SiriusXM (NASDAQ:SIRI) found itself in an unenviable position last week when Anthony Cumia, co-host of the popular Opie & Anthony show, went on a Twitter tirade that the company called "hate-filled" against an African-American woman he alleged attacked him the morning of July 1.
The company decided to part ways with Cumia in an effort to avoid backlash from listeners, its advertisers, and other on-air talent. But it also got an ugly protest from Cumia's fans who canceled their accounts in support of the embattled host. More importantly, the move also will make it more difficult for SiriusXM to attract the on-air talent that can differentiate the service in an increasingly crowded music marketplace.
A company dependent on unique content
With more than 20 million subscribers and $3.8 billion in revenue, SiriusXM built its reputation as a bastion of free speech, as its non-music programming is not subject to FCC regulations.
Hiring people like Opie & Anthony and Howard Stern, popular hosts known for outrageous stunts, non-FCC complaint language (i.e., cursing), and controversial views, showed the company as a place where the medium's elite talents could be themselves, free of programming restrictions.
By firing Cumia for comments made off the air and on a social media account where followers had to opt in for his commentary, the company showed it would bow to societal pressure instead of backing a 10-year employee that the company paid a reported $3 million per year. Other premium talent will see this action and likely look for other options, such as starting their own podcast or UStream Channel.
The approach it should have taken: Let the comments blow over, publicly reprimand Cumia, but in the end do what it takes to keep him without angering those who might be offended. Chances are in a week or two this scandal would have blown over.
Music no longer a draw
Having talk talent will be key to SiriusXM in the future -- with so much free competition on the music side, fewer people are subscribing just for that. When the company launched, it provided listeners with a platform to hear a huge variety of music -- not just the Top 40, country, and other genres that were readily available on terrestrial radio. SiriusXM offered homes for everything from hair bands to Motown to contemporary jazz and all the listeners that loved that music.
Now, a listener can simply put the type of music they like into Pandora or Spotify on their smartphone, plug into their car stereo, and listen to anything they want – without paying XM's $18.99 monthly subscription fee. This change makes exclusive content, like Opie & Anthony, more of a premium and incentive for listeners to subscribe. Without content like this, and that from other talented talkers, SiriusXM faces an uphill battle to bring in and retain paying customers as the music game is becoming less and less a buying point for consumers.
Entering the podcast world
For Cumia's part, he's already moving on from the company and taking his show online. In an interview with The Wire, he said he'll do a show from his home studio, where he's hosted an occasional web show for years, and come up with a subscription model.
The show's most vocal fans have already promised to follow him wherever he goes. As for his co-hosts, Gregg "Opie" Huges and Jim Norton? They are under contract until October, so they are staying put for money reasons. But some believe that when their contract is up they will be moving on and rejoining Cumia on a new venture. Other talents such as Adam Carolla and Marc Maron have already proved that the podcast game can work for their career. It's safe to say that for a proven brand such as Opie & Anthony, the transition could be successful.
The reality is that some customers would cancel their accounts if Cumia were kept on the air, but that was collateral damage. The company faces a harder battle by firing him. This kind of behavior will stick with other famous talkers and show hosts. By trying to protect itself, SiriusXM has done more harm than good. The reality is, it needs talents like Anthony Cumia more than he needs them.
David Stegon has no position in any stocks mentioned. The Motley Fool owns shares of Sirius XM Radio. 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. The Motley Fool has a disclosure policy.