Info
Stern costs drive Sirius loss
Although revenue and subscriber numbers surged, shock jock's huge stock-related compensation sends satellite radio firm to wider loss.
To many entertainment industry insiders, the sheer size of the deal that helped Sirius Satellite Radio lure Howard Stern away from terrestrial radio in January meant that the company's fortunes were forever tied to the shock jock.
One rich man.
That became exceedingly clear today, when the company reported a wider first-quarter loss despite seeing its revenue nearly triple and surpassing 4.1 million subscribers.
Sirius reported a loss of $458.5 million, or 33 cents a share, for the period ended March 31, a marked drop from a loss of $193.6 million, or 15 cents a share, in the same period a year ago. Wall Street analysts had been expecting a loss of 36 cents per share, according to a survey from Thomson Financial.
The loss came largely due to stock-related compensation expenses of $284.6 million, $225 million of which went to Stern and his associates as part of the $600 million deal he signed last year to ditch CBS Radio for Sirius. All companies had to begin recording stock-related compensation this year under new accounting rules.
The company said stock compensation costs accounted for 20 cents per share of the 33-cent per-share loss.
The loss came despite what the company touted as huge gains in the quarter. Quarterly revenues nearly tripled, surging to $126.7 million from $43.2 million in the same period a year ago.
Sirius also nearly tripled its revenue based on strong advertising sales.
"Sirius generated more advertising revenue in the first quarter than we generated in all of 2005," Sirius CEO Mel Karmazin said in a conference call today. "We are already the advertising revenue leader in satellite radio."
Karmazin reiterated the company's commitment not to keep its music channels commercial-free, a hallmark of satellite radio.
Sirius added 761,000 subscribers in the period, enough to raise its end-of-year projections to 6.2 million subscribers. Rival XM Radio concluded the quarter with 6.5 million subscribers and expects to hit 9 million by the end of the year.
Sirius said it expects to see 2006 revenue in excess of $600 million, revenue in 2007 of about $1 billion, and 2010 revenue of around $3 billion.
The company also said it would begin streaming the Howard Stern show on its and the shock jock's Web sites later this year, giving potential subscribers a new way to listen to Stern as part of Sirius' standard $12.95 per month package. Sirius also plans to launch a wearable satellite radio device this summer.
The first quarter was a busy one for the company.
It signed deals with all four major record labels to settle a dispute over how Sirius compensated the labels for the company's new portable devices that allow users to record and store music from Sirius channels. The Sirius S50 player can record and store up to 50 hours of music, and the labels had said the royalty rates Sirius paid to broadcast music on its channels were too low given the added downloading capacity of the new devices.
In the wake of those deals, the labels also indicated that they were not fully satisfied with the terms, as they pushed for a bipartisan bill in Congress that would require satellite radio firms to "pay fair market value" for songs that are downloaded from their channels.
Karmazin said today that he didn't think the bill would go anywhere.
"We believe that what they're talking about is not very consumer friendly," Karmazin said. "We think that clearly we are providing a great service for the music industry. We are paying them a significant amount of money... We would be very surprised if in fact there is any movement on that bill. Our relationships with the music industry in spite of them trying to get more money from us remain to be very strong."
Just added
