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330 Million Reasons to Like Sirius XM

By Rick Munarriz - Apr 12, 2013 at 5:15PM

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The satellite radio provider comes up victorious -- again -- in a big lawsuit.

Sirius XM Radio (SIRI 0.83%) has won the latest legal tussle with its most magnetic on-air personality.

A New York state appeals court is standing by a trial judge's earlier ruling to toss out a $330 million lawsuit spearheaded by Howard Stern.

Stern's camp contends that his original contract featured subscriber bonuses that should have included the additional subscribers that Sirius gained when it acquired XM. The total compensation that Stern and his production company were seeking was $330 million.

On the surface, it was a ludicrous claim. Why should XM subscribers count toward Stern's appeal? Stern's two channels aren't even available on the standard XM package. If anything, an XM subscriber could be interpreted as a vote against the occasionally outrageous but insanely popular morning show host.

However, one can also rightfully argue that Sirius combining with XM -- with the then-smaller Sirius calling the shots -- wouldn't have been possible without Stern. His presence validated satellite radio in general and Sirius in particular.

Shareholders are naturally going to be pleased with the decision. Even if they're fans of Stern, a reward of that magnitude would've been brutally dilutive to a media giant that already has way too many shares outstanding.

What was Stern's on-air reaction? Well, there wasn't one. He's off the air today. He's not doing as many live shows as he was during his earlier terrestrial years. However, if he does decide to rant against Sirius XM on the air when he does return, would that be so bad? It would be good radio.

Stern is nearly halfway through his second five-year deal at the satellite radio provider. He has suggested that there won't be a third deal, and that seems even less likely these days as he pursues television opportunities and settles in on an early retirement while he can still enjoy it.

Sirius XM naturally will want to make sure that it's able to replace him come 2016. The market for premium audio has never been stronger, but it's also growing more competitive.

The Verge is reporting that Apple (AAPL -2.46%) negotiations with Universal Music Group -- the largest of the major labels -- are in the final stages. An Internet radio licensing deal could be in place as early as next week, giving Apple the long overdue leeway to enter into the music discovery and on demand streaming markets.

This isn't necessarily a threat to Sirius XM, for now, but it's one more reason why the premium radio leader needs to stock up on proprietary content -- anchored now by Stern -- to compete against cheaper Web-based offerings that are a mere trickle now but will soon be a deluge.

Thankfully, Sirius XM won't be $330 million poorer as it tackles Apple and everybody else.

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Stocks Mentioned

Sirius XM Holdings Inc. Stock Quote
Sirius XM Holdings Inc.
$6.09 (0.83%) $0.05
Apple Inc. Stock Quote
Apple Inc.
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