NEW YORK Ã¢â‚¬â€- Howard Stern is making good on his threat to move to satellite radio.
The shock jock signed a five-year deal with Sirius Satellite Radio worth $100 million a year beginning in 2006.
The deal could vault satellite radio into the mainstream and also complicate matters for Viacom’s Infinity Broadcasting, the nation’s No. 2 radio chain, which has been battered by a prolonged advertising slump. Stern’s contract with Infinity ends at the end of 2005.
The $500 million deal includes guaranteed payments to Stern, as well as the cost of promotions, staff and overhead for the show. Stern will host a show on the basic Sirius service, as well as develop at least two other channels, the company said.
Shares in Sirius rose 14% in early trading on the Nasdaq. Shares in competitor XM Satellite Radio slipped nearly 3%.
“It has been my dream to have the top-rated show in radio since I was five years old,” Stern said in statement. “Sirius — the future of radio — will take this dream to a whole new level as I bring my fans my show my way. It will be the best radio they will ever hear.”
The contract is a huge financial gamble for Sirius, which is betting that Stern will bring enough subscribers to make the deal pay. “We believe that the material positive effects on our business far outweigh the related incentive payments,” the company said, in a filing.
The deal includes substantial cash payments to Stern and stock grants when subscriber goals are met. Terms of the deal were not disclosed.
My thoughts: Say goodbye to XM. This is the first big coup for satellite radio, and could be the beginning of a new trend. If radio personalities feel constricted by FCC laws, they can simply take the big cash from the satellite boys and have the exact show they want to without anyone looking over their shoulders. Also, sign me up for Sirius.