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.”

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Well, not quite. Sirius closed at 39 cents yesterday.

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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?
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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.”

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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!

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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.

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It's called a SBT. You're screwed, blewed, and tatooed.

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Sirius and XM are scheduled to merge their programming by November 5.
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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.

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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.
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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.”

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Ghoulardifest weekend