By Matt Phillips
Prices for Sirius XM Radio are up a healthy 6.5% on news that the satellite radio operated nailed down the shock jock for another five years.
In a statement this morning the company said Stern’s new contract will run through December 31, 2015. “Under the terms of the new contract, SIRIUS XM will now have the right to transmit Howard’s exclusive programming to mobile devices. Additional terms of the contract will not be disclosed,” the statement said.
Questions about Stern reupping for another stint at Sirius seems to have been a weight on the shares lately. In a note published Wednesday Miller Tabak analyst David Joyce wrote “we reiterate our Neutral rating due to the potential loss of Howard Stern-reliant subs if he does not renew his contract.”
Last month analysts at Wunderlich Securities tried their hand at what they called “Sternomics,” in trying to suss out whether the subscribers Stern delivers are worth the compensation the company has to shovel out for the superstar radio personality:
Variables are Stern’s annual compensation, the number of listeners who would defect to a Stern streaming service or terrestrial radio, and the duration of any new contract. We assume a 70% monthly ($9+) variable cash flow contribution on each Stern fanatic and a low 1.5% churn rate. We run compensation iterations at $75mm, $100mm, and $150mm. We are neutral between a five-year contract at $100 million and losing one million customers.
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