Now that he has resigned as CEO of Sirius XM, Mel Karmazin says he’d like a new gig — either running an entrepreneurial company with an independent board, or helping New Jersey Gov. Chris Christie’s efforts to rebuild areas hit by Hurricane Sandy. “I would be the czar…or the pope of the Jersey shore,” Karmazin tells CNBC‘s David Faber. That might make for an interesting reality show. But Karmazin, who had a famous falling out with Sumner Redstone, says “I probably wouldn’t take it to Viacom.” Meanwhile he’s upbeat about the satellite radio company’s prospects, even after cars connect with Internet radio.
UPDATE, 6:56 AM: As interim CEO, Jim Meyer will collect a base salary of $1.3M per year, plus annual bonuses to be determined by the board, in a new contract that runs until October 31, 2013, the company says in an SEC filing. He can retire then, if he wants. And if Sirius XM picks someone else to be CEO then he can leave with “an additional bonus to reflect his contributions.”
PREVIOUS, 6:06 AM: The change takes place today: Mel Karmazin resigned as CEO and from the board, Sirius XM says. With Liberty Media poised to take control of the satellite radio company (it owns 49.8% of the voting shares), Karmazin had already announced that he would leave in February when his contract expires. Jim Meyer, who had been President of Sales and Operations since May 2004, now joins the board. Directors have formed a search committee, led by Liberty CEO Greg Maffei, that will consider “both internal and external candidates, including Mr. Meyer” to take the top job on a more long-term basis, the company says. Lazard Capital Markets’ Barton Crockett notes that “investors have had limited interaction with Meyer.” The exec commutes from Indianapolis; the company pays for his travel expenses and for an apartment in New York. Board Chairman Eddy Hartenstein says that Meyer’s experience should make this “a seamless transition” and thanked Karmazin for his “leadership, strategic vision … Read More »
Maybe this shouldn’t be a surprise considering all the will-he/won’t-he stay speculation that’s taken place since Liberty Media‘s John Malone began his takeover effort. Lately it seemed as though Mel Karmazin was warming to the idea of staying, and that Malone would be glad to have the voluble exec — who’s famously a pal of one of Sirius XM Radio‘s biggest attractions: Howard Stern. Karmazin’s decision to bolt suggests that big changes are ahead for the satellite radio company. The smart money is betting that Malone will spin it off at some point in a way designed to minimize his tax hit. But it’s far from clear how long that might take, and how Malone will operate the company in the meantime. Sirius XM says the board has formed a search committee chaired by Liberty CEO Greg Maffei and including Sirius XM directors James Mooney and Eddy Hartenstein, who will “consider both internal and external candidates” to replace Karmazin. Shares are down 1.4% in after-hours trading. Here’s the release: Read More »
Deadline’s Executive Editor David Lieberman talks with host David Bloom in Episode 2 of Deadline Big Media. Lieberman discusses whether Mel Karmazin will stay with satellite broadcaster Sirius XM after Liberty Media completes its acquisition; what impact James Murdoch might have on News Corp’s U.S. TV operations if he takes over, as rumored; and who might be interested in spending up to $7 billion to buy the live-entertainment and sports powerhouse AEG from Denver billionaire Phil Anschutz.
