A great deal has been made of the $500 million deal that Sirius Satellite Radio (SIRI) gave Howard Stern. Since it is a five year deal, it is safe to assume that it has added at least $100 million in costs to Sirius’s P&L eaach year (with bonuses, perhaps more).
But, what if Sirius had grown only as fast as XM from the time the Stern rumors began and the deal was announced in the fall of 2004. The official deal was made public on October 6, 2004.
At the end of the second quarter 2004, Sirius had 480,000 subscribers. XM (XMSR) had 2.1 million.At the end of 2006, Sirius had 6.024 million subscribers and XM had 7.625 million.
If XM’s growth rate is applied to Sirius, the No.2 satellite radio company might not even be in business. From Q2 04 to the end of 2006, XM’s subscriber base increased 3.6x. Sirius’s figure was 12.5x. Take XM’s growth rate against the Sirius base at the end of Q2 04, and Sirius would have 1.73 million subscribers. It would probably not be a viable operation at all.
Has Stern added 4 million subscribers to the Sirius base? Maybe not. But, the lion’s share of the difference in the growth of the two companies has to be attributed to him.
If so, he may be the only reason Sirius is in business.
Priceless..
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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