Thursday, October 16, 2008

Radio: But Sirius-ly, folks!

Sirius-XM satellite radio CEO Mel Karmazin got his merger through the DOJ and the FCC but he may have to cut a Faustian bargain to keep Wall Street on his side. Either that or Mel knows something we mere mortals don’t.

Mel was being Mel in his keynote interview at the Dow Jones and Nielsen-sponsored Media & Money conference in New York earlier this week.

"We're probably one of the top 25 media companies today," he said of the Sirius-XM merger. "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 David Byrne sang, “Same as it ever was.”
Well, not quite. Sirius closed at 39 cents yesterday.
Last month Mel told Wall Street that Sirius-XM will be down $350 million this year on revenue of $2.4 billion.

Sirius-XM is saddled with $2.1 billion in debt. $1.1 billion of it has to be refinanced in 2009 and $300 million comes due in February.

Just ask the stock market how the $700 billion bailout is helping it out.

So how does Mel get his money? Reverse psychology. Faust? Luck? Hubris? All of the above?

Try Mel Math and the automotive industry.

First, let’s get the facts out of the way. General Motors is burning through over $1 billion in cash per month. Most analysts believe it could run out of money to run the company in less than a year. Its sales are down 18 percent, and the company’s lost $57.5 billion over the past 18 months.

Chrysler chairman and CEO Bob Nardelli blasted a memo to his staff, which read in part, “As the company evaluates strategic options to maximize core operations and leverage its assets, we engage in a dialogue with these parties. We do so keeping in mind our vision, our mission, and the best interests of those who have shown tremendous support for this company — including you, our employees, dealers, suppliers and customers.” Translation: We’re in deep and talking merger with GM.

Ford had a second-quarter loss of $123 million. So far this year it’s lost over $1 billion (it lost a mere $1.6 billion in all of 2005).

And that’s not counting the slump in sales from foreign auto manufacturers.

Nonetheless, Mel Math has12 million cars being sold in 2009 – half of them equipped a Sirius-XM satellite radio receiver. Of that half Mel claims half will become full-fledged subscribers – adding up to three million new subscribers, assuming none of them are already subscribers.

In Mel Math that adds up to $300 million revenue growth for Sirius-XM.

“Even if Detroit has a very bad year,” said Mel to the Media & Money audience, “Even in a market where cars are not doing well, we can still feel successful.

If Mel could strap Sirius XM receivers on a galloping horses, he would – and he’d count half of them as subscribers.

In the real world, subscriptions bring in 95 percent of the company’s revenue. We know the remaining five percent is not coming from ad revenue. So where is the other five percent coming from?
What about the fact that Sirius-XM is spending more on operating costs than it’s bringing in with subscriptions and advertising? What about the cost of replacement satellites?

Are you beginning to figure out what a flim-flam this is?

Satellite, shatellite!

Here’s another Mel Math factoid: Slightly down is the new up.

MLK said “I have a dream.” MAK said “I have a scheme.”
And Mel being Mel always has a back up plan. If everything else fails, he'll go old school and push for shareholder authorization to issue more shares and go from 4.5 billion to 8 billion. That Mel Math - gotta love it!
To restore credibility in U.S. business, CEOs must candidly come clean on the scale of problems a company is facing and purge any absurd valuations, inflated balance sheets, and hidden liabilities that are veined through financial balance sheets. But don’t look for that to happen here.

Then there’s the company morale. The Sirius-side is driving the bus. Roughly fifty Washington DC based XM-side employees prematurely learned they were about to be fired when someone in HR accidentally or on purpose, depending on who you talk to, put a termination date on employee payroll files. It’s projected that Sirius-XM will terminate eighty employees in total, including a few from the New York Sirius-side.

The downsizing, which eliminates duplicated formats and jobs created by the merger, will contribute to the $425 million in cost reductions according to Mel Math.

One spywitness told me that Sirius XM is insisting on a nationwide radio non-compete clause as a condition for receiving severance pay.
It's called a SBT. You're screwed, blewed, and tatooed.
Sirius and XM are scheduled to merge their programming by November 5.
Meanwhile, there’s this other medium called Internet Radio or Streaming Audio for those that find the word “radio” offensive. Unlike satellite radio, Internet radio is free, format choice is endless, and the stations are worldwide.
For less than $30 you can buy Aluratek's USB Internet radio juke box, which provides easy access to over 13,000 stations from over 150 countries. That’s a few more options than satellite radio offers.
Will that make Sirius XM forgotten but not gone?

