Sirius XM Raises Subscriber Projections As 2Q Earnings Beat Forecasts But Revenue Falls Short

UPDATE, 6 AM: Sorry, analysts didn’t ask about Howard Stern — and Sirius XM doesn’t allow reporters to participate in its quarterly calls with The Street. So Mel Karmazin stuck with the themes that have served him reasonably well over the years: Promises of cost cuts and lots of love for Wall Street. He crowed that Sirius XM will end 2011 offering “more channels with less programming expense” than it did last year. He put subscribers on notice to expect an increase early next year in Sirius XM’s $12.95-a-month base rate. And he says that he plans to funnel some of that cash to shareholders. (He doesn’t rule out an acquisition but says “they are hard to come by.”) The company says that by year end it will introduce Sirius XM 2.0: It’s built on a new technology that will accommodate additional channels, program time shifting, and replays. The company’s online service also will offer pause and rewind. At least one auto maker will commit to offering Sirius XM 2.0 radios in 2012. About 65% of all new cars come equipped with a satellite radio, and Karmazin says he plans to step up efforts to have dealers install them in used cars. The company also plans to offer a suite of channels for Hispanic audiences. All told, Karmazin says, “we are growing in a very competitive market and a weak economy.”

PREVIOUS, 4:15 AM: The satellite radio company reported 2Q net profits of $173.3M, up from $15.3M in the same period last year, on revenues of $744.4M, up 6.4%. Earnings at 3 cents a share beat the 1 cent consensus among analysts who follow Sirius XM. But they thought that revenues would reach about $752.6M. Read More »

Comments (14)

MySpace Debacle Vindication For Fired Viacom CEO Tom Freston

Viacom chairman Sumner Redstone stunned the entertainment industry in 2006 when he fired CEO Tom Freston. One of the chief reasons for the move was that Freston hadn’t moved decisively enough to buy MySpace, enabling Rupert Murdoch to pick up what was then the most popular social networking site for $580 million. Redstone seemed to think that contributed to the 20% drop in Viacom’s stock price in 2006 up to the date of Freston’s ouster. The CEO’s successor, Philippe Dauman, would “never, ever let another competitor beat us to the trophy,” Redstone told analysts. Redstone told interviewer Charlie Rose that losing MySpace had been “humiliating,” adding, “MySpace was sitting there for the taking for $500 million.”

But who’s laughing now? MySpace has collapsed into a distant also-ran behind Facebook and Twitter. And Murdoch took a bath on MySpace this week. He wanted $100 million for it but sold 95% of his interest to ad company Specific Media for a mere $35 million. Just imagine what would have happened to Viacom’s stock if Redstone’s passion for chasing fads led him to outbid Murdoch. It’s hard to believe that the owner of MTV would have seen what Murdoch didn’t — that social network fans were being turned off by MySpace’s tawdry commercialism as it established itself as a music and entertainment portal. That provided the opening for Facebook and Twitter to position themselves as safer alternatives for people who simply want to connect with friends.

Read More »

Comments 20

Howard Stern Vs Mel Karmazin: Round Two

Journalist and attorney Allison Hope Weiner is a special correspondent to Deadline and files this exclusive breaking news:

Now it’s getting personal in Round Two of the legal war between Howard Stern and his satellite radio boss Mel Karmazin according to affidavits filed today by Stern and his longtime agent Don Buchwald, reviewed exclusively by me. Only last January, both Stern and Sirius CEO Mel Karmazin were basking in the glow of Stern’s new contract, with Howard praising how well he’d been treated. But it turns out that, even as Stern was inking the new 5-year pact, the two men were already clashing over Karmazin’s refusal to acknowledge that the company owed Stern additional performance-based stock awards because he exceeded the subscriber targets set in his original agreement with Sirius. Three months later, Stern and Buchwald sued the merged Sirius XM. Now new details keep surfacing about what went wrong between Stern and Karmazin.

In the affidavits, Buchwald reveals that in early 2010, he contacted Sirius about why the performance-based compensation that Sirius then owed Stern for 2008 and 2009 wasn’t paid. “Sirius claimed that no compensation was due,” writes Buchwald. He then had Stern’s lawyer write to Sirius’s General Counsel asking for an explanation. The company again refused to pay. “Sirius’s lawyer claimed that the subscribers on the XM platform did not count toward the total number of Sirius subscribers and pointed out that we had already received the ‘merger bonus’,” writes Buchwald. Finally, during the renegotiation of Stern’s original contract, Buchwald tried again. “I attempted to discuss the performance-based stock awards with Karmazin,” writes Buchwald. “Karmazin, however, refused to discuss any resolution of the matter.”

Buchwald alleges that only when it became clear they weren’t going to “make any progress with Karmazin,” he and Stern decided to bring a lawsuit because Sirius was now trying to renege on the agreement. Buchwald points an accusatory finger at Karmazin in the affidavit. “Sirius’s CEO, Mel Karmazin, was not at Sirius when I negotiated the Agreement with the company. The CEO at the time was Joseph Clayton. Scott Greenstein has told me a number of times that Karmazin is unhappy with the size of the Agreement that was negotiated and agreed to by his predecessor, and that Karmazin has said that if he had been CEO at the time, he would have given Stern much less and not given into our demands. He might have tried to do that, but in this case, as I told Scott Greenstein more than once, Sirius would not have gotten Stern.”

