A gargantuan lawsuit that commanded business and entertainment headlines just months ago was settled rather unceremoniously last week, when CBS (NYSE:CBS) agreed to drop its case against radio host Howard Stern. The agreement's terms lend some credence to claims from Stern and many legal experts that CBS's legal attack had little foundation. The deal will give more than bragging rights to Stern, though, since it involves an exchange of assets that seems likely to strengthen the content of Stern's new employer, Sirius Satellite Radio (NASDAQ:SIRI).
The publicly released portion of the settlement calls for Sirius to pay CBS $2 million to settle the lawsuit. However, The Washington Post notes that the wording of the deal may mean CBS will receive additional payments from Stern himself -- payments that won't be made public. Whatever the case, CBS's decision to settle out of court suggests that the total amount rendered will be well below the $200 million-plus in damages that the network had sought in filing the suit.
More importantly, Stern will gain control over a valuable asset from CBS in exchange for the payments: As part of the deal, CBS will surrender its rights to 20 years of master tapes of Stern's CBS radio shows. It's not clear how these tapes will be used, but since Sirius' $2 million contribution goes toward paying for these rights, there's a good chance that the material will be integrated in some way into Stern's programming at the satellite radio company.
If so, this old content would provide Sirius with a rather strong selling point for former Stern listeners who haven't yet signed up for satellite service, since Stern surely would enrich his current show by the selective use of old material. But with so much content and a lot of airtime at his disposal, Stern probably would do more than that. He could, say, dedicate a time slot to replaying old classics, or have a call-in request show for past bits. That could provide Sirius with a whole new sales pitch -- Lots more Stern for the same (at least for now) price. With this move, Sirius is only strengthening its edge over competitors such as terrestrial radio and rival XM Satellite Radio (NASDAQ:XMSR).
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