Survivors of the Sirius XM massacre don’t worry about filing their predecessor’s shoes; they worry about the day when Internet radio is commonplace, which should coincide with when the company’s satellites fall out of orbit and burn up in the atmosphere.

What’s the line in that Eagles song? “They’ll never forget you until somebody new comes along.”


Former Mel employee - twice & never again said...

Thank God someone finally put Mel Karmazin in his place. Has everyone forgotten how he raped and pillaged both CBS Radio and Westwood One? He cut budgets to nothing, hired a revolving door of inexperienced sales people and treated his managers like doormats. Ask the buyers of CBS stations in upstate New York about the deplorable condition CBS Radio left those properites in. How many Westwood One Metro Network offices still worked off of Windows 95 and had to guess on traffic or monitor the competition because Mel refused to renew the leases on fixed traffic cameras stationed in key trouble spots in most cities. When you worked for CBS or Westwood One you didn't work for the company you worked for Mel Karmazin's own bank account. He took everything out of his properties and put nothing back but unsaleable crap.

Anonymous said...

Karmazin will bleed Sirius dry, take his money and run when he and Howard Stern announced that they will not renew their contracts.

How many people know that Karmazin owns a piece of Howard along with Don Buchwald? They are partners.

He got around it at CBS by forcing his managers to negotiate for Howard which kept Karmazin out of it.

At Sirius they hired him first and how about that for a coincidence. A few weeks later Karmazin becomes its CEO.

Anonymous said...

Mel expects loyalty yet never returns it. Remember Scott Muni and his lifetime contract with WNEW-FM? One of many.

Anonymous said...

I have a name for you. Roscoe Mercer. One of the original WNEW-FM staffers going back to 1967. He and Mel did not hit it off and Roscoe had the unfortunate experience of always being employed by a company that ended up being taken over by Mel Karmazin who fired him as soon as he could. I believe Roscoe took Mel to court but I never learned how it ended up. Roscoe passed away a couple of years back. That was just plain mean and spiteful on Mel's part.

Anonymous said...

I am an XM subscriber who renewed the contract prior to the merger. I prefer XM to Sirius programming. Their playlsits are broader in the formats I like. Now it appears that I will have the Sirius product and I'm stuck in a contract that I after I read closely realized I can't get out of. Thank you, Mel Karmazin. You cheapened my product, deceived me and I can promise you one thing. I will not renew the next time around. I think I will look into internet radio instead. Thanks for nothing.

Anonymous said...

Hopefully Wall Street wises up to this charlatan Mel Karmazin. He destroys companies not builds them. Every company he left was in worse shape than when he arrived but Wall Street kept treating him like a darling. Times have changed and the Street is beginning to see what Mel is really made of. About time.

Anonymous said...

When Mel first took over Westinghouse I had great respect for him. I was aware of how he built Infinity into a respectable company of well-known top notch revenue generating stations. Was I ever surprised? The Mel I met was a driven, egotistical self-centered individual who made it clear that I was his servant. He didn't care about my well being or that of my staff. Rather than go into a long boring story let me close by saying that I agree with the statement than Mel is out for Mel not the company he works for and I believe he will leave Sirius as high and dry as he left Viacom.

Anonymous said...

Mel Math = me, me, me, me, me, me.

Anonymous said...

Mel Karmazin's luck is running out. He has screwed too many people over along the way. Be nice to the people you meet on the way up.

Mel still has friends on Wall Street and has another scam or two up his sleeve but his time is running out.

He's fooled some of the people some of the time. I agree with the other commentor on this blog who said that Mel and Howard will make their Sirius exit once the contracts are up.

I am one of the believers that Mel may not get out of this one easily. Too many people are wise to his ways which was not the case with CBS/Viacom/Infinity.

What goes around comes around.

Melhell said...

