Source : National Post

Reaches goal of three million subscribers

Sirius Satellite Radio Inc., the No. 2 U.S. pay-radio provider, has surpassed three million subscribers as users signed up ahead of talk-show host Howard Stern's debut at the company next month.

The New York-based company, with more than 120 commercial- free stations, said in a statement yesterday it expects a "strong" end of the year. Sirius on Nov. 1 had predicted more than three million users at year-end.

Mr. Stern, who is being paid US$500-million over five years, helped Sirius win customers over larger rival XM Satellite Radio Holdings Inc. in the Northeastern United States, Citigroup Inc. analyst Eileen Furukawa said. Sirius chief executive Mel Karmazin in November predicted a "blowout" quarter, propelled by holiday purchases and Stern fans joining.

"The 'Stern effect' is real," Ms. Furukawa, who is based in New York, wrote in a note to clients yesterday. Sirius outsold XM at least three to one in the Northeast, she said, citing checks with retailers. Citigroup surveyed more than 100 stores across the United States and said it found some locations sold out of some XM and Sirius products during an "extremely strong holiday selling season in general for satellite radio."

Sirius shares (SIRI/NASDAQ) added US16 cents to close at US$6.99 yesterday. The stock, which reached US$69.44 in March, 2000, has risen almost 8% since Nov. 1.

Mr. Stern will begin on Jan. 9. Sirius said when it signed him in October, 2004, that his show needs to generate one million customers to pay to produce and broadcast the program.

Mr. Stern, whose show was top-rated among young men in New York and Los Angeles, ended his 30-year career on free radio on Dec. 16. He began in 1975 as a newscaster at an AM station in Newton, Mass. His jokes drew more than US$2-million in indecency fines before he left Viacom Inc.'s Infinity Broadcasting Corp.

"Satellite radio is the growth engine for the radio business," Mr. Karmazin said when he joined in November, 2004. "It's all about content. That's what people watch, that's what people listen to, and Sirius is committed to being the premier content company in the radio business."

Helped by Mr. Stern, Sirius is growing more quickly than XM. Sirius added 359,294 users to 2.17 million last quarter, a 20% gain from the second period. Washington-based XM had 5.03 million listeners, up 14% from the prior quarter.

Still, higher programming costs and spending to add listeners caused Sirius's third-quarter loss to widen to US$180.5-million, or US14 cents a share, from US$169.4-million (US14 cents) a year ago. The company has never been profitable.

Sirius, which charges US$12.95 a month, spent more than US$720-million last year on new programming. The service airs National Basketball Association, National Hockey League and National Football League games, as well as Nascar auto racing and English soccer.

Eighteen analysts recommend investors buy the shares, eight suggest holding them and four have "sell" ratings. Banc of America analyst Jonathan Jacoby on Dec. 13 lowered his rating on the shares to "sell" from "neutral" and said Mr. Stern may not bolster subscribers as much as investors expect.
 
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