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Howard Stern Sues Sirius XM for Millions

Shock jock cites breach of contract in brief

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Howard Stern Sues Sirius XM for Millions
[ Business]

The self described “King of all Media” wants his royalties.  On Tuesday Stern’s production company One Twelve Inc. and agent Don Buchwald were named plaintiffs in a lawsuit against Stern’s employer, Sirius XM satellite radio.  The lawsuit claims breach of contract and states that Sirius reneged on guaranteed stock bonuses for Stern based on successful performance.  Buchwald is also demanding his guaranteed consulting fee of 10% of One Twelve payments.

By October 2004, Howard Stern was already in the upper echelon of his profession.  The Howard Stern Show, broadcast in New York City, garnered 20 million listeners at its peak.  Stern was the first radio host to be number one in both NYC and Los Angeles simultaneously.  As the suit takes time to explain, nobody could argue against Howard Stern’s incredible popularity:

Howard Stern is a world renowned radio and entertainment personality.  Stern is a unique talent who is widely credited with revolutionizing talk radio.  His brand of free-wheeling discourse and reality programming is enormously popular and has made Stern into a household name.

The suit identifies Stern a a superstar – one who took an enormous risk by agreeing to take his widely popular show to an unproven satellite radio company.  At the time of the contract, Sirius only had 700,000 subscribers, a distant second behind industry leader at the time XM who had upwards of 2.5 million.

Sirius needed Stern more than Stern needed Sirius. Stern was unsure if he wanted to continue in radio. He was under pressure to perform, keeping a grueling schedule that required getting up at 4 am., and was seriously thinking of retiring. Moving to satellite radio, and especially to Sirius, was a significant risk for Stern. Stern and Buchwald wanted assurances that if Stern made Sirius a success, they would share in that success.

In order to tempt Stern to come on board, Sirius drew up a plan that involved a series of escalating stock awards, payable to Stern’s production company One Twelve if Stern himself attracted 2 million new subscribers or if Sirius exceeded their own yearly estimates for subscribers by more than 2 million.

In addition, for each additional 2 million subscribers per year, Stern was to receive stock bonuses.  Those subscribers had to either be directly attributed to Stern or simply be total users above Sirius’ own projections.  The bonuses were to be paid for increases in subscriptions in multiples of 2 million, capping at 10 million.  In lawyer speak:

Sirius was required to pay One Twelve a second performance-based stock award if the Agreement remained in effect and, on or before December 31, 2010, either (i) Sirius had acquired a total number of 4 million or more HS-Generated Subscribers or (ii) the total number of Sirius subscribers at the end of any calendar year exceeded the “Siri Internal Estimate” year-end subscriber target for such year by more than 4 million subscribers.

And so on and so forth, up 10 million subscribers each year.  The lawsuit quotes Sirius as justifying the stock bonuses by drawing on the overwhelming good Stern would do for the company.

Sirius acknowledged that it was “obligated to make substantial stock-based incentive payments under the agreement if [it] significantly exceed[ed] agreed upon year-end subscriber targets during the term of the agreement.” But Sirius stated that any such payments would be more than offset because its “agreement with Stem [would] have material positive benefit to [its] business, including a positive impact on consumer awareness, average revenue per subscriber, churn and partner relations.”

Well, it seems as though Stern did his part in drumming up subscribers.  Before he even went on the air in 2006, Sirius had nearly 3 million more listeners waiting for his arrival.  By the end of 2006, Sirius had gained nearly another 3 million listeners, having more than 6 million total.  They promptly paid Stern his bonuses.  It wasn’t until Sirius acquired XM in a merger in 2008 that things began to go off the rails a bit.

The acquisition of XM caused a enormous leap in Sirius’ subscriber numbers. Here are the statistics the lawsuit throws at us:

By the end of 2008, the total number of Sirius subscribers had reached 19,003,856, exceeding the estimate contained in the Agreement by more than 10 million subscribers. By the end of 2009, the total number of Sirius subscribers had dipped slightly to 18,772,758, exceeding the estimate contained in the Agreement by more than 8 million subscribers. By the end of  2010, the last year of the Agreement, the total number of Sirius subscribers had reached an all-time high of 20, 190,964 total subscribers, exceeding the estimate contained in the Agreement by more than 8 million subscribers.

