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Is it wise for Sirius/XM to keep betting big on broadcast refugees?

Sirius XM

It appears that Sirius/XM satellite radio continues to bet its fortunes on big names, to the extent to which its willing to cut the salaries of its less well-known names. As we covered here, the big drama at the end of 2010 was whether or not the self-proclaimed King of All Media, Howard Stern, would renew his contract with the satellite radio provider. In the end he did, but the full financial terms of the contract still have not been made public. It was widely speculated that Stern was being pushed to take a hit to his salary, given how expensive it was to sign him five years ago.

It seems safe to guess that Stern probably came out of this new contract with even money. The key is probably his agreement to permit his show and dedicated channels to be offered on the Sirius mobile apps for the first time. But keeping Stern, even with being able to distribute his content more widely doesn’t come cheaply. Neither does signing Dr. Laura, Jamie Foxx and Oprah.

The pressure of these star salaries appears to have fallen upon Sirius’ second-tier talent. Most prominently, the Florida-based shock jock Bubba the Love Sponge Clem refused to renew with Sirius at the end of the year after being offered an 80% reduction in his salary. Reportedly making $1 million a year before, Bubba would have been cut down to $200 grand. Still good money for a morning shock-jock DJ, but I’m sure that would have cut into Bubba’s beer, porn and wild boar budget.

Bubba was featured on one of Stern’s channels, and this week Howard told listeners that he would like to see the Love Sponge return to Sirius. The big question is if Howard is willing to pony up his own cash or make other concessions to Sirius to make the deal happen.

What I find ironic about Sirius’ celebrity strategy is that it is so reliant on names that became famous in conventional broadcast radio and television. So far Sirius/XM has failed to find or nurture any radio stars on its own. Even many of the second-tier hosts, like Bubba and fellow shock jocks Opie and Anthony, defected from broadcast.

Yet, it’s arguable that a sizable percentage of Sirius/XM subscribers are not drawn in by names like Stern, Dr. Laura or Oprah, instead getting on board for the commercial-free music and other talk programming. This makes me wonder if the headline-grabbing celebrity signings are worth it for the service.

As a result, 2011 will prove to be a very pivotal year for Sirius, demonstrating if the big signings and renewals add any more subscribers than the previous few years. With 20 millions subscribers at the end of 2010, satellite radio is not a fringe service. But at the same time it’s still not an overall profitable service, either.

I’ve always been of two minds about satellite radio, especially since the merger in 2009. Yet, in addition to exclusive and ad-free content, satellite radio does offer a useful service for a lot of listeners, especially people who spend a lot of time in a car or truck. But I really wonder if the company’s pursuit of celebrity doesn’t thrust it down the same road the music industry got lost on, betting big on top artists, which can also mean losing big on them. I also wonder if the money spent on the Sterns and Schlessingers won’t take a toll on the less flashy channels, draining them of the qualities that separate satellite from the wasteland of commercial broadcast radio.

It should be an interesting year.

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6 Responses to Is it wise for Sirius/XM to keep betting big on broadcast refugees?

  1. John Anderson January 20, 2011 at 9:53 pm #

    Short answer: no. But a lot is dependent on debt-refinancing….

  2. Scott greenstien January 21, 2011 at 12:08 am #

    Sirius don’t care bout no talent, I mean cmon look at me!

  3. Angie Whetstone January 21, 2011 at 3:42 am #

    The only reason I have 3 XM accounts is Opie and Anthony. The second they’re gone, I’m gone. Who cares about Oprah, Martha and Dr. Laura…

  4. Lou Pickney January 21, 2011 at 7:21 pm #

    Exclusive sports broadcast packages, commercial free music, and real radio talent are the main reasons why people subscribe to satellite radio. I know about 20 people with satellite radio, mostly working men, and none who care about Martha, Oprah, Jamie Foxx or Eminem. It seems like some of the Sirius XM execs are star struck and want to be friends with famous Hollywood types. I hear that they like to throw big, expensive parties where Sir Paul Mcartney performs and invite all the top celebs. Are these soirees merely 2 Million dollar photo ops, or are the Sirius XM bigwigs looking for new celebrities to overpay for naming rights on new channels? As a stockholder, I hope they were just Scott Greenstein’s chance to have his picture taken with Hollywood stars because then they only wasted 2 million dollars. If the Paul Mcartney Concert was an attempt to recruit more “no radio talent” celebrity types, this company is big trouble.

  5. mike January 22, 2011 at 11:19 am #

    Jason Ellis is homegrown on SXM and you will be hearing more about him in the years to come. He caters to the younger crowd and has all the energy Stern did back in his “best” years. Covino and Rich are also homegrown talents going after the young generations. Neither are famous just doing good radio, hence no one screams about them. Bubba put down sirius execs all the time during his last year, and then started sucking up with 1 week left on his deal. That is not good business sense. You could also consider ralph and John Hein homegrown since howard gave them shows, and theirs shows are sometimes better then howards

  6. Stern Fans Prank Dr Laura January 26, 2011 at 7:33 pm #

    Howard is the backbone of Sirius and it would be hard for them to survive without his show, but they need to keep in mind some of the other talent in the company.

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