Shock jock Howard Stern said Wednesday that he will move to satellite radio in 2006, launching what may be the biggest challenge to traditional radio since the arrival of television and freeing himself from government regulators.
Stern, whose salacious show reaches more than 12 million listeners in 46 markets, will move to Sirius Satellite Radio Inc. The fledgling subscriber-based radio system has been scratching for the right mix of content that will entice listeners to shell out $12.95 every month.
He’s not coming cheap.
Sirius is paying roughly $500 million over five years to land Stern and all of his sidekicks from Infinity Broadcasting Corp., the nation’s second-largest owner of radio stations.
But some industry observers say it will be worth it. The satellite industry is counting on Stern’s reach to help push it into the mainstream, in much the same way that pro sports and HBO helped cable TV muscle into broadcast TV’s territory.
Wall Street liked the gutsy moved too. Shares of Sirius jumped 15 percent, to $3.87, on the Nasdaq stock market.
“Satellite radio is going to take its place as a mainstream force, and it may surpass AM and FM,” said Michael Harrison of the monthly trade publication Talkers.
“It’s very intriguing,” added Norm Winer, longtime programming chief at rock station WXRT-FM 93.1. “People have been speculating that all you need is for Howard to make that move to revolutionize that media.”
Sirius, like its only competitor, XM Satellite Radio, offers subscribers 120 commercial-free channels that serve up a huge variety of musical genres as well as sports and news. To subscribe to the service, users have to buy specialized radios for their homes or cars.
Some die-hard Stern fans on Wednesday were already planning to buy satellite units–as well as shares in the company.
“I actually bought stock [in Sirius] this morning,” said Tracy Hickman, 38, an interior designer in Chicago who plans to become a subscriber when Stern’s show becomes available. “I think most of his listeners will. He put talk radio on the map. He’s going to put satellite radio on the map in a different way.”
Sirius Chief Executive Joseph P. Clayton called signing Stern the “most exciting and transformational event in the history of radio.” Stern is “capable of changing the face of satellite radio and generating huge numbers of subscribers for Sirius.”
“It’s certainly an important acquisition for them,” said Harvey Wells, former general manager of WCKG-FM 105.9, which carries Stern’s show in Chicago. “Satellite radio needs to throw some long touchdown passes to gain any kind of traction.”
For his part, Stern said he was frustrated by the Federal Communications Commission’s recent crackdown on radio and television content.
The FCC increased scrutiny after this year’s Super Bowl telecast, in which Janet Jackson briefly exposed her breast during the live halftime show.
“I’m tired of the censorship,” Stern said on his morning program. “I’ve decided what my future is. It’s not this kind of radio anymore.”
Since the crackdown began, Stern’s raunchy show has drawn the FCC’s ire. In June, Clear Channel Communications Inc., the nation’s largest owner of radio stations, agreed to pay a record $1.75 million fine to settle indecency complaints against Stern. It had already dropped Stern from its lineup, fearing more fines.
Since then, Stern has dialed back a bit, avoiding certain words and phrases.
But he also stepped up his threats to leave, complaining that the FCC and the White House were unfairly targeting him and other radio personalities.
“The FCC … has stopped me from doing business,” Stern said during his on-air announcement. “Clear Channel, you [expletives], I will bury you.”
Because it is a paid service, satellite radio falls outside of the FCC’s jurisdiction.
Though Viacom, which owns Infinity Broadcasting, said Stern’s departure will not affect the company materially, his departure could dramatically alter Infinity’s business strategy of acquiring news and other talk stations that line up with Stern’s mostly male audience.
In New York and Los Angeles, where Stern’s shows draw big ratings, the advertising fallout could be significant. His show in Chicago draws a lower rating, and ad revenue is not as significant.
“It was always hard to sell the Stern show here,” said one Chicago radio executive.
Still, analysts said Stern gives satellite one of traditional radio’s dwindling assets: a known personality that can attract an audience–something that can not be found on digital music players or the Internet.
“You want to have something that people can’t get anywhere else,” said Jimmy Schaeffler, CEO of technology and media research firm The Carmel Group.
Both companies have been paying significant fees to get content. Sirius signed a $200 million deal this year to get National Football League games. And XM signed up former National Public Radio news host Bob Edwards. XM also hired shock jocks Opie & Anthony, who were fired from WNEW-FM in New York after they claimed to broadcast a couple having sex in St. Patrick’s Cathedral.
How much damage Stern, the self-proclaimed “King of All Media,” can inflict on the rest of traditional radio remains to be seen.
With only 600,000 subscribers, Sirius remains a money-loser, as does the bigger XM. Sirius has said it would need at least 2 million subscribers to break even. It’s hoping that Stern will bring in at least 4 million.
XM currently has 2.5 million subscribers.
Locally, radio executives are comforted by the fact that their stations still provide a local connection to the community that satellite cannot.
“It’s probably not a threat in a city like Chicago, where you have a spectrum of alternatives,” said WXRT’s Winer, noting the popularity of local personalities like shock jock Mancow Muller on WKQX-FM 101.1.
And satellite may still have to pick off a number of other programming entities from traditional radio before becoming a major threat.
“Satellite radio is still a kid brother,” said Tom Taylor, editor of trade publication Inside Radio. “Two hundred and eighty million Americans listen to [traditional] radio every week. Three million people listen to satellite radio, and that’s split among 250 total stations.
“Long term, that thing in the rear-view mirror is wireless Internet broadband access. At some point, all of this goes to the Internet.”
