Maybe Howard Stern really is the king of all media.

This morning's New York Daily News offers up what most Stern fans have known for years. "Howard Stern has proven irreplaceable on radio," it begins, chronicling the terrestrial-radio destruction left in the wake of Stern's departure from the FM airwaves at the end of 2005. The flagship Stern station went through several uninspiring replacements before finally converting to a music format.

This has naturally blessed Sirius XM Radio (NASDAQ:SIRI). Stern’s arrival at Sirius in 2006 triggered a shift in power. Sirius was much smaller than XM at the time, but Stern's arrival found Sirius closing the gap with every passing quarter. Few will argue with what I'm about to say next: If Stern had gone to XM instead of Sirius, we would be talking about XM buying Sirius -- and not the other way around -- for a much kinder exchange ratio right now.

So why do some people question the merit of signing Stern to a five-year deal worth $500 million? Yes, it's a lot, but he has certainly earned it. You can't blame him for the company's weak financials and cumbersome debt. He was brought in to ramp up subscriptions, and he certainly did that.

The New York Daily News article offers up a history lesson, but it's also one that Sirius XM will have to bone up on soon. Stern's contract concludes at the end of next year.

How much will it take to retain Stern's services? Will it be more or less than $100 million annually?

Let's look at both sides of the argument. One can argue that Sirius XM has a few aces in its hand to drive down that price, even as Sirius XM has grown to a whopping 19 million subscribers.

  • Terrestrial-radio heavies like Clear Channel and CBS (NYSE:CBS) are weaker now than they were a year ago.
  • Sirius merging with XM means that the two satellite-radio services won't be bidding against one another.

The flipside to the argument is that Stern may have more options than the obvious.

  • The evolution of Web radio and the multitude of portable gadgets that will hit the market in the coming years make it quite feasible that Stern could break out with his own subscription product.
  • More to the point, instead of competing with terrestrial radio, the real battle may be with digital delivery powerhouses like Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), or possibly even Google (NASDAQ:GOOG).
  • We may never know how many of Sirius XM's subscribers came over only to follow Stern, but just knowing that they may follow him off satellite radio can be troublesome to Sirius XM's subscriber base growth.

It's hard to say who has the upper hand here, though one would think that Stern has the edge. If he decides to stay with Sirius XM, he may even opt to keep the renewal short, to give the market changes a little more time to evolve to the point where he can make more money elsewhere.

Either way, while it seems that most of the non-sports talent acquired by Sirius and XM over the years is truly replaceable -- and that includes Oprah Winfrey, as retail subscriptions have trickled consistently lower since her arrival -- Stern is the most important person at Sirius XM.

Sorry, Mel Karmazin. Even you know it has to be true.

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