NEW YORK – Sirius Satellite Radio (SIRI) paid shock jock Howard Stern a bonus worth nearly $83 million on Tuesday for surpassing subscriber goals set in a 2004 contract that had already turned heads with its $500 million compensation package.
The freewheeling and ribald Stern joined Sirius one year ago, jumping from the FM dial where he rose to become one of radio's biggest stars but frequently bridled at government indecency regulations and ties with his corporate bosses.
His defection marked a turning point for the nascent business of satellite radio, with both Sirius and larger rival XM Satellite Radio (XMR) paying millions more to sign on other talent and attract listeners to their subscriber model.
Sirius had roughly 600,000 subscribers when it signed Stern in 2004 for a contract valued at $500 million over five years.
At the time, analysts had forecast the company would grow to about 3.5 million subscribers by the end of 2006. Sirius and Stern agreed to an added bonus in the event that the number of subscribers exceeded that forecast by more than 2 million.
Last week, the company reported that it ended 2006 with more than 6 million subscribers, at the middle of a forecast range made in December, triggering the bonus payment of about 22.1 million shares. Sirius closed at $3.76 on Tuesday.
"The decision to bring Howard Stern to Sirius required a very significant commitment and we are very pleased that our investment has dramatically paid off," Sirius Chief Executive Mel Karmazin said in a statement.
Sirius said the bonus to Stern would not increase its diluted share count and that expenses related to the payment have been reflected in operating results throughout 2006.
Both Sirius and XM are growing rapidly, but losing money as they aim to improve their technology and sign on top-shelf entertainment, from the largest U.S. sports leagues to celebrities like Stern, Oprah Winfrey and Martha Stewart.
Sirius and XM shares have also shed more than 40 percent of their value in the last year, compared with a 10 percent rise in the Standard & Poor's 500 Index, with investor concerns ranging from the ability to meet new subscriber targets to a weak retail sector.
Stern's contract with Sirius offers additional stock-based bonuses for exceeding subscriber targets on an annual basis, but the threshold grows increasingly higher over time and is substantially greater than 2 million.
That makes it less likely the radio host would qualify for another bonus going forward unless Sirius posts tremendous new growth.
Sirius shares were down slightly at $3.75 shortly after the Nasdaq's open on Tuesday.
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