NEW YORK — Former Viacom chief operating officer Mel Karmazin was named CEO of Sirius Satellite Radio in a move that will reunite the longtime radio exec with his star former employee: Howard Stern.
Karmazin, who resigned from Viacom in May after a long-simmering dispute with president-CEO Sumner Redstone, was Stern’s most vocal champion at Infinity Broadcasting, paying fines levied by the Federal Communications Commission against the shock jock and defending him against censors and regulators.
Now, the two will work together again.
Scott Greenstein, who is Sirius co-prexy with James Mayer, was instrumental in brokering deals with both men and will report to Karmazin.
Karmazin signed a five-year deal worth $1 million a year with Sirius starting Dec. 31. In addition, he gets an undisclosed number of stock options that vest at 20% a year. He’s going to buy a lump of Sirius stock today in order to align his interests with those of investors.
Karmazin succeeds Joe Clayton, who will remain as chairman.
The announcement follows Sirius’ high-profile signing of shock jock Stern to a five-year $500 million deal beginning in January 2006. But that start date could come sooner as the shock jock chafes under management at Infinity, saying recently Sirius is “the reason I’m staying in radio.”
At a rally in Gotham timed to coincide with the Karmazin announcement, Stern told thousands of gathered fans that satellite radio “is the death of FM radio and the death of the FCC.”
Flanked by scantily clad card girls and against the sonic backdrop of the AC/DC anthem “You Shook Me All Night Long,” Stern, sporting a Sirius T-shirt, handed out 500 free satellite radios and vouchers for 20,000 more.
Greenstein, who helped Stern hand out radios Thursday, said, “Mel Karmazin is a legend in the entertainment industry and can help us build the new medium of satellite radio.”
“No need to push forward. Everybody here will leave with a radio or a certificate for a radio,” Stern said as police officers struggled to keep the streets around Union Square clear for traffic.
When Stern announced that he would be joining Sirius in October, he said he knew some of his closest friends in the radio business were looking at following him to the medium.
Stern viewed Karmazin as his primary defender in disputes with the FCC and with local programmers who hover over the censor button during his broadcasts. He was fond of saying, “If Mel goes, I go.”
Sources said the Stern signing with Sirius made the opportunity more attractive to former radio exec Karmazin.
When Karmazin left Viacom in May he said he would look for another opportunity to be a CEO. He was linked with the top job at Disney when activist board members Roy Disney and Stanley Gold insisted the company approach him.
But by joining Sirius, Karmazin found a way to stay in the medium he grew up in, albeit a very different type of business.
“After I took the summer off I told people I wanted to be CEO of a company that was a growth company,” Karmazin said, adding that he had no interest in a large, mature media company. “This was in the sweet spot of what I was looking for.”
Karmazin said the Sirius board approached him after the deal with Stern and he said he would not interfere with Stern’s current contract with Infinity.
“My history is we don’t interfere with contractual relationships in the business,” he said.
But if Infinity wanted out of the Stern deal early, he’ll talk. “If they were OK with it, (Greenstein) and his people would look into it,” he said.
Karmazin left Viacom with a $31 million payout for the remainder of a three-year contract signed in May 2003.
Talent tunes in
His contract had no noncompete clause, but most noncompete clauses don’t mention satellite radio anyway, a loophole that has allowed the satcaster to sign other high-profile talent.
Karmazin is known as an advertising executive, a salesman-in-chief who was beloved by Wall Street for carving a bigger share of a shrinking pie of radio advertising for Infinity.
Sirius is a subscription business whose main selling point is commercial-free music radio in exchange for a $12.95 monthly fee. A spokesman said Sirius would keep its music stations a commercial-free zone but that all other stations, including sports, talk, news, traffic and weather, about 40% of its airtime, carries advertising.
Before the Stern signing, Sirius projected that it would have 1 million subscribers by the end of the year. At its last report, sub count was about 700,000.
Karmazin knows he has a learning curve ahead. “I’m going to have to learn the subscription business; there’s an abundance of talent here that have that knowledge starting with Joe Clayton,” he said.