Stern’s threat to leave Sirius radio may ring hollow

The recession has hit commercial radio stations particularly hard.

ASSOCIATED PRESS

Howard Stern is threatening to leave Sirius XM Radio Inc. now that the shock jock and the satellite radio provider are getting set to enter contract talks in 2010.

That threat probably seems less daunting to Sirius than it once would have. Sirius originally wanted Stern so badly that it gave him the most lucrative radio contract ever, a five-year deal that started in 2006 and paid him $500 million in cash and stock.

Today, he doesn’t have many places left to go — at least if he wants another huge payday.

Free radio stations are struggling with steep drops in advertising and high debt loads, and probably can’t pay top dollar to get Stern back to the medium where he began. He also likely would chafe at being censored again after enjoying the freedom of satellite radio, where his racy banter hasn’t been subject to federal restrictions on language and content.

He can’t switch to another satellite radio provider — Sirius swallowed the only other one, XM, last year.

So if Stern, 55, does re-sign with Sirius, it’s likely to be for less this time around.

Sirius nearly had to file for bankruptcy protection this year and is still trying to reduce costs. The company is feeling the brunt of weak auto sales, which deliver many of its new customers. And it faces new threats from emerging commercial-free rivals such as Internet radio.

For these reasons — and because Stern has warned other times that he might quit or retire — his latest threat rings hollow to some analysts.

“It’s probably positioning for contract negotiations,” said Brett Harriss, an analyst at Gabelli & Co., whose parent Gamco Investors Inc. owns 1.1 million shares of Sirius. “I don’t think he would give up his bullhorn.”

Sirius’ chief executive, Mel Karmazin, told The Associated Press in a recent interview that he will work hard to retain Stern, but the company would not offer more detailed comments. Stern’s agent, Don Buchwald, did not respond to requests for comment.

Stern made his name on traditional or “terrestrial” radio. While Sirius mainly makes its money from selling subscriptions, the money that flowed to Stern on traditional radio came from syndication rights. In that setup, radio stations pay companies that distribute programs such as Stern’s.

Many of those radio stations have struggled since Stern left the free airwaves, and the recession compounded the problems. In the first nine months of the year, radio advertising revenue fell by 21 percent to $11.8 billion, according to the Radio Advertising Bureau.

Citadel Broadcasting Corp., the nation’s third-largest operator of radio stations, filed for bankruptcy protection this week. Other big station owners also are wrestling with debts.