the less-patrolled satellite airwaves. Stern and his randy antics have been judicial targets in the past, but now his old boss is the one gunning for him.

In a story originally reported by the New York Post and later confirmed in a press conference by Stern himself, CBS (NYSE: CBS  ) is suing the talk show host to the tune of $500 million. Why? CBS charges that Stern signed with Sirius while still under contract to CBS' former parent Viacom (NYSE: VIA  ) , then spent the last 15 months of his contracted life on terrestrial radio pitching the services of his eventual satellite radio employer on the air.

The claims may be true, but CBS will be hard-pressed to emerge victorious. Stern was paid to pick apart his own daily life, and obviously his impending deal was going to come up often. More importantly, Viacom censored the show to keep the naughtiest bits off the air; they could have just as quickly bleeped out any references to Sirius.

CBS may feel that Stern's Sirius mentions over the last year or so helped further the cause of the fledgling satellite radio service, but that may not quite be the case. Since the deal was announced in October 2004, rival XM Satellite Radio (Nasdaq: XMSR  ) had signed up more new subscribers than Sirius. That only changed this past quarter, when Sirius lined up more new users for the period. Many of them came in over the holidays, after Stern was already off the terrestrial air.

But how silly does this make CBS? Going after Stern for the original value of his five-year deal with Sirius simply denigrates his CBS Radio replacements, who could use a little more corporate support. But it's equally brainless that CBS is giving Stern another crack at the national media stage.

Stern was already starting to settle in with his smaller Sirius audience. A Sirius investor might have wondered what Stern would have to do to promote his show to those outside of his satellite radio reach. Was taking shots at Oprah in recent weeks a tactical ploy to land him on her show? Would he give Larry King a good reason to have him on his show again? Where art thou, Jon Stewart and David Letterman?

CBS, in a move that game theory advocates will likely judge brutally idiotic in a few years' time, seems to have accomplished what Stern alone would have been hard-pressed to do. It just gave Stern new life. CBS presented him with a can of worms, then loaned him a can opener.

It gets better, though. Come Monday, CBS Radio will start airing a daily afternoon show with TheStreet.com's (Nasdaq: TSCM  ) Jim Cramer. The incendiary stock guru has been bullish on Sirius in the past. It's perpetually one of the most actively traded stocks, so you just know it's going to come up often during his show. Will CBS be able to sue Stern successfully if one of its own hires is pitching Sirius at the same time? You can't gag Cramer any more than you can muzzle Stern.

CBS is getting itself into a legal tangle it will be hard-pressed to win, and empowering its target along the way. Can you believe it?

A clip of Howard Stern's dad chastising a young Stern gets played often during Howard's show.

"I told you not to be stupid, you moron!"

If the sound bite fits, CBS, blare it.

Rick is a fan of satellite radio and has been a Sirius subscriber since 2004. He also recommended XM toMotley Fool Rule Breakersnewsletter subscribers last year, based on the prospects of the promising satellite radio industry. He does not own shares in any of the companies in this story.The Fool has a disclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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