Company Town

The business behind the show

« Previous Post | Company Town Home | Next Post »

Lots of similarities between Yankees' situation with Derek Jeter and Sirius XM's talks with Howard Stern

December 8, 2010 | 12:38 pm

STERN

If Derek Jeter ever went on Howard Stern's satellite radio show, many of the questions would no doubt be about the bevy of beautiful women the Yankees shortstop has dated over the years.

While that would fascinate the bulk of Stern's male audience, the radio personality himself might benefit more by talking with Jeter about his recent renegotiations with the Yankees. There are a lot of similarities between what the Yankee shortstop just went through and what the self-proclaimed king of all media is dealing with right now.

Both Jeter and Stern are New York institutions with national fan bases. Both are considered tops at their position and each has made clutch plays for their teams for years. And lastly, both are arguably approaching the twilight of their incredible careers.

Jeter just finished negotiating a new deal that should keep him in pinstripes until he hangs up his glove in a few years. Stern, who turns 57 next month, is coming to the end of his contract and Sirius XM would like to hold onto him.

The question, though, is at what cost.

The Yankees decided to play hardball with Jeter and talks got heated at times. Perhaps knowing Jeter wasn't really interested in jumping to another team so late in his career, the Yankees negotiated in public and made clear that they felt Jeter's age and disappointing 2010 season meant he should be prepared to take a pay cut.

It's not that the Yankees didn't have a point. After all, prior to this current deal Jeter had made over $200 million with the team. It's not like his next deal was supposed to be some make-good for previous slights. The Yankees saw it more as a reality check. To borrow from Michael Corleone, "It's not personal ... it's strictly business."

JETER Still, Jeter felt disrespected and some fans got irked, because even though they know their idol's best days are behind him, he still puts people in the seats and sells jerseys. Jeter is an icon for the franchise. He has avoided scandals and no one ever questions his work ethic.

Jeter ended up signing a deal that will pay him less (his annual salary dropped from almost $19 million to $17 million) than he was making, but probably more than any other team would have given the aging player. 

Stern was paid handsomely for making the jump from broadcast radio to satellite. His deal is valued at $100 million annually. That's a big figure, but keep in mind that it's for the cost of the show. In other words, his sidekicks and crew get paid out of that as well. Even after that, though, Stern is still being compensated tens of millions a year.

Sirius XM has indicated that it wants to rein in some of its programming costs, although contrary to some reports, it has not said Stern would necessarily have to take a pay cut. It's only natural that Sirius XM wants to save some money. Its stock is trading at under $2 a share, and after merging with XM it has removed one of its biggest competitors. 

"At the time of the merger, we were in many long-term contracts," said the company's chief financial officer, David Frear, at the UBS Global Media and Communications Conference earlier this week. "As they come up for renewal, we'll have the opportunity to get more favorable economic terms there." 

Karmazin When Stern joined Sirius in 2006, it was groundbreaking, sending a signal that satellite radio was for real. Other stars have followed, including Rosie O'Donnell, Dr. Laura Schlessinger and Oprah Winfrey. It also has a slew of specialty music and sports channels. The service has grown from 600,000 subscribers before Stern joined to almost 20 million now.

Though Stern may not be as crucial to Sirius XM as he once was, like Jeter he is still a vital cog in the machine. Without him, Sirius XM loses not only his followers, but all the free publicity he generates for the company. Is he still worth such a huge paycheck? That's up to the two of them to decide. Stern is brassy on the air, but he is also pretty savvy behind the scenes, and he has a sense of loyalty for Sirius XM boss Mel Karmazin. The two have worked together for decades.

Stern does have some options. A return to broadcast radio is unlikely given that he's probably gotten used to swearing whenever he wants. But Stern has a big-enough following to give going truly solo serious consideration. Stern could launch his own subscription radio show on the Internet and would easily find backers.

That scenario may seem intriguing, but it comes with lots of risks. For starters, much of Stern's audience listens to him in the car on their way to work. While it's not impossible to get streaming Internet content in the car, it's also not as easy as pushing a button. There would be heavy marketing expenses for any new venture. There is also no guarantee that all of Stern's fans would follow him. A chunk went to Sirius, but a lot of the rest just found someone else to listen to on broadcast radio.

There has been speculation about Stern doing some sort of deal with Apple and its iTunes service. But  Apple does not usually pay directly to talent. Stern could sell shows on iTunes and keep a big chunk of the money, but again anything that takes away the live element to his show, or is on a platform that not all his listeners can enjoy together, is a big gamble. It's also not clear that he could make any more money from either approach than what he's making now.

Like Jeter, Stern is probably worth the most to his current employer. If he's offered a new deal for less money, perhaps his producer Gary "Baba Booey" Dell'Abate will take one for the team.

-- Joe Flint

Related post: Gary Dell'Abate talks about life as Baba Booey.

Photos: Top: Howard Stern. Credit: Getty Images. Right: Derek Jeter. Credit: Marcus Donner / Reuters. Bottom left: Mel Karmazin. Credit: Jonathan Fickies / Bloomberg.

 

Comments 

Advertisement










Video