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Is Howard Stern Part of SiriusXM’s Future, or Only Its Past?

It’s 2015, and that means Howard Stern’s SiriusXM five-year contract is up for renewal again. Last time around, in 2010, Stern milked the protracted “will he or won’t he” drama nearly right up to the end, finally signing on at the beginning of December.

Back then the biggest rumor swirling around was that Apple had offered the King of All Media an unbelievable $600 million to join iTunes for exclusive distribution. There’s no evidence that was ever real, especially since Stern’s SiriusXM deal is reportedly worth $80 million, a fraction of that supposed Apple offer, albeit still an enormous sum of money.

In 2010 Stern also declared that these would be his last five years in radio. His stance seems to have softened a bit since then. Bloomberg Business just published a lengthy profile of Stern and the state of his relationship with his bosses. In it Bloomberg quotes Stern’s on-air musings about retiring, though given how many hours the host is on air every week, reading much into these utterances is a fool’s errand.

This time around there’s still speculation about Stern jumping ship for a new pier, ranging from his own online venture to a subscription service like HBO or Netflix. Again, it’s important to note that he comes at a great price. By most measures SiriusXM made its investment in Stern pay off, but it’s taken nearly 15 years. Stern turned 60 last year, so I doubt many other media companies are ready to take their own decade-plus risk with him.

Bloomberg’s lede is the question if SiriusXM can survive the departure of Stern. More so than ever before it appears the satellite service’s overall business is strong enough. A SiriusXM customer survey found that 12 percent said they listen to Stern, and five percent said they’d cancel if Stern were lost. The company would feel that kind of loss–about $240 million in lost revenue–but it wouldn’t be a mortal wound, given that the company grossed $4.2 billion in 2014.

SiriusXM has reached sustainability in the last five years, primarily due to staking out territory in the car dashboard. That space is hotly contested, with smartphones and in-car internet vying to put podcasts, internet radio and streaming services just a button press away from satellite radio. But, kind of like making Stern’s big money contracts pay off, SiriusXM’s dashboard play has been a long game that competitors are going to have to play in five to ten-year increments. Automakers simply don’t update models as quickly as smartphone manufacturers, and consumers upgrade even less frequently.

Even if internet audio services aren’t yet positioned to eat away a significant portion of SiriusXM’s market share, I do think they have a good shot at stunting satellite radio’s growth. If SiriusXM loses Stern at the end of this year, it may not be able to make back those listeners and that revenue, as young people simply connect their smartphones as if the AM, FM and satellite radio buttons on their dashboard were useless vestiges of an earlier time.

In the Bloomberg article SiriusXM CEO acknowledges that their customers tend to be, “people who buy new cars, who on average are 46 years old and make $100,000 a year.” That’s a good business to be in now, but I wonder if satellite radio will age with that demographic, or continue to appeal to affluent 30- and 40-somethings as millennials enter that demo.

The more immediate question is, is Howard Stern part of SiriusXM’s future or its past? This isn’t just a question of whether or not he renews his contract, but whether this seemingly pivotal moment actually impacts where satellite radio goes from here. While your 46 year-old commuter might be relieved, will the 25 or 30 year-old even care? And will SiriusXM have what it takes to lure her into a subscription, with or without Stern?

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