News Forbes Prediction of Stern's Next Media Move

Discussion in 'The Howard Stern Show' started by Vinegarette, Sep 2, 2015.

  1. Vinegarette

    Vinegarette Don't Believe What You Hear

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    http://www.forbes.com/sites/ericjac...ge-the-broadcasting-world-again-by-going-ott/

    Looks like some of the article was sourced from the same material from an earlier Buchwald press release.

    Over the Top
    (OTT) refers to video, television and other services provided over the internet rather than via a service provider's own dedicated, managed IPTV network.
    Comments also open. V. :hat:
    -----

    Forbes: It's Time For Howard Stern To Change The Broadcasting World Again by Going OTT
    By Eric Jackson

    Howard Stern is my favorite interviewer today in broadcasting. He’s had an incredible career, scratching out his reputation city by city as a disc jockey and turning into one of the most powerful media personalities – perhaps the most powerful and highly paid – today.

    Ten years ago, he redefined radio and “talent” forever when he decamped from terrestrial radio at Viacom (VIA) for satellite radio at Sirius (SIRI). He signed a 5 year, $500 million a year contract which was unprecedented at the time.

    Stern got an additional $250 million in bonuses through stock compensation for helping Sirius grow its subscriber base.

    In 2010, despite Sirius going through a near-death experience in the 2008 credit crisis requiring a lifeline from John Malone to save them, Stern re-upped with Sirius for another 5 year contract. As part of that deal – negotiated with Stern longtime friend and boss Mel Karmazin – Sirius promised to push Stern’s content everywhere through the Sirius mobile app.

    In three months from now, Stern’s contract will again come up for renewal. This has sparked a lot of angst among Sirius investors – as it should. Despite some who argue that Sirius is a much more diversified company today than it was when Stern signed with them in 2004 and could continue to flourish without him, this is still the House that Howard built and would suffer large subscriber losses if he left.

    The two deals that Stern signed with Sirius in 2004 and 2010 were the best for him at the time to maximize his income. However, this time, he’s got a better option: Over The Top (OTT).

    [​IMG]

    NEW YORK, NY – AUGUST 11: Radio personality/TV personality Howard Stern attends the ‘America’s Got Talent’ season 10 taping at Radio City Music Hall on August 11, 2015 in New York City. (Photo by Michael Loccisano/Getty Images)

    Why should Stern participate in enriching a middleman in Viacom or Sirius when the OTT option – the same one that Netflix (NFLX) and Hulu use – can allow him to capture all the economics of his show and reputation himself?

    Stern was correct when he made the jump to satellite from terrestrial radio that terrestrial was an outdated model. He believed that satellite would one day overtake it. Increasingly though, satellite looks like a stepping stone to the Internet and Direct To Consumer (DTC) world overtaking both of them.

    Neither Internet radio nor OTT had matured enough to be viable options for Stern in 2010. That’s changed in 2015. And, as he did in 2004, Stern can revolutionize the world of broadcasting and continue to prove he’s still the “King Of All Media” by making the move to OTT now.

    Here’s how it would work. Stern would start his own channel available on video and audio through a mobile app. The channel would be sold on a subscription model at something like $6 a month, akin to the recent CBS Unlimited price point below Netflix and Hulu.

    There are two big questions for any celebrities like Howard Stern or Jon Stewart when deciding if they can succeed in going OTT or if they should re-sign with an established media brand like Sirius: (1) how many subscribers can I get and (2) what will my costs be?

    Any idiot can start a subscription video service but that doesn’t mean it will succeed. Sarah Palin recently announced she was shutting hers down after a year. Just because there’s a new technology for distributing content doesn’t mean it can circumvent basic business economics.

    But I think many forget just how special a broadcaster Howard Stern is and how loyal his fans are.

    At the end of 2003 – 8 months before Stern signed his initial deal with Sirius – Sirius only had 261,000 paying subscribers. The day he announced he was signing, on October 6, 2004, Sirius had 600,000 subs. By the end of 2004, Stern had helped Sirius double its subs to 1.1 million. At the end of 2005, just a week before Stern began to broadcast his show on Sirius, Sirius had 3.3 million subs. By the end of 2006, Sirius subs had swelled to almost 10 million.

    Critics will say that this sub growth wasn’t only due to Stern. But, let’s be serious: Stern’s deal legitimized this business. And the vast majority of these new subs to Sirius were due to Stern. Today, Sirius has over 27 million subscribers and the company’s market capitalization is over $20 billion. Stern is that foundation of that.