Stern for his part, seems to be taking the lawsuit very personally. “Our Agreement is clear — the stock awards are based upon the total number of subscribers that the company has at the end of any given year,” Howard says in his affidavit. “When we were negotiating the agreement, Don raised with Sirius the possibility that Sirius and XM might combine. Sirius never said that, if that happened, it would not count the new subscribers for purposes of the stock awards.” Stern adds that he fulfilled his role of drastically increasing the subscriber numbers and now deserves to share in the company’s success. Read More »

Comments 124

Howard Stern Vs Mel Karmazin: It’s War!

Journalist and attorney Allison Hope Weiner is a special correspondent to Deadline and files this exclusive breaking news:



Throughout Howard Stern’s career, his radio contract often prevented him from saying anything nasty about his frequent boss Mel Karmazin. But the shock jock also had little to complain about: Karmazin helped make Stern a very, very rich man at Infinity Broadcasting, then CBS, then Viacom. After Karmazin became CEO of Sirius, he inherited Stern’s original satellite radio deal. Then Sirius merged with arch-rival XM, and last December Stern opted to re-up. Once again, Howard publicly praised Mel, now CEO of Sirius XM. But behind the scenes relations between Howard and Mel were becoming seriously strained. And only 3 months after entering into that new 5-year pact, Stern and his longtime agent Don Buchwald sued Sirius XM,  claiming that the company had failed to pay him performance-based stock awards which he’s owed because he exceeded the subscriber targets set in his original agreement with Sirius. But even then, Howard refused to discuss the lawsuit at length or say anything negative about Mel or even Sirius XM.

But that was then, and this is now.

Today, Karmazin confirmed at the Sirius XM shareholders meeting that the company will file a motion for summary judgment in the Stern lawsuit yet also warned that judges rarely dismiss a case at this stage. But the real surprise, several of my sources with knowledge of the dispute tell me, is that Mel is the driving force behind Sirius XM’s position that Howard is owed no additional compensation. Even more of a shocker, they claim Karmazin was never happy with the original Stern/Sirius- $80 million a year in cash and $20 million in stock to program two channels starting in 2006 as well as bounties if Sirius’ subscriptions passed certain milestones — negotiated before Mel arrived. And, here’s the real stunner from my sources: allegations that Mel didn’t take care of Howard financially as well as the world believes: “Mel Karmazin does a much better job of taking care of Mel Karmazin than most other Sirius shareholders,” accuses one of my sources.

At issue is what happened after Sirius and XM merged in 2008 and the combined company nearly went bankrupt in 2009. As the recession killed new car sales (by far the biggest source of new satellite radio customers), Sirius XM couldn’t meet its hefty debt payments. The company’s stock plummeted to below 6 cents. That’s when Karmazin turned to John Malone’s Liberty Media for a rescue: $530 million in exchange for 15% interest as well as 40% equity in Sirius XM. But after the stock went to 50 cents, Karmazin and a few favored executives received options for approximately 150 million shares at that price. Today, Sirius XM stock is over $2.40. ”This option arrangement was not offered to many other shareholders, including Howard Stern,” one of my sources complains. Add to this some massive “golden parachutes” for Karmazin and others, and Stern feels inadequately compensated for his contribution.

“Howard took the job on the promise that he would have a share in Sirius’ future success,” one source with knowledge of the negotiations explains to me. “He worked hard from the day the deal was signed to insure that success. That was the way the Sirius contract was structured. When Sirius needed Howard, they promised him a share in its success.”

Stern’s complaint claims that, in October 2004, Sirius had fewer than 700,000 subscribers and now the combined Sirius XM has 20 million — and he’s responsible for that number. He also claims Sirius was able to merge with its biggest competitor because of him, and he also helped Sirius XM avoid bankruptcy and he didn’t take his rightful payments.

On yesterday’s show, Stern spoke at length about the lawsuit. “Sirius Radio, by the way, was just about going out of business. I sat down with these guys and I said to them: ‘Look — if I leave terrestrial radio and come to Sirius, I’m gonna bust my balls for you. I’m gonna make shit happen… I guarantee you guys acquire XM radio. Forget merge — that’s a horseshit fucking term — acquire XM Radio… But people have a short memory… And now that times are good and they’ve reached ‘it,’ everybody wants to fucking forget what they owe — and who they owe… There wouldn’t be a Sirius if I wasn’t here.”

A source familiar with the negotiations between Stern and Sirius XM tells me that the satellite radio company negotiated a very generous deal with Stern and that he should be satisfied with the contract he signed only a few months ago. And that both Stern and the company agreed they would discuss Stern’s claims to performance-based stock awards after his new deal was closed. But after that happened, the negotiations went nowhere.

Read More »

Comments 92
« Previous Deadline | Hollywood