Technology

Sirius XM Trying to Renegotiate Costly Deals


In the midst of scrambling to keep his satellite radio company out of bankruptcy court, Sirius XM Radio (SIRI) CEO Mel Karmazin is trying desperately to renegotiate pricey programming deals with pro sports leagues and big-name talent like Oprah Winfrey.

For an executive who is known to lose sleep over an office lease that he considers too expensive, Karmazin is particularly bothered by the deal to air Major League Baseball games, a deal that costs his company $60 million a year, according to a radio industry source. As recently as last week, Karmazin met with top league officials in New York, including league COO Tim Brosnan, who negotiates television and radio deals. Talks apparently didn't go Karmazin's way. Brosnan declined to comment, other than to say "We have a binding agreement that we intend to honor." Karmazin inherited the baseball deal from XM, which merged with Sirius last year. The 11-year deal doesn't expire until 2015.

Patrick Reilly, a Sirius XM spokesman, declined to comment. Sirius XM is struggling to meet nearly $1 billion in debt obligations due this year, with the first installment due on Feb. 17 and another in May. The Wall Street Journal (NWS) reported Feb. 5 that EchoStar (SATS) has acquired a large chunk of Sirius XM debt in a bid to take over the company—a prospect that could make some of Sirius XM's talent more confident that the satellite broadcaster will avoid court protection.

Although Karmazin privately may be perturbed by having to pay for these programming deals, the consummate salesman is nothing but affable in his demeanor during these recent meetings, say sources who have attended.

Deals With Howard Stern and Others Expire Soon

Karmazin has also talked with officials of the National Football League, to which Sirius XM pays $23 million annually. Executives from Oprah Winfrey's Chicago-based Harpo Productions were in New York recently to meet with Karmazin, who asked them about renegotiating the talk show host's $55 million, three-year deal, which expires in the fall of 2009. Karmazin is often accompanied to these meetings by Scott Greenstein, his programming chief. Greenstein, ironically, was hired to strike these high-profile deals at a time when Sirius and XM were trying to outspend each other on splashy programming in a game of one-upmanship.

It's not clear whether Karmazin has yet approached his highest-profile talent, Howard Stern. The shock jock's five-year, $500 million deal expires in 2010. While that deal was struck before Karmazin arrived at Sirius, he and Stern are friends, dating back to their days at Infinity Broadcasting. Karmazin has said in the past the deal made economic sense because of the millions of new subscribers who signed on to Sirius when Stern made the jump from broadcast radio. Don Buchwald, Stern's agent, did not return a phone call or e-mail seeking comment.

Also coming due is Martha Stewart's deal, for which Sirius XM pays the doyenne of domesticity $7.5 million a year. Representatives for Winfrey and Stewart did not return calls for comment on Wednesday, Feb. 11.

Of course, one issue for the programmers is that if Sirius XM does file for bankruptcy protection, a bankruptcy court judge is likely to dismantle many of the programming deals and revise their terms. That might even cost the programmers more than under a Karmazin-revised plan.

Lowry is a senior writer for BusinessWeek in New York.

Tom_lowry
Lowry is a senior writer for BusinessWeek in New York.

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