Journalist and attorney Allison Hope Weiner is a special correspondent to Deadline and files this exclusive breaking news:
Throughout Howard Stern’s career, his radio contract often prevented him from saying anything nasty about his frequent boss Mel Karmazin. But the shock jock also had little to complain about: Karmazin helped make Stern a very, very rich man at Infinity Broadcasting, then CBS, then Viacom. After Karmazin became CEO of Sirius, he inherited Stern’s original satellite radio deal. Then Sirius merged with arch-rival XM, and last December Stern opted to re-up. Once again, Howard publicly praised Mel, now CEO of Sirius XM. But behind the scenes relations between Howard and Mel were becoming seriously strained. And only 3 months after entering into that new 5-year pact, Stern and his longtime agent Don Buchwald sued Sirius XM, claiming that the company had failed to pay him performance-based stock awards which he’s owed because he exceeded the subscriber targets set in his original agreement with Sirius. But even then, Howard refused to discuss the lawsuit at length or say anything negative about Mel or even Sirius XM.
But that was then, and this is now.
Today, Karmazin confirmed at the Sirius XM shareholders meeting that the company will file a motion for summary judgment in the Stern lawsuit yet also warned that judges rarely dismiss a case at this stage. But the real surprise, several of my sources with knowledge of the dispute tell me, is that Mel is the driving force behind Sirius XM’s position that Howard is owed no additional compensation. Even more of a shocker, they claim Karmazin was never happy with the original Stern/Sirius- $80 million a year in cash and $20 million in stock to program two channels starting in 2006 as well as bounties if Sirius’ subscriptions passed certain milestones — negotiated before Mel arrived. And, here’s the real stunner from my sources: allegations that Mel didn’t take care of Howard financially as well as the world believes: “Mel Karmazin does a much better job of taking care of Mel Karmazin than most other Sirius shareholders,” accuses one of my sources.
At issue is what happened after Sirius and XM merged in 2008 and the combined company nearly went bankrupt in 2009. As the recession killed new car sales (by far the biggest source of new satellite radio customers), Sirius XM couldn’t meet its hefty debt payments. The company’s stock plummeted to below 6 cents. That’s when Karmazin turned to John Malone’s Liberty Media for a rescue: $530 million in exchange for 15% interest as well as 40% equity in Sirius XM. But after the stock went to 50 cents, Karmazin and a few favored executives received options for approximately 150 million shares at that price. Today, Sirius XM stock is over $2.40. “This option arrangement was not offered to many other shareholders, including Howard Stern,” one of my sources complains. Add to this some massive “golden parachutes” for Karmazin and others, and Stern feels inadequately compensated for his contribution.
“Howard took the job on the promise that he would have a share in Sirius’ future success,” one source with knowledge of the negotiations explains to me. “He worked hard from the day the deal was signed to insure that success. That was the way the Sirius contract was structured. When Sirius needed Howard, they promised him a share in its success.”
Stern’s complaint claims that, in October 2004, Sirius had fewer than 700,000 subscribers and now the combined Sirius XM has 20 million — and he’s responsible for that number. He also claims Sirius was able to merge with its biggest competitor because of him, and he also helped Sirius XM avoid bankruptcy and he didn’t take his rightful payments.
On yesterday’s show, Stern spoke at length about the lawsuit. “Sirius Radio, by the way, was just about going out of business. I sat down with these guys and I said to them: ‘Look — if I leave terrestrial radio and come to Sirius, I’m gonna bust my balls for you. I’m gonna make shit happen… I guarantee you guys acquire XM radio. Forget merge — that’s a horseshit fucking term — acquire XM Radio… But people have a short memory… And now that times are good and they’ve reached ‘it,’ everybody wants to fucking forget what they owe — and who they owe… There wouldn’t be a Sirius if I wasn’t here.”
A source familiar with the negotiations between Stern and Sirius XM tells me that the satellite radio company negotiated a very generous deal with Stern and that he should be satisfied with the contract he signed only a few months ago. And that both Stern and the company agreed they would discuss Stern’s claims to performance-based stock awards after his new deal was closed. But after that happened, the negotiations went nowhere. (more…)