Getting Howard Stern, the self-anointed King of All Media, to give up broadcast for this nascent medium looks a lot like a stroke of marketing brilliance for Sirius Satellite Radio-even at the high price of $500 million for five years. The closing of the long-rumored deal, effective in 2006, led to a PR splash for satellite-radio companies once better-known for big losses and small subscriber bases.
Analysts generally agreed with Sirius CEO Joseph P. Clayton's description of the signing as a "watershed," hailing it as potential spark for subscriber growth. This is largely because Mr. Stern is a major force on the airwaves, with 10 million listeners in 45 markets. If it comes to pass, the company's expectation of gaining 1 million subscribers-the amount the company says it would take to recoup the annual investment-would be a major boon, given that Sirius and rival XM Satellite Radio together now boast only 2.6 million customers.
Mr. Stern's migration from Infinity Broadcasting to a medium where his show will be offered as part of subscription package that costs listeners $12.95 a month is a nod to the trend of consumers demanding control over media. Not only will the at-times-profane Mr. Stern, who has dueled bitterly with the FCC throughout his career, be out of the regulators' grasp, he'll become part of the evolving media culture where consumers opt-in to content rather than have it thrust upon them.
"Satellite radio provides listeners who are dissatisfied with terrestrial radio with an option of traditional music channels and specific talk genres that they can get on terrestrial, but with commercials and interruptions," said Irene Katsnelson, VP-director of network radio at Interpublic Group of Cos' Universal McCann.
That's not to say that the satellite-radio companies don't have a lot of work in front of them. In addition to increasing their puny subscriber base, which will lure advertisers, Sirius and XM also have to forge connections with consumers, said Dennis McGuire, VP-regional broadcast for Aegis Group's Carat. "Satellite is exciting, but it doesn't offer the personal touch," he said. "People wake up with traditional radio. They get news, weather, traffic. Satellite doesn't offer that connection yet."
Of course, Sirius, which has lagged behind XM both in terms of subscribers and the all-important car installations, has more than a year to get its act together. The deal's price tag is high, considering Sirius won't have Mr. Stern on board for a year. But during this time, he will be sure to evangelize his new media home to an impressionable fan base largely made up of young males. He will be able to promote advantages that include more choice in choosing content and better reception, factors that will be key in getting listeners to pony up the monthly fees for subscription. In short, his influence will dwarf the impact of the biggest personalities previously associated with satellite, namely fellow shock jocks Opie & Anthony and former NPR radio host Bob Edwards.
Most experts were cautiously optimistic. "Popularity does not ensure willingness to pay, representing a marketing and financial risk for Sirius," said Yankee Group analyst Dominic Ainscough in a research note. "However, in order for satellite-radio services to replicate the success of cable television, such bets are appropriate."
A Sirius spokesman, Ron Rodrigues, declined to say whether the company has seen an early increase in subscribers or interest on the part of car companies. He did acknowledge the announcement has increased buzz around Sirius' offerings. "Web traffic has quintupled and the customer-service line has become more active," he said. "All the indications are that people are interested and that the announcement has had the effect we desired."