Sirius XM eyes Howard Stern renewal

NEW YORK (Hollywood Reporter) - Sirius XM Satellite Radio hopes to have an update within three months on the future of shock jock Howard Stern, whose contract is up at the end of this year.

"We hope that prior to the third-quarter earnings conference call we can have an announcement on what is going on with Howard," CEO Mel Karmazin told Wall Street at the end of Wednesday morning's second-quarter call.

Wall Street observers have predicted a renewal of Stern's deal with Sirius, but at a lower cost for Sirius, possibly in exchange for less on-air work for Stern. The shock-jock signed a five-year, $500 million contract with Sirius in October 2004, and went on air the following January.

Barrington Research analyst James Goss said financial details and terms of a renewal will be "critical" to determining how well investors receive it. For example, a deal should balance "the potential loss of revenues without Howard Stern programing versus the costs of keeping that programing in the mix," he said.

Lazard Capital Markets analyst Barton Crockett said more than 1 million subscribers signed up with Sirius around Stern's hire in a sign of his immediate appeal, but given his high cost, the deal to date was likely more or less a wash for Sirius.

"In the dance between Sirius and Howard Stern, there is some entertainment, and they both know it," he added.

Wunderlich Securities analyst Matthew Harrigan predicted Stern won't get a similarly lucrative contract. How does he view Sirius without him?

"It would certainly be a material loss," he said. "He adds aura like NFL Sunday Ticket does for DirecTV even if (people) don't listen."

Given his edginess though, the former CBS Radio star can't go back to terrestrial, and it's still hard to monetize Internet radio. So, "he should come back unless he wants to sit on the beach," Harrigan quipped.

In another news tidbit that created buzz early Wednesday, Sirius said it is working on a 2.0 satellite radio product that is expected to become available in time for the holiday season next year.

While providing no specifics yet, Karmazin told Wall Street Wednesday that it will offer more content and features. Management also said it could become one of the company's biggest drivers of financial returns.

Karmazin was as bullish as ever Wednesday now that Sirius has put its 2008 merger of the two big satellite-radio firms and the following financial crisis and resulting debt challenges behind it.

"In 2010, investors will get a real indication of how good our (performance) can be," he told analysts. "I feel really good about our future prospects."

Sirius said Wednesday that it swung to a second-quarter profit as it continued its recent subscriber momentum.

The company early Wednesday posted a profit of $15.3 million, compared with a year-ago loss of $159.6 million, which included big debt-related losses. Revenue rose 16% to $705.6 million.

Sirius ended the quarter with a record-high 19,527,448 subscribers. The quarter's net additions of 583,249 compared to a year-ago loss of 185,999. Based on the strong results, Sirius increased some of its 2010 forecasts.