Newsweek chats with Mel

Sunday, July 09, 2006

"In 2007, We Will Be Generating Cash"
Mel Karmazin, CEO, Sirius Satellite Radio
NEWSWEEK's Brad Stone got to sit down with Mel and chat about a few things, you can read the full story in this weeks Newsweek, and also at MSNBC.com
Stone: Is Sirius where you wanted it to be a year and a half into your tenure?
Karmazin: The company is far ahead of where most people thought it would be. When I joined in November 2004 we had 700,000 subscribers, and as of the end of the first quarter of this year we had over 4.2 million. Obviously, investors are most interested in how we can make money. In 2007, for the first time, we will be generating cash as compared to using cash. That could happen as soon as the fourth quarter this year.

How do you account for the decline in the stock price this year?
Wall Street has gotten past this idea that people will pay for radio. The catalyst for the stock moving now is, what's the business model? So I think it's so important that we generate this free cash flow and that we do generate a billion dollars by 2010. That would clearly say that this is a good business.
Isn't it a little boring to be judged on pure financials, instead of, say, the success of your next movie?
That's the reason I joined. At CBS, everyone would worry about how well "Mission: Impossible" would do, and I would try to get them to focus on cash flow of outdoor advertising or our TV or radio stations. I feel most comfortable running a business where the report card is financial.

You recently spoke about the possibility of buying XM. Clearly that's not a short-term possibility. Why did you say it?
I was asked the question. I answered it honestly. Certainly I'd be interested if a company is for sale, if the price is right and if regulators would allow it. In the case of satellite radio, it's hard to argue that strategically [buying XM] would fit. It's not something we're pursuing.

What was your reaction when the National Association of Broadcasters recently asked the FCC to investigate decency standards on satellite radio?
An organization like the NAB should be a proponent of free speech. There's certainly disappointment on my part and I know others who are saying, gee, that's not what the NAB should be doing.
Do you think we're going to see more acquisitions by big media companies, along the lines of News Corp.'s purchase of MySpace?
I do. I think it makes sense assuming they are buying at the right price. It still will be immaterial to revenues for an awful long time. If something happens to the more mature assets at News Corp., I don't think that MySpace is going to be an offset.
Why do these Internet firms pose so much of a threat to traditional media, but on the other hand don't help the bottom line much?
The opportunity is with the larger companies. Yahoo or Google have the potential to balance out some of the erosion, but the problem is those Internet firms are not for sale. The stock multiple of those Internet companies, versus the stock multiple of media stocks, makes that kind of combination almost impossible.

What are your thoughts on the recent split of Viacom into two separate units, Viacom and CBS?
It's not something I wanted to see happen, since I was the one who put the companies together. It's only been about six months since the split. Do the math and the stock is down significantly from that time.

via Newsweek via MSNBC

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