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January 10, 2006

Howard Stern and Mel Karmazin

Yesterday, January 9, 2006 was the first day of the rest of Howard Stern's satellite life, and I don't wish him well for a couple of reasons.

First, I'm sick of reading about Stern in the newspapers, in online news, and in blogs. Enough already. Second, I don't like Howard Stern or his radio program. He is outrageously self-absorbed and an outrageous, but very clever, self-promoter, whose idea of a good time and of good humor is to tell flatulence jokes. And he's where the flatulence comes from--he's an asshole.

But even Howard is often more credible and less outrageous than his boss, Mel Karmazin, who gave a speech to the Citigroup Media and Telecommunications Conference in Phoenix just hours after Stern did his debut show. Karmazin is CEO of Sirius Satellite Radio, Stern's new home, and he told the gathered analysts that Sirius would be "a $600 million advertising market by the end of 2006," according to Advertising Age's online Media Works news service.

What has Karmazin been smoking? A $600 million dollar advertising market? More ad revenue than the number-one advertising revenue producing magazine, People? I'm sure he meant that Sirius would have $600 million in total revenue in 2006, including subscription revenue and ad revenue from all of its channels that carry commercials. Sirius might do $600 million in total revenue. Let's look at the numbers.

If Sirius has 3.3 million average monthly subscribers during 2006 (a conservative number) who pay $12.95 a month (we'll make it $13 so the math is easier), that would bring in $514.8 million in subscription fees, leaving $85.2 million for ad revenue. Divide that $85.2 million by 52 weeks and you get $1,638,461 a week that Sirius has to generate in ad revenue.

Could Stern alone generate $1.638 million a week? If he's on five days a week, that's $327,692 a day and if he's on for four hours, that's $81,932 an hour he has to generate. If Stern runs 12 spots an hour, that's $6,826 a spot, assuming he's sold out. If we also assume that all 3.3 million Sirius subscribers listen to Howard Stern (and he certainly believes they do), then the cost-per-thousand (CPM) for a $6,826 spot would be $2.07, which is quite good. If only half of the 3.3 million subscribers listen, the CPM would be $4.14, and if only 25% of all Sirius subscribers listen, that would be a potential CPM of $8.28, which is reasonable, especially if Howard reads the commercial.

If I were an advertiser trying to reach a male 18-34 year old audience that laughs at fart jokes and likes to hear Howard talking with a stripper sitting in his lap, would I pay an $8 CPM for Howard? Yes, more than likely.

So, I guess Karmazin has been smoking expensive cigars as he looks forward, reasonably, to a $600 million year, and I might advertise on Howard Stern's show but never be able to stand to hear my commercial.

Posted by Charles Warner at January 10, 2006 10:23 PM

Comments

Judd Author Profile Page at January 14, 2006 4:35 PM writes:

Sorry to be a party pooper, but Ad Age messed it up. The number quoted was $60 Million.

But I agree that Stern warrants little sympathy. The fanfare for this change-over has been remarkable for its lack of depth. Everybody knows about Stern already. They know he's clever and scheming and so all of these articles have essentially been advertisements for Sirius.


Media Curmudgeon Author Profile Page at January 11, 2006 12:30 PM writes:

Bill Grimes writes:

"I gree with your logic on Sirius Radio economics.
I saw pix of Mel with Stern at NYSE and he looked like a caricature of himself.

I think he meant total revenues but I also think he is in need of public exposure and thus continues to overstate and overpromote his affiliations. It was his "blue sky" revenue forcasts that got him fired at Viacom but Mel listens to only Mel. Maybe a bit to Howard the Gross.


Media Curmudgeon Author Profile Page at January 11, 2006 12:23 PM writes:

Bruce Braun writes:

"Dead on Charlie! Mel must have been smoking something funny. It also points to how little many financial types attending these conferences understand about the media business. “If Mel says so…it must be true”.

Given all of the now unfettered profanity and subject matter in Stern’s new show, I think the vast majority of advertisers will still stay away….no matter how low or competitive the CPM’s!

I remember hearing the late Steve Allen commenting once on Stern as “The Vulgarian entertaining the Barbarians”…an apt characterization!"