New York — Sirius Satellite Radio’s signing of Howard Stern, the controversial and popular radio personality, could create enough buzz and, eventually, new subscribers to boost Sirius’ subs by 1 million, and offset the expenses of the $500 million partnership for the No. 2 satellite radio provider, said analysts.
According to analyst Steve Mather of Sander Morris Harris in Los Angeles, Stern’s presence could lead to even more paying customers for Sirius.
“In my opinion, Sirius will add much more than a million subscribers and ultimately [the deal] can become pretty profitable. It’s not going to help XM, but it’s a big sandbox and XM and Sirius are positioning themselves in different parts of the box.”Sanders added, “I’m not going to reduce my XM numbers by one million just because of Howard Stern.Some of those new subscribers may just have been AM/FM listeners.”
Equity analyst April Horace of Janco Partners, Denver, Colo. said, “There’s a potential it could hurt XM, but I think the market is large enough to support both suppliers, and XM has Opie and Anthony.”
The news that Howard Stern will leave Infinity Broadcasting for Sirius on Jan. 1, 2006 announced today boosted Sirius shares by $0.50 in early trading and sent XM Satellite Radio’s shares sliding by almost $3 before stabilizing in later trading at $0.95 below its starting price.
Sirius’ five-year contract with Howard Stern will cost $500 million and follows another Sirius megabucks deal with the NFL costing $188 million plus $41 million in Sirius stock. Horace said hiring Stern is worth the cost. “I believe this is a good strategic move for Sirius. It not only broadens consumer awareness, but consumer appeal.And I believe, based upon Howard’s track record, he will be successful in this endeavor as well.”
An XM spokesman said the Stern deal is good for satellite radio in general. “It fully validates that satellite radio is a major force in entertainment.” He noted that the deal will not impact XM’s forecast of reaching 20 million subscribers by the year 2010, or its near term forecast of 3.1 million subscribers by year’s end.
