What happens after Sirius Satellite Radio (SIRI) completes its acquisition of XM Satellite Radio (XMSR)? It cuts costs in a bid to survive. What does this mean for Howard Stern? Fortune thinks he probably won’t get a raise when his current deal–$500 million, including incentives–expires in 2010.
Easy call. The bidding wars between Sirius Satellite Radio and XM Satellite Radio that drove up prices on content such as Stern, MLB, NFL, NASCAR, etc, have been over for a few years now, and they’ll be officially dead-and-buried when the two onetime big-spenders become one. What’s more, the joint company needs to cut costly talent/content deals, which cost them a combined $475.4 million, or 23% of total revenue last year, to make the merger pay.
No amount of cuts will change the challenging business conditions they both face: today Citibank cut price targets on both SIRI and XMSR due to sluggish new car sales.
Wait: Stern can always move back to FM radio in two years, or at least use that as leverage for another sweet deal, right? Well, no. The radio business will be in no better position to shell out $501 million for talent in 2010 than it is today.
So how much will SIRI-XM pay to keep Stern? This will truly be interesting. Stern made an estimated $30 million at CBS, which loved to talk about his 8 million-odd listeners on the radio. But at Sirius, Stern’s listener numbers are treated like a state secret. Does he have a million subscribers? 2 million? A combined SIRI-XM will have about 20 million subscribers. How many are there because of Stern? In a few years, we’ll find out.
Sirius-XM: $400 Million Post-Merger Savings In 2009 (SIRI, XMSR)
Goldman Brings Sirius-XM Crashing Back To Earth
What Happens To XM And Sirius After A Merger? Not Much, And That’s A Problem
Sirius: FCC Delay Hurting Satellite Radio Sales