Conversation with Mel Karmazin

Monday, June 19, 2006

Kai Ryssdal talked with SIRIUS CEO, Mel Karmazin.. Read it all here from (Mel is making the rounds he talked to over the weekend)

This interview was from Public Radio.. you could tell there was an anti-Satrad spin on the questions. Mel did not let that fly; here are some clips..

RYSSDAL: Let's talk about this company for just a second. It's been around for a good long while, yet still isn't really turning a profit, though.

KARMAZIN: Well, I don't know what you mean "a good long time." We got our first subscriber in 2002, and here were are in 2006, and we're saying that we're going to have over six million subscribers. And we said that we will make a profit - that we will have free cash flow as recently as the fourth quarter of '06. So if you were to compare SIRIUS to many other start-up businesses, I think that it's a great accomplishment.

The other thing about the business is that it's a high fixed cost business so that when - before we got our first subscriber, we had to spend $1.5 billion in putting up satellites. Obviously, no one was going to subscribe to a service if the service didn't exist. So we spent $1.5 billion on satellites. We then had to provide all of the programming because, again, if you're going to - before you get a single subscriber, you need to have the programming offering. So all of these fixed costs were in there already before we got a single subscriber. Now we're dramatically adding subscribers, and the revenues that you generate fall to the bottom line, and therefore you make the turn pretty quickly.

RYSSDAL: You brought him here in a $500 million deal. Isn't that a whole lot of the company's money to plow into one guy?

KARMAZIN: Just for the facts - you know, I did not bring him here. I joined the company after Howard did, but stand behind the decision that was made and absolutely was a tremendous amount of money. There's no way of saying that that's not a lot of money. The difference is that Howard's - that decision has paid off significantly for SIRIUS. That we sell subscriptions at $12.95 a month - a very low price in our opinion - and if in fact Howard were to bring a million subscribers, then we would have more than paid for itself. So we would have brought in well over $140 million as a result of Howard, pay him about $100 million, and therefore there was a profit in it for us in making that decision.

When Howard was announced that he was joining SIRIUS, we had 700,000 subscribers. Today we have over 4 million subscribers. It's our belief that Howard was responsible for more than a million of those incremental subscribers. And obviously if he did that, not only did he increase the awareness and the visibility and the promotion, but he also paid for himself with the additional subscribers.

Read it all here


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