Gorman I dont get where you are coming from. Your previous blogs supported Mel merging Sirius with XM. Now you are against it. Who are you John Kerry? What side are you on? You dis radio left and right. You supported Jim Cramer when he called for the merger to go through. Now you are against everything Mel is doing. Please explain. He is the same Mel doing the same things. Screwing over loyal employees and replacing them with his machines.

soon to be an EX subscriber said...

Thank you Mel. My favorite XM channel was the Cafe. Now you fired the program director and others connected with it. What are you going to put in its place? A Matchbox 20 channel?

You can count me as a subscriber today but you will not be able to count me as a subscriber in a few months. I will not be renewing my subscription and I know of others who feel the same way.

The first thing I am going to do today is check out that internet radio device. Sayonara.

Anonymous said...

I don't know who to feel sorry for. Those that were fired by Mel or those that are going to be stuck with him.

Anonymous said...

"Ford had a second-quarter loss of $123 million. So far this year it’s lost over $1 billion (it lost a mere $1.6 billion in all of 2005)."

So, Struble thinks Ford is going to add HD Radio as standard/optional equipment net year, as the dealer-installed HD Radio never materialized. Now, that SIRI will eventually be history, so goes that other dead product HD Radio. Go for it, Struble - get your dead product into another dead one!

Anonymous said...

"Karmazin will bleed Sirius dry, take his money and run when he and Howard Stern announced that they will not renew their contracts."

That is exactly what Struble is doing to terrestrial radio.

Jeff Ryan said...

At the end of Howard Stern's contract, I see him staying in broadcasting but leaving Sirius and moving to an internet-only platform. I'm sure Mel will continue to be involved in some way.

That Aluratek product looks interesting. Although, I own a Grace Wireless Internet Radio which I am very satisfied with. It's a table top internet radio (no computer necessary) that can tune into literally millions of streaming stations worldwide. No subscription costs either. Check it out here:

pocket-radio said...

The first week of my very first media job, a friend sent me a short list called ‘The 6 Stages of a Project’. It said that every project goes like this…

Sure was plenty of it for Satellite radio. Mean while iBiquity Digital has nothing

2. Disillusionment
Yup, ask investors & fired XM people. On a sidebar, I’m sure Bob Struble feels the same way too.

3. Panic
Global, economic meltdowns. Car sales dead in the water.
No golden parachutes or bailouts. Oh my god, hell yes there’s panic!
Bob Struble must be shitting his pants watching Mel’s meltdown.

4. Search for the Guilty
Bob Struble is making a list and checking it twice..

5. Punishment of the Innocent
It’s obvious, listeners who bought radio’s HD fans won’t be far behind either.

6. Praise and Enthusiasm for the Uninvolved

Poor bastards who didn’t buy a dam Satellite or HD radios.

Anonymous said...

Satellite radio is just getting started, and there are many things I feel we're not aware of regarding the financing. It's just a hunch, but I'm not going to say any more.

Anonymous said...

"Satellite radio is just getting started, and there are many things I feel we're not aware of regarding the financing. It's just a hunch, but I'm not going to say any more."


Disapointed said...

I preferred XMs oldies channels to Sirius. I have Sirius at home and XM in my car. The Sirius oldies channels have a high rate of repetition. They also have second rate DJs. The XM oldies 50s and 60s channels sounded like they were put together by people that really loved and respected the music and understood its impact on the baby boomers.

The Sirius oldies stations sound like they were slapped together by some radio guy whose only knowledge about oldies comes from the Joel Whitburn books and some oldies auditorium tests.

I listened to XM oldies to get away from what was being offered on terrestiral radio. I don't care what you say WCBS-FM did not return to oldies.

I don't know the reason why the Sirius oldies stations come from Cleveland. Does doing it from Cleveland make the rock and roll more authentic? If that is the case how about playing the original versions of the songs instead of some of the rerecorded copies starting with the original version of "The Twist"?

Call me disapointed.

Anonymous said...

