Howard f****** Stern!!

The words drip with venom from the mouth of actor Paul Giamatti playing a reviled former boss of the radio host Stern affectionately nicknamed Pig Vomit in his autobiographical 1997 movie Private Parts, and Pig Virus in his best-selling book of the same name.

Stern has always elicited strong responses and has been a polarizing figure. Loved by his legions of fans and despised by others who find his brand of radio rude, crude and base.

But anyone paying attention has to agree Stern has matured and mellowed with age and is not the shock jock of years ago, that at 66 years-old his success and longevity in a fickle business is impressive, and that he remains one of the best interviewers out there consistently getting big name celebrities to divulge sides of themselves they ordinarily wouldn’t.

More importantly to SiriusXM Holdings (NASDAQ:SIRI) Stern, since committing to the satellite operator in 2004 and starting in 2006, has been a cash cow, and the pillar with which the company has built its profitable business.

Stern is now on the verge of becoming the $600 million man as Sirius attempts to tie him up for another five-year deal at $120 million per year. As always, the contract would include Stern’s salary along with those of his staff and production costs.

Glenn Peoples of Billboard magazine has broken down why SiriusXM is willing to continue to pay Stern what seems an exorbitant amount. The conclusion is that he’s worth it. Here’s why:

Billboard estimates Stern is worth $600 million over five years if SiriusXM retains 1.07 million, or 3.1%, of its current 34.3 million subscribers.

The host’s breakeven point — where SiriusXM would recoup its money — depends on a handful of factors such as the annual cost, the length of the contract, and SiriusXM’s average revenue per user (ARPU) growth rate, churn rate and gross margin.

While Stern may not impact prices, his value increases the more he helps SiriusXM retain subscribers (reduce churn).


  • SiriusXM can pay more than competitors because its gross margin percentage (62%) is far higher than competitors such as Spotify (25%) and the standard in subscription service licensing deals (30%).


  • What’s good for SiriusXM is good for record labels, artists, publishers and songwriters. SiriusXM pays a share of its revenue as royalties for performances of recordings and musical works. Also, SiriusXM helps break new artists and gives a platform to the legends.


  • The way bundled content works, Stern likely improves SiriusXM’s perceived value for people who don’t listen to him.


  • Credit Suisse analyst Brian Russo estimates 15% of Stern’s listeners, or roughly 2.7 million subscribers, would leave SiriusXM if he does not return.


  • 2.7 million subscribers have a lifetime value of $1.4 billion, far greater than the value of Stern’s contract.


Investors showed their approval by sending SiriusXM’s share price up 7.2% in the two days following the initial report. The company’s share price is down 16.4% year-to-date but has rallied in part because it has added subscriptions during the pandemic.

SiriusXM Five-Year Chart

Google Finance

Getting to Stern’s true value is a challenge when he represents a small, albeit important, part of SiriusXM’s programming.

SiriusXM has learned how to bundle content over the years by mixing low-cost radio stations with expensive, exclusive deals for live sports leagues such as Major League Baseball, CEO Jim Meyer said during the July 30 earnings call.

“Customers pay for what they think they listen to, not necessarily entirely for what they do listen to. They pay for what their perceived value is for the service.” – Jim Meyer, SiriusXM CEO 

Stern’s contracts always send shock and awe through the business world.

Sirius — before its merger with XM — lured him from broadcast syndication in 2004 with a five-year, $500 million contract that began in 2006.

Stern’s next two five-year SiriusXM contracts were worth $80 million to $100 million per year as he dropped his work week from its original four to three days per week.

Stern also made the equivalent of about $250 million in bonuses when SiriusXM hit specific subscriber targets.

“I can look every investor in the eye and tell them that Stern is a good investment for SiriusXM,” Meyer said at a recent investor conference.

No sane streaming service could pay Stern’s going price. SiriusXM’s 62% gross margin is more than double the 25% to 30% gross margins of music subscription streaming businesses.

And SiriusXM’s $13.96 ARPU is more than two times Spotify’s $5.18.

SiriusXM can maintain its ARPU because it does not offer family plans that are effectively rebates for multiple listeners on a single account.

Spotify can afford to give podcaster Joe Rogan a multi-year, $100 million licensing deal. But no music streaming service could use Stern as anything but a loss leader to sell other goods and services.

Stern has called himself the King of All Media for decades. And as long as satellite radio is a stable business, he won’t lose his crown.

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