According to the agreement quoted previously, it seems as though Stern earned his bonuses, by an incredible margin.  Sirius feels differently, as explained in the suit.  As Stern was re-negotiating his contract in 2010, he was also asking about his bonuses.  When pestered enough about them, Sirius’ lead counsel told Stern that subscribers on the XM platform didn’t count towards that total number of Sirius subscribers mark that he was shooting for.

The lawsuit argues two major points in the contention of the above claim.  First, it argues that without Stern, Sirius never would have been able to acquire XM.  It was his popularity, they say, that even put Sirius on the map and made them a competitor in the satellite radio world.  The subscriber growth numbers seem to support that conclusion, as they are staggering.  Second, the suit argues that the original agreement differentiates between Howard Stern specific generated subscribers and total subscribers over the yearly projections.  Even if all those subscribers couldn’t be directly attributed to Stern himself, Sirius’ total subscribers obviously beat their yearly projections at least 2 million – 8 million in 2010.

The suits’ closing argument, per say:

In 2004, when Sirius desperately needed Stern to make its business viable, it induced him to move to Sirius by offering him a chance to share in the success of the company.  Now that Stern has put the company on the map, brought in millions of subscribers, and helped it conquer its chief rival, Sirius has unilaterally decided that Stern has been paid enough. The amounts owed to One Twelve and Buchwald represent a fraction of the revenues that Stern enabled Sirius to achieve, yet Sirius refuses to honor its commitments to him and Buchwald.

And so ends a straightforward and quite reader-friendly brief. Howard Stern has been an enormous draw for Sirius XM, however, is he solely responsible for their early success that allowed them to grow and acquire more market share?  That’s debatable.  Stern’s argument looks pretty strong to this writer, however we have yet to hear Sirius’ defense.  All we know is that Sirius says it is “surprised and disappointed” according to Reuters.  Last time Stern had beef with his bosses, he turned it into the film Private Parts and only boosted his notoriety.  Could another ongoing struggle with his employer bring even more listeners to Stern?

Howard Stern Sues Sirius XM for Millions
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  • catherine howes

    This will be the old Howard we have missed, nothing like behind the scenes drama to bring out his best…. running for the popcorn and renewal for Sirius, can’t miss a moment!

  • iFan

    Howard is at his best when he is at odds with his employer. While I have enjoyed the last 6 years of Howard on Sirius, there has not been the fire and emotion behind the performance that there was while on terrestrial radio. Here’s hoping this dispute will reignite that fire.

    • http://www.ientry.com/ Josh Wolford

      I agree that his public battles with NBC were priceless. Plus Private Parts wasn’t a bad movie!

  • Milton Hywatt

    Greed is the root of all evil. I listen to Stern every day. He is already fabulously wealthy. The merger nearly destroyed Sirius and they are still trying
    to recover to be a profitable entity. Now this legal battle ensues. And Stern will be diminishing his live content over the course of the nest several months to three days a week. I’ve already dropped one radio off my subscription after 7 years paying for two. Now listen at home via the internet. All this explains why Stern has been so short tempered, even more than usual.

    • iFan

      So, if you negotiated a deal with specific goals and measurable objectives, and you delivered everything you were supposed to, but the other party delivered nothing they were supposed to, you would simply throw up your hands and say “I’m not greedy, just forget about it”?

      The level of wealth of either party does not negate the fact that a contract was freely and willingly entered in to by both parties and that contract needs to be honored. Apparently neither of these parties can agree what was delivered and what is owed, so they’ll let a Judge make that decision.

      • http://LOVEIT! JESSICA MCCLARY

        I totally agree. It’s the whole point of it. If you put a company on the map and were pretty much the reason for it’s exponential growth, how would you feel if you were not paid as agreed.

    • http://www.ientry.com/ Josh Wolford

      I’m sure he has more money than he knows what to do with, but in my opinion the contract is pretty clear and he held up his end.

      • http://www.ientry.com/ Josh Wolford

        Of course, we haven’t heard Sirius XM’s side yet.

      • http://www.liveambitions.com Steve

        They should have drawn up a new contract before the merger with XM. Now, it’s a mess.