Liberty Media CEO Greg Maffei wasn’t trying to put down Mel Karmazin. ”Mel has done a great job” at the satellite broadcast company, Maffei told the Goldman Sachs Annual Communicopia Conference this morning. But he added that Sirius XM’s colorful chief also can be replaced once Liberty takes control — which could happen any day. “Graves are full of irreplaceable people,” Maffei says. “There are plenty of people who could do a great job…Without Mel the business will not fail.” The answer leaves open one of the key questions investors have about Sirius XM’s fate as Liberty prepares to take over. Liberty reported this week that it owns 49.5% of the stock, and is still buying. Karmazin said last week that he’s “open” to staying at Sirius XM. He added, though, that “my instincts are that Liberty does not need me,” noting that “I have historically been expensive…That’s OK with Mel.” One likely key to any discussion is whether Liberty will hold on to Sirius XM, or plans to spin it off — possibly as part of a tax-saving process known as a Reverse Morris Trust. Maffei was coy on the matter. He says that Liberty will decide later about the Reverse Morris Trust but added that “our history has been eventually to spin off these businesses.” Before anything happens, Liberty will press for Sirius XM to return cash to investors, probably by repurchasing shares. Sirius … Read More »
The Sirius XM CEO isn’t sure that John Malone’s Liberty Media will want him to stay after it owns more than 50% of the satellite radio company’s stock — something that could happen as early as today. “My instincts are that Liberty does not need me,” Mel Karmazin said at the Bank of America Merrill Lynch Media, Communications and Entertainment Conference. “I have historically been expensive…That’s OK with Mel.” But he also says that he’s “open to having a conversation” about staying after. For example, if Liberty decides to spin off Sirius XM then “that would be a situation I might be interested in.” Karmazin says there’s been “no dialogue whatsoever about me coming or going,” including with Sirius XM’s existing board. His current contract expires in December. If he signed a new deal while the company’s future is in flux then “it would look [to shareolders] like I sold out.” Read More »
The satellite radio company CEO didn’t say that directly in a conference call with analysts this morning. But he sure left that impression after he was asked about the effort by Liberty Media Chairman John Malone — Sirius XM‘s biggest shareholder with about 46% of the voting stock — to take control. It’s been widely believed that Karmazin would split if that happened, based in part on comments he made a few years ago about not wanting to work for someone else. Yet he said this morning that his statements about wanting to be No. 1 came in the context of his frustrations trying to run Viacom under Sumner Redstone. Karmazin left the company in 2004. “My experience at Viacom was something I didn’t enjoy,” he said this morning. So what about working for Malone? Karmazin says that “there is no issue involving Mel” that might interfere and “I can assure you that the board and I are interested in accomplishing whatever Liberty wants to do” as long as it serves all shareholders’ interests. Karmazin says that his contract expires at year end and “the board and I will deal with it” before the next quarterly conference call with analysts. As for the status of Liberty’s take-over effort, ”we really have nothing new to report,” the Sirius XM chief says. “Liberty has to decide what they want to do, and maybe they’ve done that already. They have … Read More »
Malone controls shares convertible into more than 40% of the satellite radio company stock — but he’s talking like Sirius XM will soon be his based on news coverage of his comments to reporters at Sun Valley. The Liberty Media Chairman said that he’d “prefer not to lose” Mel Karmazin, but the Sirius XM CEO “said he won’t work for me so what am I supposed to do?” Malone didn’t mind taking a few jabs at Karmazin, though. He says that the former Viacom No. 2 exec — who had a famous falling out with Chairman Sumner Redstone — “needs to go back in history, transport himself back in time, mend his fences with Sumner and go be a new person. Relax, enjoy his success, bask in the glory, and enjoy his job. He does a great job. We love him.” Malone scoffed, though, at Karmazin’s claim that he’s underpaid. “It’s a joke. He’s clearly doing it tongue-and-cheek. He has an enormous equity incentive.” Malone is asking the FCC to give Liberty de facto control over Sirius XM’s broadcast licenses. So it’s interesting that he says he had dinner last night with FCC Chairman Julius Genachowski, although the Liberty chief declined to say what they discussed. If Liberty persuades regulators to recognize Liberty’s de facto control, then “there is no barrier to us having actual hard control.” What then? “There’s no question that eventually Sirius … Read More »
The satellite radio company’s shares are up more than 3.6% in pre-market trading this morning after it beat its own projections, and analysts’, for subscriber growth in Q2. Sirius XM says it added 622,042 net subscribers — a 38% improvement from the same period last year when it picked up 452,147. All told, it has gained 1M customers in the first half of 2012, giving it a total of more than 22.9M. The company now expects to end the year with 1.6M new customers, and about $3.4B in revenue. It left unchanged the projection for free cash flow, the metric that CEO Mel Karmazin watches most closely. That stays at $700M. “Our second quarter subscriber gains mark a record quarter of net additions since the merger of Sirius and XM in July 2008,” he says. He attributed the improvement to “our unparalleled programming lineup” in the midst of “a weak US economic outlook.” But last week one analyst, Lazard Capital Markets’ Barton Crockett, predicted that sub numbers would be strong based on the pickup in car sales — one of the main sources of satellite radio customers. Auto sales were up 22.2% in June vs the same month last year, and +2.5% in May. “If new car sales stay near current levels, we see 2M sub adds as possible” this year for Sirius XM, he says this morning.
Do you believe that Liberty CEO Greg Maffei doesn’t know whether he’ll keep Sirius XM or spin it off if his takeover attempt works? Me neither. But that’s his story and he sticks to it in his interview this morning with CNBC’s David Faber. Maffei adds that he wants to keep Mel Karmazin as the satellite radio company’s CEO. On other matters, Maffei takes a swipe at the New York Post, praises Barnes & Noble, notes that consumers are “very nervous,” and says Liberty plans to keep the Atlanta Braves.
