Digital Media

Howard Stern won't be coming to the Sirius XM iPhone app.

(Credit: Sirius XM)

When Sirius XM released its iPhone application last week, one of the conspicuous omissions was Howard Stern. After fielding a call from a fan on Monday, Stern discussed why his channels won't be featured on the iPhone app.

"It was a rights thing, a contractual-rights thing," Stern told listeners. "It was a rights issue and a whole entanglement thing. So, we're not on it. Maybe one day, we will be."

Stern sidekick Artie Lange chimed in, saying, "Apple shouldn't profit off Howard Stern."

After trying to find the words to answer Lange, Stern responded with a simple, "Yeah, that's it."

Stern's production company is paid $100 million each year by Sirius XM. I guess that fee just isn't enough to include his channels in its iPhone app.

Satellite radio company Sirius XM Radio, despite recording a greater net loss for the first quarter of 2009, says it is encouraged by higher sales.

New York-based Sirius XM on Thursday reported a net loss of $236.6 million, or 7 cents a share, compared with $104.1 million, or 7 cents, in 2008's first quarter. Sales grew to $587 million from $270.4 million in the year-ago quarter, while operating costs dropped 23 percent.

Subscribers to the company's services dropped to 18.6 million, from 19 million at the end of 2008, which Sirius XM attributes to reduced auto sales. The number of subscribers added during the quarter sunk to 404,400 from almost 626,000 during the year-ago quarter. However, the cost of gaining new subscribers was slashed to $61 per customer, a savings of 26 percent from $82 a year earlier.

Operating expenses in virtually all of Sirius XM's key segments decreased in the first quarter. Satellite and transmission costs dropped 23 percent, programming and content costs were down 10 percent, and the cost of equipment dove 35 percent.

On a pro forma basis, which excludes certain nonrecurring expenses, Sirius XM reported that operating earnings showed a profit of $108.8 million, compared with a pro forma loss from operations of $70.2 million in the previous year. Pro forma revenue rose to $605.5 million.

"With a 5 percent increase in pro forma revenue and a 23 percent decrease in cash operating costs, these results demonstrate our focus on improving profitability, despite slower automobile sales and a 2 percent sequential decline in satellite radio subscribers," Mel Karmazin, CEO of Sirius XM, said in a statement Thursday.

The earnings and sales results are being compared to the first quarter of 2008, before Sirius' acquisition of XM Satellite Radio, but Sirius XM looks at the results as if both were one company a year ago. The latest results also factor in the hit that Sirius XM took earlier this year, when it borrowed $530 million from Liberty Media to save it from potential bankruptcy.

"Satellite radio is now a cash flow growth story," Karmazin said. "First-quarter 2009 adjusted income from operations of $108.8 million is our second consecutive quarter of positive adjusted income from operations and represents an improvement of $179 million over last year's first-quarter pro forma loss from operations of $70.2 million."

For the outlook ahead, Sirius XM says it expects to see more than $350 million in adjusted income for 2009. This is an increase from the company's previous estimate of more than $300 million for 2009 adjusted income, which it provided on March 10 of this year.

Troubled Sirius XM Radio announced Tuesday, following reports, that it will accept an investment from cable giant Liberty Media.

The investment, which will save the satellite radio company from bankruptcy or a hostile takeover, will take the form of $530 million in loans in exchange for an equity stake.

The first phase of the investment will consist of a $280 million loan, $250 million of which will be funded immediately on Tuesday, a statement from Sirius XM noted. The second phase, a $150 million loan, will be aimed specifically at the company's XM Satellite Radio subsidiary. Liberty, which owns a big stake in satellite television provider DirecTV, will also offer to purchase up to $100 million worth of XM's outstanding loans.

"We are pleased to have come to this agreement with Liberty Media, particularly in light of today's challenging credit markets," said Sirius XM CEO Mel Karmazin, whom creditors had been threatening to oust if the company chose bankruptcy over an investment deal. "Liberty's investment is an important validation of what Sirius XM has already achieved and a vote of confidence in what we will achieve. This agreement enables Sirius XM to continue to develop the opportunities first outlined in the merger of Sirius and XM."

Sirius XM was formed in July when longstanding merger agreements between two rival satellite radio companies, Sirius Satellite Radio and XM Satellite Radio, closed following FCC approval.

In October, Karmazin took the stage at a New York business-media conference and insisted that the company was on a firm path to profitability despite the fact that the credit crunch--then in its first throes--had hit Sirius XM particularly hard.

This post was expanded at 6:20 a.m. PST.

Sirius XM Radio's chief executive may lose his job if the company chooses to file for bankruptcy protection.

A group of creditors tells The Wall Street Journal that it will seek the removal of CEO Mel Karmazin if the company chooses bankruptcy over a deal with an investor that would allow it to remain solvent.

"Creditors will act quickly and definitively if they perceive that management is acting in their own interest and not in the best interest of the estate," Edward Weisfelner, a partner with Brown Rudnick, the law firm representing the creditor group, told the newspaper. "The board of directors should carefully consider the ramifications."

The company is reportedly meeting this weekend to determine a course of action, with a final decision expected as early as Monday.

Sirius is staring at a significant debt crisis. According to a story that appeared on Yahoo Finance, financial research firm Moody's "thinks there's a 'high likelihood' that Sirius will fail to repay or refinance its debt in 2009." And that debt is reportedly coming due Tuesday.

If the company does file for bankruptcy, the creditors could petition the court to have Sirius' management removed and have the company placed under the stewardship of an independent trustee.