    Despite some who might say Stern has been overpaid by Sirius (let’s call it $1.2 billion in the last decade including stock bonuses), and that he’s now older and less relevant, I strongly disagree.

    Would there be a $20 billion Sirius business today with 27 million paying subs had Stern never signed in 2004? I don’t think so. I don’t think the company makes it out of 2008 because it wouldn’t have had 17 million paying subs at the time and Malone would have likely taken a pass on pulling it back from the abyss.

    Stern’s – and his agent, Don Buchwald’s – mistake in striking his initial deal with Sirius is that Sirius – the stock – was hugely overvalued in 2004. It was trading in the mid-$2s (today’s dollars) in the summer before the Stern deal. It was at $3.29 the day before the announcement and closed at $3.80 the day after. By the summer of 2005 – still months before Stern’s premier Sirius broadcast – Sirius’s stock got up into the $7s. Today, the stock trades around $3.80.

    Any rational person would conclude that, by helping take a service from 261k in paid subs the year before he announced he was coming to 10 million in the month after he started broadcasting to 27 million today, Howard Stern was the single most important reason for that company’s growth as a business.

    Stern and Buchwald hoped to benefit in that growth with Sirius because of the large potential bonus payments tied to growth at the company. However, they tied the payments to growth in the stock price instead of growth to the overall subscribers. The stock price – in hindsight – was extremely over-valued at that time, pricing in that Sirius would basically wipe out terrestrial radio.

    As a comparison, Sirius barely had any revenues before Stern signed on and yet the market was valuing the stock between $10 – 20 billion. Internet radio company Pandora (P) had about $1 billion in gross revenue last year and is today valued around $3.6 billion.

    In a recent Bloomberg article about Stern’s decision to re-sign with Sirius, the author says:

    In January 2014, Macquarie surveyed 800 SiriusXM subscribers and found that while SiriusXM is available on the go for premium subscribers via Web and mobile apps, 84 percent of listening takes place in cars. Of the respondents, 12 percent said they listen to Stern—the equivalent of about 3.2 million listeners. Five percent said they’d consider leaving SiriusXM if Stern departed. A rough estimate suggests it could cost the company about $240 million in lost revenue annually if he left. For a company that generated $4.2 billion in revenue last year, that would be a substantial blow—but hardly crippling.

    If you strictly went by the math in this survey above, you might conclude that only 1.3 million Sirius subs would cancel to go and subscribe to a Howard Stern OTT offering. However, this vastly understates the potential revenue a Stern OTT offering could generate. Just look at the growth of Sirius around the Stern news for a clue.

    And, do you think it’s more difficult for people to figure out how to sign up for a Stern OTT offering – when 60 million subscribe to Netflix – than it was signing up for Sirius back in 2004? Some Stern critics have said that his audience is older now. Great, because those are the ones who won’t think twice to pay $6 a month.

    My guess looking at the Sirius sub growth in 2003 – 2006 and how it’s grown since is that, within 2 years of launching an OTT service, Howard Stern could get 10 million paying subs. That’s far more than the estimated 400k subs Glenn Beck is reported to have today for TheBlaze.

    At $6 a month, 10 million Stern subs translates into $720 million a year in revenue. That’s gross revenue. Stern would have to hire a whole media team to execute his business plan. He’d have to have a studio. He’d have to pay his sidekick team as well. And then, in addition to producing his daily show, he’d likely produce additional content similar to his Howard Stern late-night TV show he put on the air against SNL years ago, or to his additional Sirius channels. (I forget if he owns all his historical content from Sirius and before or not. If he does, even better.)

    In the age of YouTube, it’s getting cheaper and cheaper to produce content – especially sending goofballs on to the streets of New York to talk to people, do stupid tricks, or crash press conferences. Let’s estimate all-in sales & marketing as well as general and administration costs are going to be 20% of sales or $144 million annually.

    More ...
     
    Last edited: Sep 2, 2015
  2. Smartguy

    Smartguy This Space Is For Rent VIP

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    If the InDemand failure taught us anything, it is that Howard can no longer maintain a subscription media based on his content. Any next move will be a failure. He should go out grab whatever legacy he has left and retire with it.
     