The discussions, disclosed in a Sirius XM filing today at the SEC, suggest that CEO Mel Karmazin is concerned about Liberty’s renewed effort to control a majority of Sirius’ board seats. There’s no agreement yet, and Sirius XM says in its filing that it does not “expect to disclose developments with respect to these discussions.” But Karmazin’s determined to try to get John Malone’s Liberty, which owns preferred stock convertible into 40% of Sirius XM’s shares, to pay a takeover premium as it pursues its effort to buy additional shares and wage a proxy battle for the satellite radio company. Liberty told the FCC and SEC that it plans to renew its effort to win a majority of Sirius’ board seats. It still has to jump through several hoops. Liberty wouldn’t be able to elect new directors until next year’s shareholders’ meeting, unless the company calls for a special meeting. “Stockholders are not permitted to call a special meeting,” Sirius says. What’s more, Liberty would need “the consent of a majority of our outstanding common stock.” Sirius XM shares are up about 1% in mid-afternoon trading.
Shareholders probably won’t begrudge him the increase in a year when the satellite radio company’s market value appreciated 13%. Karmazin’s package is pretty simple: $1.5M salary, $9.2M bonus, and $7,350 for other compensation. The Sirius XM proxy says that it awarded Karmazin his bonus to recognize, among other things, the growth in subscriptions, revenues, and cash flow — and the reduction in the company’s debt. The CEO’s pay amounted to 23% of the pie for the company’s six named executives, and is 1.5 times higher than the average for his colleagues — well below the level that would concern corporate governance activists. But the numbers are somewhat skewed because Karmazin wasn’t the company’s highest paid exec: CFO David Frear’s package came to $20.8M, up nearly 520%. That’s almost entirely due to $18.9M in option awards granted in July. Sirius XM will hold its annual meeting in New York on May 22.
The only thing riskier than being an enemy of Liberty Media’s John Malone is to be his friend — as Sirius XM’s Mel Karmazin is discovering. They developed a corporate bromance in 2009 when Malone rescued the satellite radio company as it struggled to keep up with its debt payments: Liberty invested $530M, and received preferred stock convertible into 40% of Sirius’ voting shares. But Sirius has just disclosed that Malone quietly asked the FCC this month to give his company — in Liberty’s words — “de facto control of Sirius XM Radio Inc.’s earth station licenses.” It seems that Malone, one of the media industry’s toughest negotiators, believes Liberty is entitled to take charge with the March 6 expiration of some conditions in the 2009 agreement that limited its ability to buy additional Sirius shares. Liberty’s filing set off alarm bells in Karmazin’s shop. Late Friday, Sirius asked the FCC to dismiss or deny Liberty’s petition. The satellite company says that Liberty’s application has technical problems that should disqualify it — and it’s about corporate governance, not a matter for the FCC. But just in case the FCC wants to take on the matter, Sirius says that Liberty is wrong about the investment agreement. It only entitles Malone to pick five of the 13 board members, not a majority. And although conditions barring Liberty from buying additional shares have expired, it hasn’t bought them yet. “Liberty Media now can seek to control the management, … Read More »
Earlier this month Sirius XM CEO Mel Karmazin crowed that “things have been great” at the satellite radio company. Its stock is up 23% so far in 2012 and “our free cash flow is growing, it’s extraordinary,” he told CNBC’s Jim Cramer. But Sirius sings a different tune in a new lawsuit that accuses SoundExchange — a clearinghouse authorized by Congress to handle music artists’ royalty payments – and the American Association of Independent Music, a trade group, of leading an “industrywide conspiracy” to raise the fees Sirius pays to air recorded music. The groups’ “unlawful conduct” has “significantly raised Sirius XM’s costs, (and) threatened the viability of its business model in a highly competitive and technologically volatile sector of the entertainment market,” it just told the U.S. District Court in New York. Last year the company spent nearly $200M for royalties to play recordings on the 71 of its more than 135 channels that feature commercial-free music. The fees were set by the government’s Copyright Royalty Board (CRB) in a license that expires this year. Sirius says that SoundExchange has asked CRB to more than double its rates — to a maximum of 20% of the satellite radio company’s gross revenues — for a new license that would run through 2017. Although Sirius acknowledges that it’s growing, it “is far from recovering the enormous capital investment (to build the service) and is just at the point where it it beginning to earn a small profit on its investment.” Read More »
Mel Karmazin, the satellite radio company’s colorful CEO, is on a victory lap of sorts with his stock up more than 29% so far in 2012. He told CNBC’s Jim Cramer last night that he’s glad to see shock jock Howard Stern become a judge on NBC’s talent show America’s Got Talent: Calling Stern the “greatest radio performer of all time”, he adds that “the bigger Howard gets … the better it is for us.” (Cramer didn’t ask about Stern’s suit claiming Sirius XM owes him money for helping to boost subs.) Karmazin adds that he feels “very good about subscriber growth” despite the 11.9% price hike in January to $14.49 a month.