Sirius has been rumored to be seeking some sort of an investment from Liberty Media, which controls DirecTV, according to several media reports quoting anonymous sources close to the matter. A deal between the satellite radio giant and the largest U.S. satellite-TV provider could help Sirius fend off bankruptcy and an unsolicited takeover attempt from satellite company EchoStar, which has bought up Sirius' debt.

The company is also rumored to be mulling a bankruptcy filing to pressure Charles Ergen, the satellite-TV magnate who recently bought up most of Sirius' debt, to make a formal offer for the company.

It appears Sirius XM Radio is seeking some sort of an investment from Liberty Media, which controls DirecTV, according to several media reports quoting anonymous sources close to the matter.

A deal between the satellite radio giant and the largest U.S. satellite-TV provider could help for Sirius fend off bankruptcy and an unsolicited takeover attempt from satellite company EchoStar, which has bought up Sirius' debt.

The Wall Street Journal, citing a person familiar with the matter, wrote that "though the talks between Sirius and Liberty are advanced, a deal remains far from certain. It wasn't clear how much Liberty would be willing to invest in Sirius and whether it would end up with control." Liberty Media Chief Executive John Malone is "known as a careful negotiator and is unlikely to cut a deal in haste," the Journal added.

Time is of the essence, however, for Sirius: $175 million in debt payments come due February 17. "The company is unlikely to be able to meet those obligations," The New York Times wrote.

Bloomberg cited an analyst at Stanford Group who said both EchoStar and DirecTV could use Sirius' satellite capacity to integrate radio and television services.

And PaidContent.org noted that "DirecTV already has a relationship with the satellite radio company, offering XM channels in its own packages." It added that Liberty is "in the midst of its own reorganization to gain value for assets that include DirecTV, Starz Entertainment, and Liberty Sports Holdings."

Sirius XM Satellite Radio, the financially troubled radio service, is busy preparing for a possible bankruptcy filing, according to a published report.

Sirius, home of shock-jock Howard Stern, has been working with advisers on the bankruptcy documents that could be filed within days, according to The New York Times.

Sirius is staring at a significant debt crisis. According to a story that appeared on Yahoo finance, financial research firm, Moody's, "thinks there's a 'high likelihood' that Sirius will fail to repay or refinance its debt in 2009."

Sirius' debt comes due on Tuesday, according to the Times' story. The company may file for Chapter 11 bankruptcy to pressure Charles Ergen, the satellite-TV magnate who recently bought up most of Sirius' debt, to make a formal offer for the company, the Times reported.

If Ergen chooses to wait and Sirius files for bankruptcy, it might force him to obtain the company through an auction or bankruptcy court. Another alternative for Ergen is to convert his debt into an ownership stake, according to the report.

NEW YORK--He made it past the Federal Communications Commission. But Sirius XM Radio CEO Mel Karmazin now has to deal with Wall Street.

In his keynote interview Tuesday at the Media & Money Conference, a joint production of Dow Jones and Nielsen, Karmazin wasn't in humility mode. "We're probably one of the top 25 media companies today," he said of the newly merged Sirius XM, which brought together the world's only two satellite radio companies. "I think it's very clear that we will be the most successful company in the audio entertainment industry. I know certainly, as ranked by revenue, we'll be there soon. Now we just need to grow our free cash flow and demonstrate that."

As so many have argued in recent weeks, Karmazin's mantra was that Wall Street is misguided, myopic even. "You need to make money, and in this particular environment, with Wall Street being what it is today, I think the companies that get rewarded today are companies that have an awful lot of cash flow, that make a great balance sheet. And that's not us today."

Sirius XM is in a tight spot. The merger was long and costly, both companies have shelled out extraordinary amounts of money to secure personalities like Howard Stern (who cost $500 million alone), and the credit crunch has dealt a blow to the most lucrative base of new satellite radio subscribers--car buyers. Sirius XM also has to refinance about $1 billion in debt, something else that won't be easy considering the volatile market.

Karmazin, a veteran of Viacom and CBS (which publishes CNET News), joined Sirius pre-merger in 2004, and acknowledged that he was brought onboard to accomplish a very difficult task of making the company profitable. "Before Sirius got its first dollar of revenue, which was in 2002, we had billions of dollars invested in the company," he said, explaining that the company had to launch three satellites before a single subscriber could sign up. That was a billion-dollar project.

"The day I joined the company, we had revenues of $67 million, and with revenues of $67 million the company had announced five months before that it had signed Howard Stern for $500 million," he said.

Today, Sirius XM has 19.5 million subscribers, which Karmazin said makes it the second-biggest subscriber base in the cable-satellite space behind Comcast, and is slated to keep growing. Sirius cut back its net losses last quarter, its final quarter before the merger. But the downturn in car sales is making Wall Street and the rest of the world less confident about Sirius' growth projections.

Karmazin said that if the auto market does poorly, there will still be millions of new satellite radio subscribers. "(Let's say) in 2009 there were only 12 million cars sold. That could happen, but no one has forecast that number as low," he speculated. "Of the 12 million, 6 million will leave the assembly line with satellite radio installed. So that would get us 6 million gross adds, and then there's a conversion rate. About 50 percent of those people choose to keep satellite radio...That would mean we're going to add about 3 million new subscribers just from that OEM (original equipment manufacturer) platform.

It was an optimistic pitch to the suit-clad audience, especially considering the widespread belief that satellite radio has been an overpriced, failed experiment.

But the good-ish news? The coming advertising downturn won't shoot down satellite radio. Karmazin said that between 94 percent and 96 percent of Sirius XM's revenue comes from monthly subscription fees, not advertising.

A typo was corrected: Sirius first pulled in revenue in 2002, not 2022.