Image: Howard Stern
Richard Drew  /  AP
Howard Stern is all smiles. Why? He just received an $83 million stock bonus. What has he done to justify this windfall?
By contributor
updated 1/10/2007 3:03:04 PM ET 2007-01-10T20:03:04

When Sirius Satellite Radio announced Tuesday that it was paying shock-jock Howard Stern an $83 million stock bonus, Stern fans everywhere high-fived one another with glee at another triumph for their favorite purveyor of racy radio. The rest of us slapped our foreheads in dismay.

Here's why: Stern doesn't deserve it.

No matter the prurient appeal of Stern's playmate- and flatulence-filled on-air appearances to a significant segment of the American population, the fact remains that investors are likely to be less than pleased at his latest windfall. While Sirius execs are publicly patting themselves on the backs about their rapidly growing subscriber base and their projected first-ever quarter of positive free cash flow (fourth quarter 2006), they haven't managed to translate that enthusiasm into a payoff for stockholders.

Back in '04, Stern gave Sirius a substantial boost when he signed a $500 million, five-year exclusive deal with the company to jump ship from traditional FM radio to satellite.

Between October, when Stern signed the deal, and December of that year, the stock jumped from less than $4 a share to more than $7.50 a share. (During the same period, rival XM Satellite Radio's stock price only rose by about 15 percent.) And plenty of Howard loyalists have followed the King of All Media to his new medium, boosting the company's subscriber base from around 600,000 in late 2004 to more than 10 times that by the end of 2006.

Great. Lovely. But so what? The real question is whether anyone is profiting from Howard Stern right now other than Howard Stern. And it doesn't take more than a cursory glance to answer that one.

Between the December '04 peak and today, Sirius' stock has pretty closely mirrored the rise and fall of XM's; both hit lows in April '05 and climbed gradually from there, beginning another precipitous decline in September (XM) and November (Sirius) that continued for most of '06. Today, it's fair to say that both companies' stocks are tanking, hovering around $15 (XM) and $3.70 (Sirius).

This is the point at which Stern-lovers protest. What, they ask, has Howard to do with stock price? The man's job is to put out kick-ass radio and nothing else. Partly true, my stripper-loving friend. Yes, Stern's merely hired talent. But to ignore the fact that he was hired with a keen eye toward the bottom line is to miss a key point. And Howard ain't delivering.

Here's another way to look at it: Sirius stock is currently at almost exactly the price it was before Stern's signing. Since he went on the air a year ago, the stock has steadily declined, dropping from more than $7 to under $4 a share. Sirius' hiring of the famous host did almost nothing to give it a leg up on the competition.

Sure, the company is raving about its subscriber growth and first profitable quarter, but with programming and content expenses still increasing — by 160 percent, from $63.6 million to $165.4 million for the first nine months of '05 and '06, respectively, according to Sirius' most recent earnings statement — investors have every right to question yet another payout to high-profile on-air talent. (And for that matter, to wonder whether rumors of an XM-Sirius merger are credible and maybe not such a bad idea.)

The best one can say for Howard is that he's kept a drowning media company above water … for now. And is that really worth $83 million?

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