Mel Karmazin, the CEO of Sirius XM, explains why Howard Stern's show has ads. It's not why you think
Mel Karmazin is worried about Google.
At a panel discussion about business models for entertainment, the CEO of Sirius XM Radio raised the prospect of the search giant entering the satellite radio space and deficit-funding a chunk of market share.
“We worry someone will come along with no subscribers, no advertising – free – and that’s tough,” he said at the Milken Global Conference 2012 on Wednesday.
“That business model is so tough. How long will it be until Google says, ‘We like this space,’ and invests three, four years in the business” – at a loss? “Not so good,” he concluded.
There’s no immediate evidence that Google intends to do that. But Karmazin, who relies on monthly subscription revenue to drive his profits, is correct that any one of the cash-rich, new media giants could take aim at an existing entertainment space tomorrow and fund it at a loss.
Not just radio: how about movies, live concerts, Western rodeos? They could.
Bobby Kotick, CEO of Activision Blizzard, was also on the panel, and expressed a parallel concern. “The single biggest bucket of money at Facebook is for games,” he said, referring to what drives the social giant’s advertising revenue. “It’s the biggest platform for games that has ever existed.”
And much of it is free. “A lot of compelling entertainment is available that is just free,” said the man who sells an awful lot of “Call of Duty.”
Karmazin’s subscription business model has been working of late.
Sirius XM Radio shares rose 12 percent last year, while subscribers rose to almost 22 million. The company just announced first quarter hikes in profit and revenue, with 300,000 new subscribers signing up despite a price increase.
Karmazin has led a renaissance at Sirius XM, home of Howard Stern, boosted by the recent resurrection of car (and hence new radio) sales.
Lionsgate CEO Jon Feltheimer, also on the panel, teased Karmazin as to why Howard Stern’s show had ads.
Karmazin explained it was a call of nature. “We have no ads on our music,” he said. “But Howard Stern needs to go to the bathroom at some point. We needed a mechanism for him to do so.”
He said there are a maximum of six minutes of ads for Stern’s restroom breaks. (Google, take note.)
Meanwhile, Feltheimer – who rounded out the panel with News Corp. COO Chase Carey – reveled in the success of his “Hunger Games” blockbuster.
He noted that allowing fans to participate in the marketing of the film was critical for a studio that doesn’t have marketing budgets the size of Twentieth Century Fox.
“We allowed fans to bring their material to “Hunger Games,’ and they felt empowered,” he said.
Earlier in the day, Bill Clinton gave a keynote address and urged the attendees to focus on stimulating the economy rather than cost-cutting.
Addressing the global economic stagnation and public debt, the former president said: "You've got to do it with growth," Clinton said. "You cannot reduce the public debt without proper budget restraint, proper revenue stream and adequate growth."
Viacom chief Sumner Redstone also spoke at the conference during a panel discussion on entrepreneurship, as he did last year (when he assured all assembled that he did not ever intend to die).
The nearly 89-year-old mogul said: "You have to be in control of your destiny. You can't work for anyone else. It's not about money, it's about winning. You have to have a passion to win."