When Howard Stern left K-Rock for a hefty payday of $500 mil, he immediately became a poster-boy for Satellite Radio. From that point on, it was obvious that Sirius and Stern’s fates are tied together. Well, today we got the news that Sirius XM will file for bankruptcy. Tomorrow we will see dozens of reports painting Sirius as failure for getting Stern, and for Stern being a failure for Sirius XM. In my opinion, hiring Stern was one of the right moves made by the company. Howard Stern not only brought in buzz and excitement to the medium, he fulfilled his promise by bringing along millions of subscribers. He is a radio personality coming to do radio. Plus, If we do simple math, then each million of subscribers bring in $144 million/year to the company. If Howard Stern brought in 2 million subscribers, that translates to $288 milliion/year. His deal, if you remember, is about $500 million for 5 years, plus (now worthless) stock. That deal is a winner.
Here is where 2 major mistakes were made:
1. Stars, and lots of them! Oprah, Martha Stewart, Jamie Foxx, Eminem. These names cost a lot of money. Sure, “Oprah coming to XM” is a good headline, but was it worth it? Oprah is not a radio personality and being one is not that easy. Remember David Lee Roth? Besides, Oprah did 30 minutes a week. The rest was filler. Millions upon millions of dollars down the radio drain.
2. Trying to compete with an Ipod was the greatest mistake, however. I don’t think Sirius ever figured out in what business they are in, content or hardware. Sure you need Sirius Xm-ready car stereos, but people do not spend all of their time in the car and radio is a habitual entertainment. The Stilletto was the answer to the Ipod. It was ugly, bulky and you had to wear a satellite antenna on the head. Riiiiiiiiiight. Why wasn’t there a genius up there in the managment of both companies saying: “we have hours and hours of original content, and the smallest Ipod is 4 GB, which comes off the shelf COMPLETELY EMPTY!!!” Sirius XM should have set up an I-Tunes like platform and become the go-to place for ipod fill. No imagination at all.
The mindless and shortsighted signing of non-radio stars got the company into a huge financial hole. However, failure to connect people’s MP3 players with the Sirius XM content was a monumental disaster from which the company will not be able to recover from unless addressed in immediate future.