Monday, December 29, 2008

Radio: Sirius - Doggie downer

If the New York Times is going to do a hatchet job on your joint in their Sunday business section, you can only hope that it runs on the Sunday between Christmas and New Year when it’s least likely that most regulars will read it.

That’s Mel Karmazin. Even his bad luck is good. Well, maybe.

The Times piece wasn’t really the hatchet job it could’ve been but it took far too many words to make one specific point: Sirius XM is stuck in debt it can’t get out of.

And behold the madness of Moody’s Investor Service as they toss another anvil on Mel’s credit rating.

But you won’t hear terrestrial radio chortling over Mel’s financial tribulations. Sirius XM’s a piker compared to quandaries a few radio groups will be facing in the coming months.

It does make that siege mentality of radio promoted by the NAB over the Sirius and XM merger appear appallingly ridiculous.

Before you’re ready to kick Mel while he’s down, keep in mind that we’ll be witnessing a few radio CEOs choking up, blubbering, and melting into puddles as their over leveraged stations crumble into dust.

You can count on Sirius XM either imploding into a black hole of irretrievable debt or filing for Chapter 11, which would get the company out of exisiting deals they may not be comfortable with.

Either way, Mel knows that once you commit to a target, the details that follow shape themselves to the task at hand.

Regarding Mel’s future with Sirius XM? I expect him to ride out his contract, which is up – coincidentally – around the same time as Howard Stern’s.

You see, Mel doesn’t lose arguments, he just ends them.


Anonymous said...

I somehow don't think things are that dire at Sirius-XM. They have lots of partners who have a vested interest in its survival, lots of hardware manufacturer, marine and farming equipment distributors, manufacturers and organizations, and content providers, motor vehicle manufactueres, along with the U.S. government for which they provide a service. In addition, they are the only means by which a moving vehicle can be accessed 24/7 at any location in North America, which does have some national security implications. I don't work there, I'm just a casual observer, but that's what I see. They are very well-connected.

Anonymous said...

I forgot to mention in my last post every major NCAA football conference, Notre Dame, every team and aggregate of the NHL, NBA, NFL, and Major League Baseball. There is also CNN, Fox, and on and on. They all have a vested interest in its survival.

Anonymous said...

Mel and Zell, both from Hell. Chapter 11 is the coward's way out. Leave your 7 day a week working employees in the lurch.

Anonymous said...

To poster 1 & 2: A chapter 11 filing would allow Mel to pick and choose which alliances to maintain and dump those he does not want.

The same would apply to any staff contracts he wants to get out of or inherited from XM.

Anonymous said...

The NAB wasted time and membership money on fighting satellite radio and defending HD Radio. We must keep in mind that these are the battles its membership wanted to fight. Ultimately, the real losers all the way around are the station owners. They fight invisible enemies and make enemies out of allies. The NAB reaps what it sows.

radio, a friends ipod with commercials. said...

I agree, somehow I don't think things are that dire at Sirius-XM.

Mel will file for protection from his creditors, go bankrupt, then reemerge stronger with is debt reorganized. The silver fox did it again.. And the king of all media is laughing all the way to the bank.

radio, a friends ipod with commercials. said...

Mean while, HD is dead in the water.
satradio was first, they created the digital radio category. Consumers are confusing HD with satradio and to make things worse, HD is still pushing their no subscrition fees campaign. Here's a hint nobody cares, find something else listener might value. For the troubles of sirius-XM they proved people will pay $12.95 for radio, and the ones who can't, won't pay $79.99 for another radio that does the same thing their other radios can already do.

The radio Alliance said you'll get
Extra stations. And that's weak..
Then they said Near CD sound, and that's even weaker..

Anonymous said...

I am surprised John Gorman was not a little more indepth with this entry. Gorman spoke at the Wadsworth Library last fall and I asked him about Sirius. He did not blame Sirius's financial situation on Mel. He accused one of the founders named David Margolese of spending investor money on a multistory palace in a skyscraper just down the street from Rockefeller Plaza. He also said Margolese was more concerned about a fingerprint smudge on a glass door than he was about the product. He went on to say that Mel Karmazan inherited a mess though he also cautioned that Karmazan had to have seen all the figures and projections and from reviewing those should have realized it was a sinking ship. Since Karmazan took over Sirius he has made some major budget cuts and the merger with XM eliminated millions in costs although that may not be enough. I have Sirius and have had it before Howard Stern joined. I have to admit I do not like it as much today as I did pre-Karmazan. Let me add one more thing. Did you ever try to not renew a subscription at Sirius? They make you want to be a former customer. I have friends with XM and they are disapointed in the programming since the merger and the negatives far outweigh the positives. If Karmazan's saving of Sirius - XM is based on subscribers he has already lost.

ex-citadel, cc, cbs minion said...

personally i would love to see john ho-ho-hogan, dan butcher mason and fargreed suleman curled up in fetal positions and crying their eyes out over the death of their radio divisions. it could not happen to a nicer group of reptiles. payback is a beee-itch.