The Cleveland suburbs were late in getting cabled and the city of Cleveland was not completely cabled until the early 1990s. In the interim one of the struggling UHF stations sold its evening hours to a third party called Premium which showed first run movies. It was a stop gap before cable. Every night at 8 they would scramble the signal. If you had a Preview decoder you could watch their fare of movies. It lasted a couple of years and closed up shop as the region got cabled. I look at satellite radio the same way. Sirius XM exists as a stopgap until wifi or other wireless internet is available allowing internet radio and tv to be portable. It is definitely not something I would invest in either as a shareholder or a consumer. I am frankly surprised Sirius XM still exists today with the options of iPods and podcasting.

Anonymous said...

Wall Street has Karmazin's number. They are not going to fall for his b.s. any longer. Too bad the Mays family thought of it first. He could have pawned off Sirius on Bain Capital and Thomas H. Lee.

Too late, Mel.

Anonymous said...

I remember Mel Math at Infinity/CBS when they wanted to partially pay me in stock and all bonuses in stock.

I went with a small group that owned a station just outside of the market and made more money there and had less worries than if I had gone to Infinity/CBS.

Anonymous said...

I subscribed to both XM and Sirius. Each had its own atributes and faults.

I now listen exclusively to internet radio and love every minute of it.

I can also subscribe and listen and watch (internet tv) any MLB game at:
I can subscribe and listen to all NFL games at:
I have better choices, worldwide music, every imaginable format and with SYNC or a wireless car router I can be mobile and listen.

Mel, you are the John McCain of media. You are old and in the way.

Anonymous said...

According to Howard Stern's news service on Howard 100, the trash piece on Howard Stern that ran in the Los Angeles Times (a Chicago Tribune publication) may have been because that company has put in bids for 50 CBS stations up for sale. He apparently called the reporter who refused to go on the air or be interviewed. Randy Michaels may have been behind this article.

A former Mel slave said...

No one could bleed dry a company better than Mel.

Look at the condition he left CBS/Viacom in. The radio stations were deplorable. Nothing was updated. No promo, no marketing. CBS Radio's decline was not all Joel Hollander. He inherited the mess from Mel.

Same with Westwood One. He put nothing in that company. He replaced nothing. Camera leases cancelled, computers crashing. Mel didn't care. He just pulled his pound of flesh out and when he took all he could get he was gone.

I feel bad for those working at Sirius. Unless your Howard, Oprah, or the multimillion dollar sports guy you will never see another pay raise, you will never see any upgrades and you will probably see your company fold when Mel leaves.

Anonymous said...

John, I don't know if you saw this but it is worth letting your readers know about:

NEW YORK (Associated Press) - The chief executive of Sirius XM Radio Inc. received $5.27 million in compensation for 2007, according to a Friday regulatory filing in which the company asked shareholders to approve a reverse stock split to boost the share price so it won't violate stock listing requirements.

Mel Karmazin, whose 5-year employment contract with the satellite radio company expires next year, received a salary of $1.25 million, a cash bonus of $4 million and retirement benefits worth $18,743.

Sirius, whose merger with rival XM closed in July, also said it plans to enact a reverse stock split before the end of 2009. The company said the split, designed to boost the stock price by reducing the number of outstanding shares, would range from 1-for-10 to 1-for-50.

The stock had hovered around the $3 to $4 range last year, but fell below $1 in September as the credit crisis worsened. Sirius has $1.1 billion in debt due in 2009, and the environment for refinancing is difficult.

Sirius said its shares have to stay at $1 or higher to continue listing on the Nasdaq. Closing below a dollar for 30 consecutive business days would trigger a Nasdaq warning to meet compliance requirements initially for 180 days or face delisting. Sirius, which began trading below $1 on Sept. 19, said it meets all of the Nasdaq's other listing standards.

Sirius said Karmazin's bonus last year was based on his role in adding new subscribers to the company, generating free cash flow in the second half of 2007, increasing revenue by 44.7 percent, introducing 'Sirius Backseat TV' and snagging additional financing at good terms.

The Associated Press calculations of total pay include executives' salary, bonus, incentives, perks, above-market returns or deferred compensation and the estimated value of stock options and awards granted during the year.

New York-based Sirius set its annual shareholders meeting for Dec. 18. It was delayed pending completion of the company's purchase of XM.

Shares of Sirius closed Friday at 37 cents.

Knose for Knews said...

Now we know that Mel and Howard will be out of Sirius by the end of next year. Does this mean tht Murdoch may be interested in buying Sirius when it crashes?

