XM's Crossover Hit

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The radio arm of CBS (NYSE: CBS) may be going for something borrowed and something blue to help save its struggling morning show programming business. After failing to score in key markets when Howard Stern bolted for Sirius Satellite Radio (Nasdaq: SIRI) in January, CBS is supposedly in talks with XM Satellite Radio (Nasdaq: XMSR) in a crossover deal that will find the new- and old-school broadcasters sharing the randy morning show duo of Opie & Anthony.

In a story that was initially reported in yesterday's Philadelphia Inquirer and followed up on by Forbes and Reuters, the same tandem that was booted from CBS-owned radio stations is coming back for a two-year deal to help rescue CBS from its morning syndicating woes.

It's going to be a tricky balance for all parties involved. Supposedly, Opie & Anthony will continue to do a five-hour, uncensored show on XM, with a bleeped-up, three-hour chunk being delivered to the CBS markets in need, like New York City and Philadelphia.

By losing its exclusivity on Opie & Anthony, XM better be richly compensated. One of the reasons Stern has been such a successful draw on Sirius -- with Sirius landing more net new subscribers over the past two quarters than the larger XM -- is that you can't hear Stern's morning show anywhere else but on Sirius. With Opie & Anthony back on free ad-subsidized radio, few may be willing to pay a premium to XM for a shot at going behind the beaded curtain to hear the two work dirty.

That's because folks aren't flocking to Sirius to hear Stern work blue. As conventional radio stations like CBS and Clear Channel (NYSE: CCU) that once carried Stern's show can painfully attest, even a shackled Stern was a major draw. Radio fans are turning to Sirius because it's where they can hear Stern, period. Some may argue that XM's visibility may improve with Opie & Anthony as satellite-radio ambassadors on free radio, but I don't see that. Unless the plan is to grow the reach of Opie & Anthony's notorious wingspan over the next two years in order to have a more popular XM-exclusive product after that, this kind of deal finds CBS with everything to gain and XM with everything to lose.

XM needs to focus on building a better moat, and that means more exclusive content. It had no choice but to share Oprah Winfrey with the larger television audience, but Opie & Anthony are a different case entirely. Sharing the risks devalues the product when something so much more than a free sample at a mall food court is being dispensed. Why lend a hand to a competitor slowly sinking in quicksand? If it isn't a fair trade, don't you dare sign on that dotted line, XM.

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Longtime Fool contributor Rick Munarriz is a Sirius subscriber, but he does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.