Sirius CEO wants defined role if Liberty takes over
NEW YORK (Reuters) - Sirius XM Radio Inc (SIRI.O) CEO Mel Karmazin admits that he doesn't like playing second fiddle, which could pose a problem in 2012 if Liberty Media Corp (LMCA.O) increases its stake in the satellite radio operator.
John Malone's Liberty took a 40 percent stake in Sirius two years ago as part of deal to lend it $530 million so Sirius could stave off bankruptcy. Liberty has the option to increase its holding above 49.9 percent after March 2012.
Most analysts believe that when the time comes that is exactly what Liberty will do.
Karmazin, who spoke in New York at the Reuters Global Media Summit on Tuesday, said that Liberty Chairman Malone and CEO Greg Maffei should be very happy with the deal.
"They could call me and say 'Mel, I love the company so much, I want to buy the whole company,'" he said. "They haven't called and I don't suspect they will."
Indeed, Karmazin says that while many suitors would like to take over Sirius, he does not know who would pay a high enough multiple to do so. The Manhattan native -- Karmazin said there is no place else he would rather work than in New York -- has a long history of both leading and selling media companies.
The last time Karmazin worked for a controlling shareholder it didn't go so well. As the president and chief operating officer of a then-combined Viacom VIAb.N and CBS Corp (CBS.N), Karmazin repeatedly clashed with Chairman and CEO Sumner Redstone and eventually left after just three years.
"I'm not really good at working for somebody, I just could not be a No. 2," Karmazin conceded. "I don't blame Sumner at all. I'm just not good at that."
While Karmazin said he currently has a great relationship with Malone and Maffei, he bluntly noted that if Liberty was to take a controlling stake his role would have to be clearly delineated.
Karmazin, who took over the helm of Sirius in 2004, said his contract ends at the end of 2012. Whether or not he plans to sign a new deal is still undecided: "It depends on whether this company needs me as much or if I could make as much of a contribution someplace else or here," he said.
"I'm going to work every day," he said. "The only time I would stop is if I felt like I couldn't do it as well as somebody else."
Karmazin believes that Sirius' subscription-based business model is stronger from both a consumer and investor perspective than that of its competitors, which range from terrestrial radio players like CBS and Clear Channel to online radio companies such as Pandora Media (P.N) and Spotify.
Sirius' advantage is that it's not dependent on advertising revenue like its rivals, he said.
"The advertising business today is not as good of a business as it used to be. The main reason is the Internet has made so much content available and so much supply available it's difficult to have pricing power," said Karmazin.
Sirius, which generated roughly $2.2 billion in revenue through September, recently announced a subscription price hike of about $1.50 that goes into effect in January in order to show top-line growth without alienating subscribers. The price hike, the first one Sirius has instituted since its merger with XM Satellite Radio was announced in 2007, raises the service's monthly cost to $14.49 from $12.95.
Karmazin believes consumers will pay up for Sirius rather than flee for its free competitors because of it has better content offerings, including shock jock Howard Stern.
Stern, who moved from broadcast to satellite radio, is embroiled in a lawsuit regarding his 2004 contract with Sirius despite striking a new deal last year that keeps him at the company at least until 2015.
"Howard brought an awful lot of credibility to the medium," said Karmazin, who has been Stern's boss for more than two decades. "I don't know of another radio talent in the history of radio that has been as extraordinary performer."
(Reporting by Peter Lauria and Jennifer Saba; Editing by Phil Berlowitz)