Post-Merger: Karmazin Slashes Satcaster Costs

Mel Karmazin of Sirius RadioAfter a seemingly endless review process on Capitol Hill, Sirius and XM Satellite Radio finally received permission from the Federal Communications Commission to proceed with their merger last week. This outcome is a major victory for Sirius CEO Mel Karmazin, who engineered the merger.

Now he is orchestrating a deep cost-cutting campaign, first reported in The New York Times on Wednesday. According to reports, Karmazin is poised to cut about $400 million in annual costs at the merged entity, called Sirius XM Radio. Although the article did not go into detail, the main targets of the cost-cutting campaign are likely to include marketing and subscriber acquisitions, which have remained high despite concerted efforts by both companies to control costs over the last decade.

In 2005, the average cost of new subscriber acquisition was $139 at Sirius and $109 at XM. In the first quarter of 2008, it was around $91 at Sirius and $99 at XM.

The newly merged company may also achieve substantial savings on the cost of recruiting new on-air talent, as they will no longer be competing with each other to reel in famous hosts, such as Howard Stern or Oprah Winfrey.

The cost of recruiting Stern alone was said to exceed $500 million.

Next story loading loading..