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Stern sirius satellite radio deal drives up stock { October 6 2004 } Original Source Link: (May no longer be active)
http://www.baltimoresun.com/business/bal-sternr1006,1,2606406.story?coll=bal-home-headlineshttp://www.baltimoresun.com/business/bal-sternr1006,1,2606406.story?coll=bal-home-headlines
From Thursday's Sun
Stern moving his racy show to satellite radio
Howard Stern takes his mouth and money to Sirius Satellite Radio
By Tricia Bishop and Stephen Kiehl
Sun Staff
October 6, 2004, 9:20 PM EDT
Shock jock Howard Stern, who has earned a living -- and the wrath of the FCC -- with his foul mouth and sexual humor, is taking his act from the commercial airwaves to satellite radio. There, the government won't be able to regulate what he says, but his listeners will have to pay to hear it.
In a deal announced Wednesday, and valued at $500 million over five years, Stern will broadcast exclusively on Sirius Satellite Radio, which charges subscribers to listen to its 120 channels.
Off the public airwaves, Stern will be freed from regulation by the Federal Communications Commission, which has repeatedly found his show indecent and has fined radio stations for airing it.
"I'm done with this kind of radio," Stern said on the air Wednesday in announcing his decision. He will begin work for Sirius in January 2006. "I'm done. I'm done. I'm getting a divorce."
The move might determine not only Stern's future but also that of radio itself. Sirius, which charges users $12.95 per month, has about 600,000 subscribers nationwide and expects millions more to follow Stern to its format. Satellite radio has so far had mixed results in convincing Americans that it's worth paying for. If anyone can change that, Sirius says, it's Stern.
"We certainly think it's a watershed event. He is probably the No. 1 recognized radio personality in the country Thursday," said Sirius spokesman Jim Collins. "His coming over to Sirius will be a huge driver of growth in terms of subscribers, he has such a strong loyal fan base."
Sirius said it needs to persuade just 1 million of Stern's 12 million listeners to subscribe for the deal to pay off.
Sirius' main competitor is Washington-based XM Satellite Radio, which downplayed the Stern deal Wednesday by pointing out that it already has 2.5 million subscribers. Sirius and XM (launched in 2002 and 2001, respectively) require listeners to purchase a radio equipped to receive satellite signals -- often for about $150 -- and then pay a monthly subscription fee. Neither has yet turned a profit.
But in taking on Stern, Sirius appears to be banking on the business model that launched cable pay television: Sex sells.
"XM already has a radio version of the Playboy channel, for which subscribers pay an extra $2.99 per month for a blend of erotic fiction and reporting on the world of sex.
Some of Stern's fans say they will gladly pay to hear an uncensored, unbound version of their favorite shock jock. Stern's morning radio show (heard on 105.7 FM in Baltimore) airs in 46 markets; in many of them, it is the No. 1 show in the key 18-to-49-year-old male demographic. Fans said they expect it to get even better.
"It's gonna be pretty wild," said Hugo Guzman, a fan of Stern's in Miami who created the Free Howard Stern Web site in response to FCC actions against Stern. "I'm sure there's going to be stuff that will make even me say, 'Oh, man, I can't listen to this!'"
Stern told listeners Wednesday that they could expect rough language and in-studio sex, but Sirius' Collins said that might have been an overstatement.
Already, Stern's show is pretty wild. He has been known to talk women into undressing on air, and he discusses sexual acts in explicit detail. He popularized a remote-control flatulence machine that makes disgusting sounds at the press of a button from up to 100 yards away.
Displaced broadcasters
Satellite radio is increasingly becoming a haven for displaced broadcasters. Radio jocks Gregg "Opie" Hughes and Anthony Cumia of the Opie & Anthony Show launched an XM show Monday; they were fired from a New York station in August 2002 for broadcasting an account of a couple purportedly having sex in New York's St. Patrick's Cathedral as part of a contest.
Bob Edwards, unexpectedly demoted as anchor of National Public Radio's Morning Edition in March after 30 years with NPR, also launched a show on XM Monday.
"It's exciting, it's something new, it's the future," Edwards said in an interview Wednesday. "I'm not part of this big news organization. I don't have all of these editors and producers and a lot of suits telling me how I should do a radio show."
The Stern deal confirmed Edwards' opinion that satellite was a good choice. "Howard Stern must see the potential, too," he said. "I think this is a good thing; a lot more people will know about satellite radio this afternoon and this evening than did this morning. And they'll say, 'Hey, I've got to check this out.'"
This is what they'll find: a vast array of sports, talk, news and music. Also, since the signal is satellite-based, a subscriber can drive from coast to coast without changing the station.
As for investors, they reacted timidly to the news Wednesday, driving Sirius shares up just 15 percent -- 52 cents -- to close at $3.87. Sirius stock prices over the past year have ranged from $1.84 to $4.20 per share.
FCC cracks down
The FCC has proposed fines of at least $500,000 this year against radio stations that broadcast Stern, and it has been increasingly aggressive in policing indecency since singer Janet Jackson bared her breast during the Super Bowl halftime show. That incident resulted in a fine of $550,000 against CBS and member stations, including Baltimore's WJZ-TV.
Stern, whose show is also broadcast on cable television by the E! network, has found himself hemmed in and frustrated. The FCC's actions prompted radio giant Clear Channel to drop Stern from six of its stations this year, a sign of a new reluctance among broadcasters to air racy material.
Clear Channel was fined $1.75 million by the FCC in May in a deal to resolve indecency complaints against Stern and other radio personalities.
In response, Stern has waged a crusade against not only the FCC but also President Bush, whom he has called a "religious nut" and a "Jesus freak." Stern's Web site urges readers to register to vote, and to vote against the president.
The FCC has authority to regulate content broadcast for free over the public airwaves, both on television and radio. It does not have such authority over cable television or satellite radio, both of which people must pay for, though there has been talk that Congress might move to expand the FCC's reach.
Blair Levin, who was chief of staff to FCC Chairman Reed Hundt from 1993 to 1997, said the same principle that would apply to regulating cable TV would apply to satellite radio.
But he said he doesn't expect the FCC to move in that direction because the courts likely wouldn't allow it. Even if the FCC did attempt to regulate satellite radio, it might not be so bad for Stern.
"Howard has a long history with the FCC," said Levin, a managing director at Legg Mason, "and if one looks over the large sweep of his career, he seems to benefit more from the FCC attacking him than the FCC benefits. It never seems to hurt his ratings."
Copyright © 2004, The Baltimore Sun
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