        I don’t think Howard can take credit for the new subscribers that came as a result from the merger of the two companies.

  • http://LOVEIT! JESSICA MCCLARY

    OMG THIS IS GUNNA BE JUST LIKE DC101 AND NBC! I CAN’T WAIT TO SEE THIS PANS OUT. SIRIUS IS MESSING WITH THE WRONG HALF JEW!!

  • fred norris

    f penelope

  • micheal

    Why doesn’t the producer just find some lesbian hooker,just have her walk into his studio naked, and have a 12 inch dido shoved up her butt. That will save about five minutes of airtime harassing her with such questions.
    Typical Howard questions for females:
    Will you get naked ?
    Will you show your boobies ?
    Are you a lesbian ?
    Are you an anal slut ?

    • http://www.ientry.com/ Josh Wolford

      Point taken. But those questions interest quite a lot of people, apparently.

  • ckc

    Ive been with xm for 10 years and in 7 days will cancel my account for ever.The main reason is because of that moron.Nothing he does or says is funny and definitely not worth the money he gets.They should have never allowed xm and sirius to combine because they both suck now.

    • Andy Chow

      So now you’re leaving because you can’t change the channel?

      You can’t even get Howard on XM unless you upgrade your package. You’re just a bs artist.

  • Michael

    Well, day in and day out, I regret renewing my subscription. Jesus Christ, what have we got in 2011?

    - Howard still talking about Jay Leno stealing his stuff. No wonder O&A’s fans go Hoo Hoo all the time. And the fact that he won’t make any new bits shows he’s a little baby. Treat him like one if he wants to pull this.
    - Robin talks so much. I’m surprised they haven’t renamed his show “The Howard and Robin Show”, since it’s like every other piss-poor radio show Howard prided in attacking, especially Opie & Anthony, who he put a gag order on. BUT, that was before his show was unlistenable.
    - When one guy on the Wrap Up Show said Beth influenced Howard to try Twitter, a program he railed back in 2009, Howard fired back with some ludicrous statement that he banged models in college. This is what’s wrong with the show: no one can offer Howard constructive criticism, instead his horde of zombies (Bobo, Mariyann from Brooklyn, and the rest) fill Howard’s ego saying that the show is so great. Hell, even one guy – from what I read on Stern Fan Network, a site I rely on for my fix – said he had to pull over because Howard was impersonating his parents, which he’s been doing all year round.
    - Anyone remember when Richard offered an invite to Howard to go to his summer wedding? Howard called him selfish, saying that New York smells like boiling piss. Now, the latter might be true in some point, but regarding the former, it’s another case of calling the kettle black. Richard puts more effort into the show than Howie does, but the narcissistic guy doesn’t want any of it.
    - No one is sitting in the empty seat Artie Lange left after the decade came to an end. Remember when Jackie left? Howard had everyone from Jeff Ross to AJ Benza sit in, and even when Artie was there, he had extra comics sit in. Is Howard such a narcissistic attention whore he can’t have anybody steal his thunder.
    - Jackie Martling. They keep talking shit about him. Whatever happened behind the studios is irrelevant, the guy made the show what it is. Sure, Artie added a different flavor to it, but it was Jackie that made the show last for 20 years. They had him on the show today, and we hear Fred and Robin stroking Howard’s ego so it ensures that Jackie won’t come back. Fred is fine, but Robin in 2011 has superseded to a level of narcissism that she deserves to be heard all the time.
    - The news. Robin hasn’t been reading the news correctly. Stammering and saying “uh” all the time.

    I could go on, but this lawsuit just takes Howard to a whole new level that’s gonna make him come off bad. There’s two reasons why he’s doing this: because he’s a borderline delusional baby who thinks he’s doing such a great show that he should be paid to do a 3-day week. Or, considering the fact that he’s been plugging all this free stuff (and he can say it till the cows come home) and that there’s “no budget” to do bits or replace Bubba, I fear this is an act of extortion. This reminds me of when they had Elliot Offen back in 2006, because during the Super Bowl Poolwhen they tried to calm Elliot down with his incessant plugs, Elliot had the galls to sue them because he thought he was being fleeced out of his “25 dimes”. Deja vu now, but this time it’s Howard. He has become such a greedy motherfucker now, and if he thinks people are gonna support him, well, it’s probably gonna be those retarded zombie sycophants that follow him no matter what, but everyone else isn’t gonna be accepting.