From the Financial Times. Makes sense

Murdoch hints at $5bn spree as rivals struggle
By Andrew EdgecliffeJohnson in New York

Published: October 18 2008 03:00 | Last updated: October 18 2008 03:00

News Corporation has a $5bn "war chest", Rupert Murdoch said yesterday, as he highlighted his appetite for acquisitions while more indebted rivals struggle.

"We are as well positioned as we can be to face what may well turn into a prolonged economic downturn," he told the media group's annual meeting in New York, pointing to a 22-year average debt maturity.

News Corp was forced this week to abandon its attempt to sell News Outdoor, a Russian billboard business, to JCDecaux, and its auction of free-to-air television businesses in Bulgaria, Latvia and Serbia has stalled. However, the group chairman highlighted eastern Europe as one of three regions, with India and the broader Asian market, in which he would seek to expand.

The group is focusing on pay-TV platforms in Europe in spite of a profit warning from Premiere, the German company in which it has built a 25.1 per cent stake.

Raising subscription revenues and digital media assets would also be priorities, Mr Murdoch said, as he signalled an expectation of less competition for deals from other media groups.

Asked if News Corp might buy assets from Viacom or CBS after Sumner Redstone, their chairman, was forced into a sale of non-voting stock last week, he said: "If they were at a very reasonable price, yes. But I'm not sure they have anything for sale."

National Amusements, Mr Redstone's investment company, has hired Citigroup and Rothschild to advise it on what it said were "constructive discussions" with banks led by Bank of America and bondholders. About $800m of its $1.6bn debt needs to be renegotiated by mid-December.

NBC Universal yesterday highlighted the pressure on media owners by asking its managers to find savings of $500m from their 2009 budgets. Jeff Zucker, chief executive, called for cuts in staffing costs, promotional expenses and spending on travel, entertainment and consultants.British Sky BroadcastingITV
Copyright The Financial Times Limited 2008

Anonymous said...

So so so so true about Mel Karmazin. He put a cosmetic spin on Westwood One and just bled the company dry. Just like CBS. Mel always leaves a place in worse shape than when he arrived. He jsut sweeps problems under the rug while robbing the safe. Since Mel they have had four CEOs trying to pull WW1 out of its nose dive. Creative financing hid their problems for a while but you can't run a business on Windows 95 equipped computers. Even worse in every market Metro's traffic reports were a joke. If Clear Channel wasn not run by such a jerk (John Hogan) their traffic could have put Westwood under. WW1's stock isnt even worth the 19 cents it was down to on Friday. Thank you Mel for taking down another one. I give Sirius less than a year after you and Howard leave with your sachels of money.

Anonymous said...

John, Read Mel Phillips's blog today at
He sheds more light on Mel Hell.
If you are not familiar with Mel you should be. Like you he is a radio veteran who is best known for creating a station you probably listened to when you were in Boston: WRKO. It was one of the best top 40 stations in the history of the format.


The Haunting of Mel Karmazin continues.

Mel took great pleasure in Howard Stern going after Kathy Lee Gifford when it was learned that her line of clothing was manufactured at sweat shops in Honduras.

Now, the tables have been turned on Mel. This afternoon at 1 the National Labor Committee plans its third attempt to meet with Karmazin and others in Sirius management today at 1pm at the Sirius headquarters in the McGraw-Hill Building in Manhattan.

The NLC wants to speak with Sirius executives about the working conditions for striking women at the Kiryung Electronics factory which makes many of Sirius's receivers.

The workers, almost all women, work 13-14 hour shifts, six to seven days a week and earn a maximum $145 US a week. The cost of living in Seoul, So. Korea is even higher than it is in New York City.

When the women threatened to organize a union, Kiryung management countered that at the insistence of Sirius, production would be relocated to China if protests didn't cease immediately.

NLB is bringing some of the Kiryung workers to the meeting with Sirius today.

Mel, you should have kept your yap shut about moving the plant to China. You better duck out the back door.

Anonymous said...

Hey Mel, How about those first and second generation Sirius receivers that can't pick up all the stations now?

Get those Koreans working, Mel. Get out the whip.

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