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Satellite Radio Seeks Growth

Karmazin says anticipation of Stern's arrival is another selling point for Sirius.

"We believe that as Howard is counting down the number of days that he has left on what he calls old-fashioned radio, that people are interested," he said. "We think it will be a big item for Howard fans for the holiday season this year."

Both Sirius and XM are working hard to market their unique programming. While XM has Major League Baseball and the shock jock duo Opie and Anthony, Sirius has the NFL, Stern and a recently unveiled partnership with Martha Stewart.

Panero suggested Sirius is taking a narrowly focused low road, branding it as "raunchy," but Karmazin countered satellite radio is all about giving listeners a choice.

"I believe that America deserves a choice in the content that it wants to receive," he said, noting that Sirius also has channels aimed at children.

Karmazin bristled at Panero's suggestion, saying Stern "is the single biggest personality over the last 20 years in radio. And if the geniuses at XM want to categorize that as 'raunchy,' that's their word."

The parallel fortunes of Karmazin and Stern mark a transition point for both the traditional and satellite broadcasting realms. Karmazin moved to Sirius after serving as president of media giant Viacom Inc. He was Stern's old boss at Viacom's Infinity Broadcasting and his move to Sirius last year came just weeks after Sirius announced a $500 million pact with Stern.

Analysts believe that Stern's migration from traditional, or terrestrial radio may actually help both satellite radio companies.

Stern's planned move has put satellite radio on the map, said Jason Helfstein, senior media analyst with CIBC World Markets. It will be a test to see how many of Stern's listeners will be willing to move to satellite, he said.

Bernstein's Moffett estimates out of Stern's 12 million current listeners there are four million hard-core "zealots," many likely to pay the subscription fee.

Moffett said the Stern move "legitimizes" satellite radio by giving it "a big name and giving it a face." He looks for sales to get a boost through the first quarter of 2006.

Ted Schadler, an analyst with Forrester Research in Cambridge, Mass., said a survey found that 12 percent of households planned to get satellite radio either this year or next. And that number is likely to grow as Stern's move draws more attention, he said.

Sirius and XM are also relying on demand from new car buyers through their separate, exclusive pacts with auto manufacturers. In both cases, the service is offered free for an introductory period. After the trial, the consumer must decide whether to continue listening and pay for the service.

Long-term forecasts vary on growth of the market. Moffett looks for 44 million total satellite radio subscribers by 2010. Forrester's Schadler looks for more than 20 million households, a different measure, over the same period. In either case, it means that Stern will have to settle for a smaller initial audience, expecting continued growth, as he begins his new career on satellite radio.

Viacom is also the parent company of CBSNews.com.
By Mark Hamrick