    So now I’m bummed out. I can’t cancel, because that’s a waste of $$$. Made much worse because the other stations aren’t all that better (on Stars 108, they had replays of the Jay Thomas Show and Covino and Rich that often went into midnight, but now they’ve been replaced by some vapid porn show). And Howard 101 has that cancer voice Scott Farrell, whose type of show belongs on some sports channel.

    What a way to be remembered like this, Howie. Enjoy you’re little power trip, because karma’s gonna bite you right in the ass and you’re not gonna be pissing on everyone’s parade anymore.

    Plus, you guys can bash Megan Fox all you want, but one thing she didn’t do when she left the “Transformers” movie franchise was extort Michael Bay. In some extent, she left with dignity.

    • DJ

      You are the vast minority. Ever heard the saying if you don’t like what you’re listening to, change the channel? No one is forcing you to listen to Howard’s show… Yet you and people like you act as if his show is the only thing to listen to on Sirius.

      I love how fans that appreciate the show are labeled as “sycophants”. Not everyone agrees with your narrow viewpoint. If it really is so bad, find something else to listen to and STFU. I get so sick of idiots that do nothing but piss and moan without offering any constructive criticism. Then, to top it all off, they sit listening to a show they supposedly hate. Wow. Just wow. Hey, I hate beating my head against the wall, but I’ll do it anyway and then complain to anyone that will listen…

    • frank

      For a person who does not like the show anymore, you sure seem to listen a lot lol.

    • DJ

      Oh and by the way… Megan Fox didn’t “leave” Transformers… she bit the hand that fed her and found out that it wasn’t such a good idea. No one cares that Transformers didn’t require much acting talent (which was a perfect role for her), all she had to do was stand there and look good and keep her mouth shut. Then she could laugh all the way to the bank with the millions she made.

      But she had to open her huge trap and criticize the movie that gave her a career and got her noticed. Again, I say wow… just wow. She was hired as eye candy and that’s all she can ever hope to attain… especially after her comments. Dignity my ass.

      • Michael

        Ugh!

        Did I say I listen to the show? Let me explain, since you may not have read my post. I DON’T LISTEN TO THE SHOW ANYMORE! Like most people, we get our info online. And you come on here acting like you know every little thing about me, that I’m some sado-masochist that enjoys listening to something I hate.

        As for Megan Fox, let me explain: If Megan DID act like an ingrate to Michael Bay, here’s the thing, she could’ve done anything to take down Mike because she’s not part of the “Transformers” franchise anymore. But she did the right thing and left without playing the victim card. Regardless of what happened to her career, she made a mature choice without acting like a spoiled brat.

        As for Howard? He makes a half-billion dollars, and all he wants ::impersonating Chris Crocker:: is more, more more! He should be using the money he has already to improve the show, which may not make it another five years the way things are going. Rather, from the look of things, he’s keeping everything to himself. He’s practically bleeding the company dry.

        Look, I don’t know what’s what, you got it? That I’m willing to admit, because the situations I mentioned above are far more complex than I described. But let’s be honest, if you’ve done something legitimately wrong, would you live with what you done and make amends, or would you act like you’re some entity who deserves everything, no matter the consequences?

        P.S. “Transformers 3″ is likely going to bomb. Now, like I said, I may not be accurate. But if you look at the history of third installments of a movie franchise, besides “Mission: Impossible III and “Toy Story 3″, I couldn’t name one that was praised universally. Plus, I’d actually have NO love interest, because the whole films about robots, not star-crossed lovers. I could forgive that in part 1, because it wasn’t too prevalent. But, well, you know…

        • Michael

          Also, one more thing, I want you to do a comparison of the Howard Stern Show now to the Howard Stern Show of yesterday. Would you like to hear Howard consider a Sal Governale roast fresh from the Andy Dick Roast, or Hampton’s Howie talk about his technology and impersonate his parents ad nauseum? Let me hear your opinion.

  • ralphamcmillan

    Stern is a giant dooosher that only appeals to the braindead and the prepubescent. Pull your heads out folks.

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