Source : National Post

Radio shock jock Howard Stern received an early birthday present yesterday from his bosses at Sirius Satellite Radio Inc. -- a stock-based bonus of nearly US$83-million after subscriptions to the satellite-radio service exceeded expectations by adding 2.7 million listeners in 2006.

Sirius credited the controversial radio host, who will turn 53 on Friday, for increasing the company's brand awareness and for bolstering its subscription base in 2006. Prior to Mr. Stern joining Sirius one year ago, the average analyst prediction was that the company would see only 3.5 million subscribers by year-end.

Sirius and Mr. Stern agreed to an added bonus in the event that the number of subscribers exceeded that forecast by more than two million. Last week, the company reported that it ended 2006 with more than six million subscribers, at the middle of a forecast range made in December, triggering the bonus payment of about 22.1 million shares. Sirius shares closed at US$3.71, down US5¢, on the NASDAQ.

Mr. Stern's penchant for strippers, porn stars and scatological humour has not disappointed his fans on satellite radio, after bucking FCC regulations when he left CBS for the subscription radio service. He has also continued to parade a long list of "celebrities" through his studio, from porn star Jenna Jameson to news anchor Barbara Walters.

"The decision to bring Howard Stern to Sirius required a very significant commitment and we are very pleased that our investment has dramatically paid off," Sirius chief executive Mel Karmazin said yesterday.

Mr. Stern's presence gave Sirius a serious boost on the retail side of its business, which has allowed it to compete with its larger rival, XM Satellite Radio Holdings Inc.

XM ended 2006 with 7.63 million subscribers, up almost 1.7 million from a year ago but short of its most recent prediction of 7.7 million to 7.9 million. A year ago, XM forecast nine million subscribers at the end of 2006, before cutting its forecast in May and again in July.

Mr. Karmazin said yesterday Sirius is now generating US$300-million more revenue than analysts had predicted when Mr. Stern signed his five year, US$500-million contract with the company.

Mr. Stern and his affiliates received a bonus of more than 22 million shares of Sirius yesterday, valued at US$82.9-million, as laid out in his contract for exceeding the company's "pre- Howard" expectations.

It's the second such bonus for Mr. Stern. A few days after his show began last January, he was awarded about US$219-million in shares after the radio host hit some unspecified goals almost immediately.

Despite yesterday's bonus, Sirius continues to bleed, losing nearly US$163-million in the third quarter of 2006 alone. XM lost US$83.8-million over the same period.

XM Canada lost more than $102-million in 2006, mostly because of marketing and costs associated with signing up customers. Sirius Canada does not publish financial statements.

The hefty bonuses provided to Mr. Stern highlight the astronomical amounts XM and Sirius are willing to pay for programming to attract listeners.

"Sirius really needed a major push on the retail side so they could compete, and I think Stern gave that to them," said David Bank, an analyst with RBC Capital Markets in New York. "I think it was a smart move for them to do. It was an expensive one, but there may not have been a Sirius without him."

But the cost of talent -- Mr. Stern with Sirius and Oprah Winfrey with XM -- has lent credence to the idea that two competing companies may be considering a merger.

Mr. Karmazin sparked those rumours a few months ago by openly musing about the benefits of a merger between the two companies. Sirius' chief financial officer, David Frear, added futher fodder last month when he told an investor conference that cost savings alone justify a merger.

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