The satellite radio company’s shares are up 11.4% since early Thursday while other NASDAQ stocks collectively are down 4.4%. What’s going on? Well, it seems that many analysts who attended Liberty Media’s annual dog-and-pony show for them on Thursday came away convinced that Sirius XM is preparing to see John Malone lift his company’s 40% stake well past 50%. He has to wait until March to avoid taking a tax hit on such a move — and we all know how much Malone hates to pay taxes. After that there’d be a tax advantage: Sirius has $8B in net operating losses that could be used to shelter future payments. That’s great now, although the losses “sucked” when the company was racking them up, CEO Mel Karmazin told Liberty investors at last week’s gathering. So, is Liberty interested in buying Sirius? A lot of comments that Liberty CEO Greg Maffei made last week sure make it sound that way. “There are few businesses that I have as much confidence in,” he said. ”Boy, it’s got a heck of a tail wind behind it. Find me another business” with as much opportunity. Sirius’ first consumer rate hike, coming in January, ”is a great opportunity and there’s a potential for more…(Profit) margins will expand….It’s our kind of business.” He added that his company Read More »
Investors seemed to like what they heard at today’s annual confab for John Malone’s Liberty Media. Shares of the hodge-podge of companies it either owns or controls were up on a day when the market was shaken by new fears that the European debt crisis will widen. Liberty Starz ended the day +1% and Liberty Capital was +0.5% after their parent said it will combine the two tracking stocks into a single asset-based security. But Live Nation was +6.7%, Barnes & Noble was +5%, and Sirius XM was +4.8% following CEO presentations to the Street.
Malone was more subdued than usual. But the executive who became a billionaire on the back of his devilishly complex deals — often to help him avoid paying taxes — got a chuckle in his response to a question about whether the changes in his tracking stocks will make their businesses confusing for investors. “We’ll get as complicated as we need to get to highlight value.” he said.
Sirius XM’s Mel Karmazin won the biggest laughs, though, with Read More »
UPDATE, 6:05 AM: CEO Mel Karmazin says he’s not worried that Sirius XM will lose subs beginning in January when the monthly price will rise to $14.49 from $12.95. “We thought about raising the prices more,” he says. The company monitors consumer comments on social networks, and “we’ve seen them say they understand … there hasn’t been much reaction.” Still, he says that “we’re going to work closely with our ‘save’ desk’ ” to retain subs. He assured investors that he’ll keep costs under control but would consider repurchasing company stock or acquiring another company. “All of the bankers visit us regularly,” Karmazin says. He adds that he’s upbeat about 2012 in part because forecasts show a 1M pickup in auto sales, the main source of new satellite radio subscriptions. “The best is yet to come,” Karmazin says. Investors are less certain: Sirius XM’s share price fell more than 5% in pre-market trading after the company’s conference call. Lazard Capital Markets’ Barton Crockett says he’d give the company a “B” grade for its 3Q performance. The market wants to see sub growth and the latest figure, he says, was “light.”
PREVIOUS, 4:25 AM: The satellite radio company is down about 1% in pre-market trading: It reported 3Q net income of $104.2M, up 54% vs the same quarter last year, on revenues of $762.6M, up 6.3%. While the revenue figure was lighter than the $764.2M the Street expected, earnings of 2 cents a share beat analysts’ estimate of zero. Still, the subscription figures might worry some investors: Sirius XM ended 3Q with 21.3M subs, up 364,004 in the quarter. Read More »
Sirius XM shares are up about 6% mid-day after the company said that a January price hike will help next year’s revenues grow 10% to about $3.3B while its free cash flow will rise 75% to about $700M. CEO Mel Karmazin is salivating over the satellite radio company’s first price increase in a decade, to $14.49 a month from $12.95. Karmazin told the Bank of America Merrill Lynch Media, Communications and Entertainment Conference that although the economy is “very sloppy,” Sirius XM expects to end this year with about 22.2M subscribers — up more than 7%, a higher increase than the company saw in 2010.