5 Min Read
LOS ANGELES (Reuters) - Shock jock Howard Stern dismissed the financial troubles plaguing Sirius XM Radio Inc as "growing pains" and said he believes satellite radio will be a successful business.
Even as Sirius shares plunged to a historical low of 5.2 cents on Wednesday following media reports that the company is preparing for a possible bankruptcy filing, Stern -- whose team is paid $100 million a year by Sirius -- was unfazed.
"Everybody's wondering about this whole bankruptcy thing with Sirius," the self-proclaimed King of All Media said on his satellite radio program.
"I'm not concerned. I think satellite radio is great and will be a successful business and it will survive," he said.
The New York Times reported that Sirius has been working with advisers on a possible Chapter 11 filing, putting pressure on Charles Ergen's EchoStar Corp, which according to media reports owns a substantial amount of Sirius debt and is seeking to take control of the company.
Sirius has $175 million of convertible notes maturing on February 17, $350 million of secured bank debt due in May 2009, and $433 million in convertible notes due December. The credit squeeze is making it hard for Sirius to meet the obligations.
Stern said he tried to call Ergen himself, but never succeeded in talking with him. While noting that his knowledge was limited only to what he had read, Stern said he would not rule out a hostile takeover offer. "There's a game going on and it's for billions of dollars," he said.
"As long as someone is paying our salary, we're here and I believe we'll get paid and that satellite radio will be here," Stern said.
Many analysts have attributed Sirius' woes to expensive content deals with high-priced talent like Stern, as well as distribution deals with the now struggling auto industry to install satellite radios in cars.
With a bankruptcy filing, analysts said, Sirius could renegotiate deals with Stern and others like Martha Stewart, Oprah Winfrey and Major League Baseball.
"Bankruptcy allows you to renegotiate every contract," said RBC Capital Markets analyst David Bank, but he expected Sirius would likely try to tweak revenue-sharing arrangements with automakers rather than with Stern.
"I think there wouldn't have been a Sirius without him. There is a legitimate question as to whether Sirius would have survived up until now without him," he said.
Stern's nationally syndicated radio show once drew about 12 million listeners, while analysts estimate his daily satellite audience to be about one million to 2 million.
Stern joined Sirius in 2006, jumping from the FM dial where he frequently bridled at U.S. government indecency regulations and his corporate bosses at Infinity Broadcasting Corp, now known as CBS Radio Media Corp.
His defection marked a turning point for the nascent business of satellite radio, with both Sirius and larger rival XM Satellite Radio paying millions more to sign other talent and attract listeners to their subscriber model.
In January 2007, Sirius paid Stern a bonus of 22.1 million shares, worth nearly $83 million at the time, for surpassing subscriber goals set in a five-year contract in 2004 that had stunned the radio world with its $500 million pricetag.
RBC Capital Markets' Bank did not rule out the possibility that Stern may choose to renegotiate his terms to help out the company or even opt out of his contract altogether.
"I think he probably has less of an audience, which is frustrating for him. But is he unhappy doing what he's doing? I don't know. It's an awful lot of money," he said.
A spokesman for Stern did not return calls on Wednesday.
Asked what Stern's next contract negotiations would look like, assuming he wants to renew, James Goss at Barrington Research said: "Let's presume the company remains intact. I don't know if a contract of that nature would be written. If they lose him completely, it's likely a certain amount of listeners wouldn't stay."
Stern himself did not mention his contract on his show.
"It's a very unusual business," he said of satellite radio. "It has something like 20 million people listening to it. There's a tremendous business ... Don't get fooled by what you read."
Reporting by Sue Zeidler; Editing by Gary Hill