Why Howard Stern Is Sticking With Sirius

Howard Stern
Howard Stern

What does Howard Stern have in common with Mary Hart and Susan Lucci? Pay cuts.

The self-styled King of All Media is getting attention for his salary squabble with his employer Sirius XM Radio (SIRI), which was resolved today. Stern, who groused about maybe having to take a cut, signed a five-year deal. His earlier agreement with the satellite radio provider was reportedly worth $500 million.

Terms of this deal, which he announced this morning on his radio show, weren't released. It wasn't clear whether they were as generous. Officials from New York-based Sirius and Stern's agent Don Buchwald didn't respond to email requests for comment.

A Stock That's in Orbit

"On my first day in satellite radio Sirius had approximately 600,000 subscribers. Today, the two companies [the combined Sirius and XM] have 20 million; and, in my view, we have just scratched the surface of how many people will get on board," Stern says in a press release.

News about the Stern agreement helped boost Sirius's shares, which have soared more than 133% this year. His contract status came into question after Sirius Chief Financial Officer David Frear hinted that the shock jock was entertaining other offers and that the company might try to get more favorable long-term contracts. Stern responded that there was no (explicative) way that he would take a pay cut. He later apologized to Frear when he realized the exec's remark was not about him specifically.

"Howard Stern remains a major attraction in broadcasting," says Michael Harrison, publisher of Talkers magazine, in an interview before the announcement. "It's understandable why Sirius would be tough with him. . . . Many people are taking salary cuts. The problems facing the broadcast industry are not imaginary."

Getting Tough on Stars' Salaries

Mary Hart supposedly took a 50% less pay in the final year of her contract, though her publicist refutes that. There were even rumors that CBS (CBS) would slice Katie Couric's compensation. The network denied those claims. And earlier this year, both CBS and Walt Disney's (DIS) ABC News had major layoffs.

"Network and studio executives tell TV Guide Magazine they've adopted a get-tough policy on salaries for stars of the new fall shows," TV Guide reported earlier this year. "While the salary for a lead has been $150,000 to $200,000 per episode in recent years, most deals for stars of new series were between $75,000 and $125,000."

Soap-opera actors have seen their pay cut after their shows' ratings never recovered from the disruption caused by the 1995 trial of O.J. Simpson. Even soap queen Susan Lucci, a star of ABC's All My Children, reportedly has taken a financial hit. Local TV news is also suffering, resulting in many veteran TV anchors quitting rather than take huge salary cuts.

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Stern would most likely have been a success no matter if he stayed in satellite radio or if he decided to provide his show via the Apple (AAPL) App Store, as had been rumored. That option may have been tempting, given that Juniper Research claims mobile app downloads will hit 25 billion by 2015, according to Computer World. However, such a venture may have required Stern to invest his own money. And he would have faced the same dilemma if he chose to move his operations entirely online.

It's understandable that Stern would take the least-risky option because at this point in his career, why take a big financial gamble?

"Stern often plays the role of a victim," Harrison says. "The truth is he's one of the most blessed individuals in our industry."

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