Judge Chucks Stern's Lawsuit Against Sirius XM
A New York State judge has thrown out a lawsuit filed by Howard Stern against his employer, Sirius XM Radio, demanding company stock as part of a performance compensation agreement.
Stern’s lawsuit had demanded stock awards worth $300 million for himself and $30 million for his agent, Don Buchwald, under the terms of a performance compensation agreement based on driving subscriber growth for Sirius, which was still competing with future merger partner XM at that time.
Sirius CEO Mel Karmazin hired Stern in 2004, mainly to attract new subscribers. Stern’s show debuted on Sirius in January 2006.
Following the economic downturn and the merger of Sirius and XM in 2008, some analysts speculated that Stern’s contract might be getting too expensive for the company, which is enjoying steady subscription growth through other channels, including OEM agreements with most major carmakers. Still, Stern’s contract was renewed by Sirius XM in December 2010, and he filed his lawsuit three months later.
Stern’s lawsuit argued that the merged company should count new subscribers for both Sirius and XM -- not just Sirius -- when calculating his performance-based compensation. This would add considerably to the subscription base used in calculating performance-based stock payouts. Stern and his agent already received performance-based awards totaling $77.5 million after the first year with Sirius -- but none since then.
On Monday, New York State Supreme Court Justice Barbara Kapnick dismissed the case, stating that the contract indicated Sirius subscribers alone would be the basis for Stern’s performance-based compensation.
Sirius XM saw big growth in 2011, both in its subscription base and its revenues. The satcaster garnered 1.7 million new net subscribers in 2011, increasing its total subscription base 8.4% to 21.9 million. The number of new additions in 2011 represents a 21.4% increase from 1.4 million net subscribers added in 2010. Total revenues rose 7% to $3.01 billion in 2011.
Looking to the future, Sirius XM expects to add about 1.3 million net new subscribers in 2012.