Sirius Hits a Target, and Pays Stern $83 Million

Sirius Satellite Radio announces that it will pay Howard Stern an $83 million bonus. The bonus, part of Stern's 2004 contract with Sirius, was triggered by the company's rise in subscribers for 2006. But in spite of Stern's help in growing Sirius' subscriber base from 600,000 to 6 million, the company continues to lose money. Its stock lost 40 percent of its value last year.

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MICHELE NORRIS, host:

This is ALL THINGS CONSIDERED from NPR News. I'm Michele Norris.

ROBERT SIEGEL, host:

And I'm Robert Siegel.

Sirius Satellite Radio is bullish on Howard Stern. The shock jock has just been given stock options valued at nearly $83 million, thanks to the booming number of subscribers from the satellite service.

But as NPR's David Folkenflik reports, profits at Sirius remain elusive.

DAVID FOLKENFLIK: Flick through Sirius Satellite Radio's offerings, and you can hear almost anything.

(Soundbite of music)

Unidentified Man: …and the third one, when he was on block and had them four yards in backfield, and they threw a 37-yard touchdown…

(Soundbite of song, “Magic Bus”)

THE WHO (Rock Band): (Singing) Too much, the Magic Bus.

Unidentified Woman: So, I can't (unintelligible). Because, you know it's my birthday. Let's party like a rock star.

(Soundbite of music)

Unidentified Man: (Rapping) The captain (unintelligible) Old MacDonald, so it…

Mr. HOWARD STERN (Radio Talk Show Host): …it is our one-year anniversary…

FOLKENFLIK: And then came that last voice, Howard Stern. On old-fashioned, terrestrial radio, Stern spent decades attacking the boundaries of taste and of federal broadcast law. Sirius gave Stern a deal worth $500 million in cash and incentives to walk away from FM radio and to revive its own flagging fortunes.

Mr. JAMES GOSS (Senior Investment Analyst, Barrington Research Associates): Sirius was probably in a short lifeline. But once Howard Stern came along, it made it at least to two horse race within the satellite radio part of the world.

FOLKENFLIK: That's James Goss, senior investment analyst for Barrington Research Associates in Chicago. Rival satellite provider XM had a big lead -thanks to its early deals with the auto manufacturers - to install its receivers into new cars.

Mr. GOSS: Sirius stole the thunder a lot last year with Howard Stern. And XM has been struggling somewhat to catch up.

FOLKENFLIK: XM still has a slightly larger subscriber base, but more than 6 million people now pay for Sirius, and that's a huge increase. When Sirius announced it was hiring Stern back in 2005, there were just 700,000 Sirius subscribers. Mark Fratrik is a senior vice president for BIA Financial Network, a media consulting company. He notes that neither XM nor Sirius is profitable yet, and Fratrik gives this warning.

Mr. MARK FRATRIK (Senior Vice President, BIA Financial Network): I think the growth will slow down noticeably.

FOLKENFLIK: Fratrik says people just aren't as willing to pay for satellite radio as they are for cable and satellite TV, in part because there are other ways to get new sound.

Mr. FRATRIK: There's just so many choices already available from alternative sources, predominantly over the - radio stations, as well as CDs and iPods and other audio sources.

FOLKENFLIK: Meanwhile, the stock for both companies has tanked. Sirius' shares have lost nearly half their value in a year. But Paul Blaylock, senior vice president for investor affairs at Sirius, says the company is well on its way to profitability. He gave an interview to NPR, but refused to be recorded. Even so, his boss - Sirius CEO Mel Karmazin - has publicly mused about the benefits of merging with XM to hold down costs. A spokesman for XM did not return a call seeking comment.

David Folkenflik, NPR News.

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