Stern Shows Sirius Radio Can Work

I’ve always been a little skeptical about whether Sirius radio would ultimately work. After all, most pay-for-content deals on the internet have flopped because very few people put out content that’s so compelling, so much better than everyone else’s work, that it’s worth paying for.

That being said, Howard Stern debuted on Sirius radio yesterday and although it looks as if he’s going to shed roughly 75% of his 12 million listeners, the amount of money it’s going to bring in is almost mind boggling…

“Even before his first day on the job, the shock jock recruited listeners for the $13-per-month service: The Sirius audience expanded from 600,000 at the time the switch was announced to more than 3.3 million subscribers, Stern said Monday. At the same time, Sirius stock has roughly doubled.”

…At the time his October 2004 deal with Sirius was announced, the company said it could be worth up to $500 million over five years to headline two Sirius channels.”

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Let’s see: assuming Stern is responsible for those 2.7 million new listeners (although it should be noted Sirius has been doing a lot of advertising as well), at $13-per-month, that’s roughly 35 million dollars a month, $420 million dollars over the course of a year, and 2.2 billion dollars over a five year contract.

Stern may be a gross, obscene pig, but he may also be one of the few people on the planet who might end up being underpaid at $100 million dollars a year.

Furthermore, since things seem to be working out with Stern today, why not drive a dump truck full of cash up to Rush or Dr. Laura tomorrow? There are only so many really, really big names out there and with the amount of revenue Sirius can generate, no one else can offer up enormous sums of cash.

On the other hand, this whole deal also highlights how Sirius can make niche markets very profitable. For example, let’s say you can actually deliver 1000 paying customers to Sirius per month. Well, if they rake in $13 a month in subscription fees, that’s $156 per person per year, and $156,000 for the bunch. At that rate, you could pay someone, let’s say $60,000 a year, to run a show and set aside $15,000 for benefits and still leave Sirius with $81,000 leftover for expenses and profit — on a mere 1000 customers.

Put it all together and I’m starting to think Sirius could have a really bright future…

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