Industry watchers say the deal gives Sirius instant credibility but it's also costing Sirius a pretty penny. If reports are to be believed, Mr. Karmazin is getting a two percent stake in the company, worth about $120 million, and a $1.2 million annual salary, paltry by his past standards.
Karmazin will have to deliver when it comes to subscribers. Sirius is lagging well behind its larger rival, XM Satellite Radio, but rapidly closing the gap.
Joining us now on the phone to talk more about this, the dealmaker himself, Mel Karmazin.
Mel, good to have you. Thank you for joining us.
MEL KARMAZIN, CEO, SIRIUS SATELLITE RADIO (SIRI): Thanks for inviting me.
CAVUTO: Why did you do this?
KARMAZIN: Well, I didn't do it for the reason that you led up in the lead-in. I didn't get 2 percent of the stock. I got stock options at yesterday's price. So if the stock goes up significantly, I will obviously participate in the game.
But it wasn't a gift of, you know, 2 percent of company. I have stock options at the price yesterday.
I joined the company because this was the single perfect company for what I was looking for.
After I left Viacom, took the summer off, came back and decided what it was that I wanted to do, and I'm an entrepreneur. You know, when I started Infinity with two partners, we had three radio stations. The equity was worth $10 million.
When we sold it to Viacom, it sold for $18 billion. When I joined Westwood One, you know, I'm not sure you are familiar with the company...
CAVUTO: Oh yes.
KARMAZIN: OK, great. And when I joined Westwood Wood, the stock was under $2, and today it's at $23. And what I enjoyed doing is being part of a growth company.
I think Sirius is, you know, really extraordinarily well positioned. I think the decision of acquiring the NFL rights and Howard Stern (search) that Scott Greenstein did with Joe Clayton was brilliant. It was transforming, not just transforming for satellite radio; I think transforming for radio.
So, the growth has been terrific to date...
CAVUTO: But Mel, that growth has come with a lot of excessive spending. I know you made Infinity what it was by reigning in a lot of wasteful spending and watching costs, and that made you near and dear to Wall Street.
Is that your first duty coming over to Sirius?
KARMAZIN: I think if you were to take a look at my history, it was that we always spent money on content, you know, whether or not it be Don Imus, whether or not it be Howard Stern, whether or not it be various sports writers.
When I got to CBS, we made a decision to take the NFL. I understand they just renewed it again. We did a deal with the NCAA programming. CBS spent an extraordinary amount on programming.
What I've always done is make sure that the money that being spent, investors' money, was being well spent. And there's nothing better to spend money on than programming.
CAVUTO: We don't know what's accurate when it comes to Howard Stern, but $100 million a year, the figures that were bandied about.
Does that seem excessive, even for someone of Howard alternative Stern's marquis value?
KARMAZIN: Ask me the question at the end of five years and once we see the number of subscribers.
Based on the numbers that I was taken through and based on certain assumptions which, you know, look to be conservative, but you never know until you get there, this was a very smart, terrific investment.
I don't know if I'm allowed to mention Rupert Murdoch's name on this channel, but Rupert made an extraordinary traction when he took the NFL originally away from CBS.
CAVUTO: Good point.
KARMAZIN: You know, what NFL did for Fox was it really got them to pick up affiliates. It got them to, you know, really have a position. And I think that the acquisition of the NFL, the acquisition of Howard Stern, you know, is not unlike that.
CAVUTO: But could I ask you, Mel, we have XM as your rival. Can you have two satellite radio stations thriving?
KARMAZIN: Well, you know, you have two, you know, satellite television companies both, hopefully, thriving in Direct TV and Dish Network.
I think satellite radio has more opportunity than satellite television because of the mobile nature of it. You know, most people are not watching satellite television in their car. They're not watching it on their boats. They're not watching it in their, you know, RV's. So you add the home together with all of these other things.
I think that, just like ESPN and MTV is what got people to subscribe to cable -- you know, it wasn't just the broadcast stations because they this had them. It was the addition of ESPN and MTV.
And I think that Howard and the NFL are like that. I also believe that those will be the vehicles that will drive people to -- excuse the expression, driving, but drive people to buy satellite radio.
If, in fact, satellite radio goes to -- there's 100 million homes in the United States, all listening to radio now. If content, very important content moves over to satellite radio, with Sirius getting the bulk of that desirable content, I believe the subscriber numbers will be extraordinary and certainly provide shareholders with the opportunity to see these gains.
I will tell you what I did today and I'm just one individual. I believe in the company so much that I bought -- and there will be a filing on Monday -- but in the open market today, I bought a million and a half shares of Sirius.
CAVUTO: OK. All right.
KARMAZIN: Cash. You know, how many CEOs are taking their money and buying their stock?
CAVUTO: Good point. Mel Karmazin, thank you very much. Thank you for joining us. We wish you well. Quite an undertaking. Mel Karmazin.
Content and Programming Copyright 2004 Fox News Network, L.L.C. ALL RIGHTS RESERVED. Transcription Copyright 2004 eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, L.L.C.'s and eMediaMillWorks, Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.