It didn't take long. Just days after Howard Stern began his five-year tenure at Sirius Satellite Radio (NASDAQ:SIRI), pirate radio stations and renegade websites with names like hearhoward.org and hearhoward100.com began streaming taped broadcasts of Stern's live show. Sirius and Stern's production company have wasted no time in sending out cease-and-desist letters to shut down the rebellious transmissions.
Of course, pirating Stern is nothing new. During his terrestrial-radio life, folks swapped files of his syndicated Viacom (NYSE:VIA) morning show to others who lived in markets that didn't carry the provocative program. But in contrast to today, doling out copies of the show wasn't necessarily condoned or condemned back then. It was just a renegade's way to thumb a nose at station owners like Clear Channel (NYSE:CCU) that buckled under FCC pressure and pulled the popular show in select markets.
It wasn't exactly a victimless crime, though one would think that Viacom advertisers would have relished a wider distribution of their message. Things are different now, though, since fans are paying $12.95 a month for access to Stern's show and the rest of the ribald content on Sirius' two Howard Stern stations. If the show leaks out for free, fans would have little incentive to keep paying. So Sirius and Stern have gone from being the edgy alternative in satellite radio to an enforcer and protector of intellectual capital.
That's how it has to be if Sirius and XM Satellite Radio (NASDAQ:XMSR) are going to sign up more than the 9 million subscribers they have now. (Sirius has 3.3 million of those aficionados.) Patching up the pirated leaks will also pay off as Stern grows his empire through premium radio offerings and an In Demand channel for video content priced at $9.95 a month. Look at it this way: If water fountains started spewing Coca-Cola for free, no one would line up to buy it bottled.
Yes, I'm a Sirius subscriber, but even if I weren't, I would understand the gravity of the situation. Sirius' shares have tacked on nearly $4 billion in market cap since Stern announced his defection from terrestrial radio, and a lot of that jump is based on the extent to which current and future subscribers value Stern at a premium.
The fix is also critical to satellite radio, an industry that has the potential to grow above and beyond the current $14 billion that the XM-Sirius duopoly is now fetching. That growth potential is the reason XM stock was recommended to Rule Breakers subscribers last year.
So handle Stern carefully. A burgeoning industry is counting on him.
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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. T he Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
