Wednesday, October 25, 2006

Testicle Ratings are Down

My good pal at TSS-Radio (see the ad) wants me to mention that Sirius is free today for everyone who wants to take an on-line test drive.

But frankly, fuck the test ride and just get Sirius. You won't regret it. And you can't do better than by ordering a radio on line from TSS-Radio. They have the best price and service and you'll have the lastest model sent to you a lot faster than you can find one by driving around town.

But back to my blog (if you fucking don't mind TSS-Radio).

There's been a lot of news, and a lot of discussion on Howard's show, about the fact that ratings are not only down for the stations in the morning time slot that Howard left, but they are down over all. That is not only in the mornings, but in the afternoons and around the clock.

Howard and others credit this to the "halo" effect. That is, that once someone sets their radio dial on a particular station because they like that program (Howard Stern) out of laziness they tend to listen to other programs on that station even when they know Howard isn't on (like in the afternoon).

Certainly, the "halo" effect is a problem for traditional broadcasters. A big problem.

But frankly, they face an even bigger one. That is the "you can get what you want when you want it" effect. And I think this is a much bigger problem than the "halo" effect.

Traditional radio is completely over. It's a dinasour. It's dead. Seriously.

The whole idea of a "morning show" and an "afternoon show" is dead. These are completely artifical creations that were set up by the stupid fucking conglomerates who didn't understand technology and didn't care about servicing their "captive" audiences.

The "morning show" was the most important revenue generator for traditional radio because it had so much of a captive audience of people making their commute. So they knew they had to put their best and brightest (Howard) into that time slot. For afternoons, they went for their second best and brightest (non-Howard). For all the other times they went for whatever idiots they could hire and pay shit.

The real reason ratings are dropping so fast is that the 5 million people who have abandoned traditonal radio for Sirius, now can get a wide variety of Howard programing (on two channels) 24 hours a day.

So why bother to listen to the second best guy in the afternoon? Regardless of the "halo" effect. Why the fuck would you listen to something that isn't as good as what you can get somewhere else?

And that's why traditional radio is so doomed. They like to talk about the fact that 280 million people can potentially listen to traditional radio (vs. 5 million Sirius subscribers). But the fact most people don't even listen to radio. Say… 200 million people. Sirius is also availible to any of those 280 million people who might be interested, and thanks to the internet, they don't even have to buy a radio.

Press reports put Howards "regular audience" (whatever that means) at 12 million. He's already stolen the five million hard care listeners not only from "morning radio" but from radio in general. He's adding more subscribers each day. The writing is already on the wall.

If you're in your car, morning, noon, or night and you're bored, you can listen to Howard. And that means all those number two guys (who really sucked) have lost their audience overnight.

Mary DeSade

Sunday, October 08, 2006

Over 5 Million

Howard just announced that Sirius has now sold over five million radios and is on track to hit more than six million by the end of the year. It is now outselling XM almost two to one, a complete reverse from before Howard Stern announced his move. Sirius added 441,000 subscribers this quarter (up from 359,000 a year ago) and XM only added 285,000 (a shocking drop from 617,000 from a year ago). These numbers are even better news for Sirius when you consider that last years quarter took place when Howard was mounting a media blitz about his move to satellite and hard core fans were scrambling to buy radios to make sure they didn't miss a minute. Just months ago radio pundits were saying that all of all Howard's fans who would make the move had already done it. But sales haven't gone down, they've gone up. The other good news is, as I pointed out in a previous column, Sirius current hardware sucks. They're coming out with a new radio, the Stiletto, that is rumored to be amazing, has tons of new features, looks cool and is already heavily backordered. If Howard wanted to get a big jump in subscriptions he can do it almost instantly by going on the PR circuit. He's the greatest salesman in the world. But right now, he doesn't have to. Sirius will be selling every Stiletto that can manufacture for the foreseeable future.

While XM still has more subscribers, around 7 million, and is technically still growing, the size of it's growth is in a free-fall and shows no sign of stopping. Sirius should easily surpass it in total number of subscribers sometime next year. So it's not surprising that XM stocks are in the toilet.

But, some have said to me, if Sirius is doing so well, why isn't it stock up? Because the stock is Sirius Inc., not Howard Stern Inc. If it was Howard Stern Inc. it would be through the roof.

The news spinners for traditional radio say the reason the stocks are low is because the rise in subscriptions can't continue at the current pace. The Washington Post lumping the two together despite the huge differences.

Well, obviously XM's growth isn't rising, but Sirius growth is up significantly and there reason to believe it won't continue.

But there is one area that investors should be concerned about. Programming costs. Howard cost Sirius $500 million for a five year deal and while he is worth every penny, it does put a drain on profitability since he and Super-agent Don Buchwald got a nice size chunk of the company. Moreover, but Sirius and XM are in a battle over sports rights, and it has cost them a fortune dueling over who would pay the most for baseball or football. XM stupidly paid $50 million for rights to Oprah and that is a complete waste of money. Sirius success is almost completely due to Howard because he is the only distinction between two great, but very similar products. And there's nothing stopping Howard from retiring in five years, going back to traditional radio (which he will never do, but investors have no promise) or even switching to XM for a huge chunk of that company. (You know for a fact that if XM could do it over, they would have paid twice as much to get Howard.)

So time to sell your Sirius stock? Nope, hold on to it, in fact, buy a bunch more because I have an announcement to make. Sirius and XM are going to merge.

What, you say, you haven't heard that? Why hasn't Howard announced it? Do I have the inside scoop or is it just a rumor?

No, I don't have any information about negotiations, but I do know it will happen. Why? Because the business economics just makes too much sense.

While Sirius is rapidly gaining on XM, XM is still growing, at least a little, and expects to reach 8 million that year. Together, their audience would instantly be 14 Million. That's a huge leap. Moreover, they wouldn't be force to compete for content, would be able to offer all sports on one service. That would make the argument for subscribing even more compelling.

Also they would save a fortune on R & D and manufacturing costs, distribution and sales and become available in all car brands. There wouldn't be much government objection to a merger and their are no FCC rules to stop it. It just makes too much sense for them to merge.

So why haven't they already? Because XM thought it would win. When they both came out, XM looked like the winning horse. Why would it merge with a rival that was probably going to fail. But with Sirius rapidly catching up, XM has to be concerned. If Sirius continues to grow at the current rate, it will surpass XM by next year. If that continues, in a couple more years it's XM might go completely under. And already it's management is in turmoil while Sirius management is in the hands of one of the best men in the broadcasting business, Mel Karmazin.

So then why shouldn't Sirius just hold out and figure that XM will get Betamaxed? They could. And once it went under they would have the benefit of less competition. But XM's 7 million subscribers is still a lot of subscribers, and Sirius is under pressure from shareholders to offer them results as quickly as possible. And since shares of both companies are undervalued, in my opinion, it won't be hard to make a deal.

I predict the companies will merge with in a couple years. Definitely with in four years. Why? Because, of course, of Howard.

When Howard's contract comes up, if they haven't already merged, there is a huge danger that Howard could over to switch to XM for even more that the 500 million he has already gotten. There's even the danger that Howard would start his own satellite company or a new startup. He has already proven what he can do in bringing an audience into a new medium.

Not only with Sirius and XM merge, but they'll also have to give Howard a huge chunk of the new company too keep him happy and not rock the boat. If you think Howard hit the jack pot with his old deal, wait till you hear about the new one. As I've said before, it won't surprise me if he ends up owning most of the company.

And then it really would be Howard Stern Inc. And that's a stock worth betting on.