Anonymous said...

Remember how Mel left both CBS Radio and Westwood One when he was CEO there? He puts absolutely NO MONEY IN. It drained the stations and the syndicator of revenue and when there was nothing more to drain he left CBS with the unfulfilled capital improvements and lack of good will to clean up. The reason Westwood One is a penny stock can be traced back to Karmazin. He will do the same to Sirius. He will make it look profitable by squeezing every last schekle out of the operation and leave taking Stern with him. You can bet on it. Grasshopper Face made mistakes like Free FM although the real blame in the decline and fall of CBS Radio has to go to Karmazin.

Anonymous said...

John You wrote a very fair unbiased blog on Sirius XM.

Sirius and XM had to fight battles that took their eye off of the prize. For that we can credit the NAB. As much of a fool as Rehr is he did manage to create enough roadblocks to hinder the operation.

Mel runs business lean and mean and I find no problem in that.
I was pleased that unlike some other writers you did not put the blame on Mel.

An earlier poster mentioned others with a vested interest in Sirius. I am not sure that is enough.

If anyone can save Sirius XM it is Mel and he may have to increase the amount of talk-news programming in an effort to find outlets to sell more advertising on.

I am a subscriber and plan to be for a long time. I bid adeau to terrestrial radio years ago and donot miss it one iota.

I think you are wrong in one area. Terrestrial radio will not come back. In media, radio is below the newspapers in pecking order. I cannot see it surviving many more years.

Anonymous said...

Once internet radio has mobility it will make all other forms of radio dated. Satellite radio was a stop gap. It provided a relatively decent alternative to radio post-1996. Over the past few months the quality of satellite radio programming has declined, especially the music formats. I am a subscriber but not for much longer. I prefer oldies and what I hear on Sirius is not the mix I prefer. I now listen to I do enjoy sports and now I can get the same line up of sports as satellite radio plus video via internet radio and video.

Anonymous said...

Can anyone answer this?

Does Mel Karmazin own a piece of Howard Stern along with Don Buchwald?

That is how the terrestrial radio deal was set up.

It makes sense that Howard went to Sirius and Mel Karmazin signed with the company shortly thereafter.

Machiavelli lives.

Anonymous said...

I worked for Mel. He never cared about my well being. I have no reason to care about his.

I believe in many of the no nonsense practices Mel believes in. Cut to the chase, get to the point.

However, I do not believe in the way he treats people.

Maybe he needs and is getting a taste of his own medicine. When his creditors line up they will not be asking him how the wife and kids are either.

Sorry Mel. You created it.

Anonymous said...

Nothing's over yet on this one, though we are headed to extra innings.

Mel's goal was and is to make this company big enough that someone will buy it. The NAB managed to tie up the merger long enough to hurt his chances significantly. If the merger happened 12 months earlier, he would have easily found someone willing to buy the company on credit. Now that's not going to happen. It also puts him in the position of having to probably talk Howard into renewing, something that wasn't in the original plan. So how to regroup?

Plan B is bankruptcy. The problem will be structuring the reorganization so that it doesn't kill the business entirely. Stockholders will get wiped out, so he'll have to convince those who were banking on the stock (which includes Howard) as their payday to come along for the next ride. He could also face some hostility from creditors, and they might force some changes to further erode the programming. Also, he's got the failing economy to deal with. Is radio worth $12.95 a month if you're unemployed? And without new cars rolling out, the new Sat Rads are stopping, too, as the NYT pointed out.

But, if Mel can get through the bankruptcy, keep Howard on, stave off the nastiest of the creditors and retain subscribers through the recession, he'll emerge with a company that still might be a viable candidate for merger or takeover. All of that might be doable. The piece he can't control is he needs the economy to perk up fast enough so that the sale can happen before Internet radio kills the company off once and for all or reduces its value too dramatically.

No doubt, Mel will lose compared to what he initially would have made. But he still might come out with a ton of dough if the chips fall his way. Should be a fun one to watch. Personally, I'll buy the stock if he gets out of bankruptcy and bet on the rest falling into place.

Anonymous said...

Great thread for anybody interested begun by a fired radio personality in Columbus:

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