Is the self-appointed "King of All Media" also the king of all markets? Terrestrial-radio deserter and wickedly popular morning-show radio host Howard Stern helped Sirius (NASDAQ:SIRI) close the subscriber gap with market-leader XM (NASDAQ:XMSR) for the third quarter in a row. In the second quarter, which ended last week, Sirius claims that it landed 600,460 new subscribers, while XM generated just 398,000 net additions.

XM can't sugarcoat the disparity. It's true that XM still commands the larger audience. The company closed out the quarter with 6.9 million subscribers, while Sirius totalled 4.7 million. Even if XM's subscriber count remains stagnant over the next few periods -- highly unlikely, of course -- Sirius wouldn't catch up until the first half of 2007.

The problem is that this is a momentum game, and at the moment, Sirius is the one behind the wheel. It was able to land 64% more net new subscribers during the period than it did a year earlier. Over at XM, the company suffered a 38% slide in net new additions, after claiming 640,000 new sets of ears in the June quarter of 2005.

XM is still growing -- reporting net new additions, not subtractions. That doesn't take away from the one thing that's now becoming painfully -- or gloriously -- obvious: Howard Stern is bigger than even he thinks he is.

Hugh blew it
When Sirius agreed to a five-year deal with Stern, a stock-and-cash pact valued at $500 million at the time, XM CEO Hugh Panero was critical of the amounts being bandied about for the sometimes-controversial host. David Gardner interviewed Panero last year, and this is what he had to say:

I don't know if it is a good move for Sirius. It is clearly a very good move for Howard Stern. He is a smart guy, and he has obviously done a deal that is very good for him. I think that there will be a number of his hardcore fans who will subscribe to listen to him in that environment.

Whether it is a good business deal, I think time is going to tell. It is a lot, a lot of money. I had also spoken to Howard and some of his people, and there was some interest in us doing some sort of a deal with him, but I never, ever contemplated a deal of that magnitude. That is more money than people like Oprah Winfrey make. That is more money than some of the biggest stars that exist. It is quite a gamble, but it was clearly a very good business deal for Howard Stern.

In retrospect, Panero was wrong. Since the day the deal was announced, shares of Sirius are only trading marginally higher; that still tops XM, which has seen its shares nearly halved in the same period. It's interesting to note how Panero singled out Oprah, a broadcasting celebrity with whom XM eventually teamed up to create a new XM channel debuting this fall.

Along the way, we've had downward subscriber revisions, troublesome product rollouts, and a defecting Chicken Little board member. Investors keep waiting for the other shoe to drop at XM, only to realize that XM is really Imelda Marcos in disguise. Boy, Stern would have been really convenient about now. Would we even still be in a duopoly if Sirius had let Stern slip through its fingers and into XM's hands?

We can argue about Stern's merits until we're blue in the face -- and I don't mean the FCC's definition of "blue" here. Whether you think he's brilliant or a potty-mouth, the numbers don't lie. Consumers have been choosing Sirius over XM since Stern made his media blitz over the 2005 holiday season.

Stern is the not-so-secret ingredient behind Sirius' killer recipe. I subscribe to both XM and Sirius. I love both. XM has more channels, with a lot of content overlap. You'll get a wide range of opinion on who has the best music channels, but both services are excellent substitutes to old-school radio. One can argue that XM's deal with Major League Baseball and Sirius' pact with the National Football League make each offering distinctive, but that's also what makes Sirius clobbering XM here so Stern-driven. We're waist-deep into the baseball season and a couple of months away from the start of the NFL games. All things being equal, XM should have smoked Sirius this quarter.

Eighteen months ago, I made a pretty ridiculous prediction. XM was trouncing Sirius, yet I proclaimed that Sirius would land more net new subscribers by the fourth quarter of 2005. It seemed outlandish at the time, but I was spot-on accurate. I'm off to hock my crystal ball, though. A year later, I predicted that XM would regain the new-listener lead in the second and third quarters. Not even close.

Another shoe tumbles
This doesn't end here, of course. Anyone with a calculator and a penchant for train wrecks can see that XM may let us down one more time. Back in May, XM announced that it intended to close out the year with 8.5 million subscribers. It had originally planned to end 2006 by lapping the nine-million mark.

On the other hand, Sirius expects to wrap up the year with 6.2 million subs. In other words, over the next six months, XM expects to land 1.6 million more net new users, with Sirius projecting just 1.5 million net new subscribers.

How? If the baseball-charged second quarter didn't do it, how will XM outmuscle Sirius when the playing fields of choice go from diamonds to gridirons? XM will have "its Oprah moment" in a few months, but that's a wildcard, since Oprah's emphasis will remain with her syndicated television show.

What would it take for XM to avoid another heartbreak? Will next month's earnings report bring that 8.5 million year-end target to a round 8 million, or will announcement come in early October instead?

Things don't have to be that bleak. As logic goes, the more time that Stern spends entrenched in satellite radio and away from the mainstream spotlight, the less of a factor he becomes in moving new receivers. True Stern fans would have made the migration already. But the strong second quarter, months after Stern's first show for Sirius, throws that theory into the wood-chipper.

Maybe the thinking is that XM stars Opie & Anthony, pioneers in taking their controversial morning show to satellite radio, will be successful ambassadors. XM began syndicating part of the show to Stern's former haunt at CBS (NYSE:CBS). If lightning can be caught in a bottled-up radio show twice, XM may be on to something. But the early XM migration numbers don't seem to have panned out that way.

I still believe in XM. I even recommended the stock to Rule Breakers subscribers last year. I'm realistic, though. A year ago, I was wondering why XM had a lower market cap than Sirius. Now I understand. Still, XM's attractive valuation, and the upside potential of the niche, keep me glued to the possibilities.

Stop dropping shoes, XM. And if you've got platform shoes in there, try them on. We can all use the lift.

Rick recommended XM to Rule Breakers subscribers last year. The stock is currently in the red, though the average newsletter service pick is currently beating the market. See David Gardner's full list of growth-focused picks with a free 30-day guest pass.

Longtime Fool contributor Rick Munarriz is a Sirius and XM 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.