Analyst: Howard Stern-Sirius XM Contract Worth $400 Million

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Promoting his move to Sirius XM by handing out free satellite radios (with Scores dancers in the background) to fans in NYC's Union Square.

Wall Street experts think he will keep his annual cash payments, but won't get stock-based compensation – potentially making his new deal worth $100 million less than the last one.

NEW YORK - Sirius XM and Howard Stern on Thursday morning didn't detail financial terms of their new five year relationship, but at least one analyst estimates it is worth $400 million over the term of the contract, compared to $500 million for his previous five-year contract.

Lazard Capital Markets analyst Barton Crockett in a first reaction estimated that the deal is likely consistent with his expectations and consistent with the cash payments Stern has received in his first Sirius deal, but the shock jockey likely loses the stock portion of his compensation. 

Wall Street analysts wondered though if Stern may work only three instead of four days a week given that he had expressed an interest in scaling back his time commitment.

"We have been modeling that Stern would remain, as part of flattish overall programming costs, whereby Stern continues to receive $80 million cash per year, consistent with his former deal expiring at year-end," Crockett said. "We had also assumed no stock, a step down from the $100 million, five-year stock component of the former deal."

Crockett told The Hollywood Reporter though that there may be other ways Stern may get added value from his new contract. He mentioned success-based compensation, such as in the form of bonus-type payments if the rollout of his programming on mobile devices hits certain targets, as a possibility. Or he may work less than under his previous deal. "There is tons of flexibility to structure this, but we just don't know for sure without disclosures," Crockett said.

The analyst said he assumes that the new Stern deal is costing Sirius less than the first one or the same amount at most because CFO David Frear guided Wall Street observers to expect an "overall modest long-term easing of programming costs" in a conference appearance earlier this week. Crockett said he is maintaining his $1.65 price target on Sirius shares.

David Joyce, analyst at Miller Tabak, also said he is not sure how many days Stern will work. His most recent model calls for $60 million per year for three work days a week, but Stern may as well have decided to stay at four days for $80 million a year. Assuming unchanged cash earnings, hat would give Stern $300 million-$400 million.

Either way, Wall Street reacted positively to the news of the contract renewal, which observers argued will allow Sirius to maintain its recent subscriber momentum without overpaying. Plus, it gives the company the right to get Stern onto mobile devices. The stock was up 6.4% at $1.40 in early trading.

"This is a net positive for Sirius," said Joyce: "This talent retention should salvage Sirius' subscriber...[and financial] growth."