Sirius XM CEO Mel Karmazin was on PBS’ “Nightly Business Report” Wednesday evening, touting the future of the satellite radio business. With a business plan heavily dependent on new car sales, he insisted that auto sales are finally on the way back up.
“I think people are not buying 16 million cars a year, as has been the history over the last 10 years, but it’s higher than it’s been. We hit bottom. We seem to be on our way back. Our budget for next year is predicated on about 11 to 12 million car sales and based on yesterday’s sales, that is very much in line,” Karmazin replied when interviewer Susie Gharib asked about still-slow sales figures from carmakers.
She also asked about competition from Internet streams, with mobile broadband availability and those streams generally available for free to anyone with wireless access. Karmazin noted that Sirius XM has $2.5 billion in annual revenues, while the largest Internet radio company he knows of has revenues of around $100 million. His company is profitable and theirs isn’t, so he’s not very worried.
“Some people would say that’s just a matter of time that the satellite radio business model will be out of date. What do you say to that?” Gharib asked.
“I believe we will be the leading company in the audio entertainment space in the years ahead and it’s our position to lose and there’s nobody, nobody that can compare with the fact that we have these 135 channels in every single market in the United States and we have all of these commercial-free music channels and Oprah show and Howard Stern. We offer the best radio on the radio,” Karmazin replied.
So, what about Howard Steren, whose contract expires next year?
“Howard has been a very significant performer for us. He has to decide on whether or not he wants to continue. If he does, I would be doing everything I can to work out financial arrangements that are in our shareholders’ best interests to do a deal with Howard,” Karmazin said.
Gharib: “Can you afford to keep continuing to pay top dollar for people like Howard Stern or Martha Stewart giving the economics of this business?”
“Over my entire career, I’ve always heard that content is expensive. Well, yeah, content is very expensive and if you want to have great content, whether it be the NFL or whether or not it be Howard Stern, you have to pay for it. And my business model is always that I’d rather figure out a way to make money with the talent rather than not have them and compete against them,” Karmazin replied.