  3. Yeahnolisten

    Yeahnolisten Well-Known Member

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    10 million subscribers? He can't even get 12 people to wait outside for him at Letterman.
     
    kingship, yaddc, Bye You! and 44 others like this.
  4. Tipsey Russell

    Tipsey Russell VIP Extreme Gold

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    I'm more concerned with how I'm gonna hear Colin cowherd now


    He's really quite entertaining and annoying
     
  5. AcquiringSignal

    AcquiringSignal Girthy VIP

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    Who's down wit OTT....
     
    Mark Harris, yaddc, SternsEgo and 8 others like this.
  6. Chicken Soda

    Chicken Soda Unknown Member

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    Marci's Ex checking in :wigtip:
     
  7. Vinegarette

    Vinegarette Don't Believe What You Hear

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    I saw that. :hat:

    PS. You didn't mention the cult & "no personal coffee cups" though.
     
    smichal likes this.
  8. UpInSmoke123

    UpInSmoke123 Well-Known Member

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    You can't prank people into paying for a podcast the same way you can prank a dopey company like Sirius into a giant contract. You have to deliver. No amount of ball-washing articles can change the fact that Howard can't deliver the goods in 2015. I don't think he's stupid enough to go out on his own and fail. This is just another pathetic attempt to squeeze a couple more shekels out of Sirius by pretending that he has another viable option. He doesn't. He'll take whatever Sirius offers him, or he'll retire. Those are the actual options on the table.
     
  9. Nemo

    Nemo Beer Can Thick Gold

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    ATTN Shed social media division

     
  10. Penelope

    Penelope VIP Extreme Gold

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    You got the second part right. :p:D
     
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  11. scoobyla

    scoobyla Well-Known Member

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    i think ppl write bs articles with his name cause they know itl get clicks.
    we all know he isnt doing this
     
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  12. itsawig

    itsawig Well-Known Member

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    But Indemand thanked his "thousands of fans". The guy who wrote the article forgot about that. I imagine anyone in a position of power at Sirius is laughing their ass off while reading the article and they will wish wiggy well in his new subscriber failure.
     
  13. Vinegarette

    Vinegarette Don't Believe What You Hear

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    From the article:

    In the age of YouTube, it’s getting cheaper and cheaper to produce content – especially sending goofballs on to the streets of New York to talk to people, do stupid tricks, or crash press conferences. Let’s estimate all-in sales & marketing as well as general and administration costs are going to be 20% of sales or $144 million annually.


    :lol:

    Someone else hates Benjy too.
     
  14. Nemo

    Nemo Beer Can Thick Gold

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    Tracy, Icey, GQtaste and 23 others like this.
  15. Skipnoid

    Skipnoid Lick Me!

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    Everything said above ... and I'm sure below ... is true. PLUS: he doesn't want to work that hard either. I would think that taking on a whole new venture like a podcast would be a huge amount of work, no? :dontknow:
     
  16. Divorce Chicken

    Divorce Chicken white punk on dope VIP

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    First, this "story" has Buchwaldco Worldwide written all over it. Either as a negotiating tactic or as a heads' up on Howie's next career move. I think the author is right that it's increasingly clear that satellite radio is a stepping stone to cheaper and more direct mobile applications (like Pandora).

    The problem for Howard is that whatever he does in the future depends on content. And from the last 5-6 years at S/XM, it's clear that Howard is either unable or unwilling to supply more than the bare minimum amount of content necessary to maintain even one S/XM channel. He already duped his loyal listeners to switch to S/XM once with the promise of a notebook of ideas, I don't think they're going to be duped again.

    If Howard isn't willing to put in the time, why not just launch a podcast with unedited versions of his old shows? He has decades of material. He could charge $1.99/month, but have very few fixed costs so it would be mostly profit.
     
    Last edited: Sep 2, 2015
  17. SouthernListen

    SouthernListen I don't follow the crowd. Sorry about that. VIP

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    Howard is a PAYCHECK GUY. He is not a risk taking entrepreneur. With a paycheck he can hide any potential legacy tainting failure. So whatever he does it will be for a paycheck with another entity bearing the brunt of the financial risk.
     
  18. Chicken Soda

    Chicken Soda Unknown Member

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    Forgot about mandatory cups...
     
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  19. smichal

    smichal A1 Dick Game

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  20. Vinegarette

    Vinegarette Don't Believe What You Hear

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    We're addressing it in the comments.

    [​IMG]