XM radio signs 3-year deal with Oprah Winfrey
By Derek Caney
NEW YORK (Reuters) – XM Satellite Radio Holdings Inc. on
Thursday said it signed a three-year, $55 million deal with
Oprah Winfrey to introduce a channel on the top U.S.
subscription radio service, sending shares up as much as 10
The new channel, called “Oprah And Friends,” is scheduled
to launch in September and will include a weekly show hosted by
Oprah, as well as programs featuring other personalities from
her popular nationally syndicated TV talk show.
XM’s smaller rival in the U.S. satellite radio market,
Sirius Satellite Radio Inc., has already signed a number of
high-profile deals, most notably a five-year $500 million
contract with shock radio personality Howard Stern.
“We’re done with the big programming deals,” XM Chief
Executive Officer Hugh Panero told Reuters in an interview.
“With this last piece of the puzzle, after you sign a deal with
the likes of Oprah, we see nothing else on the horizon of this
“It’s a smart strategic move for XM because they need to
answer the Howard Stern question,” said Stanford Financial
Group analyst Frederick Moran. “It’s not a dirt-cheap deal. But
it does help XM attract a female audience.”
Oppenheimer analyst Tom Eagan called the deal economical to
XM. “On a per-subscriber basis, XM can break even on this deal
if they add 145,000 subscribers over the three-year period,” he
said. “That should be very easy for them to do.
XM shares have slid some 38 percent since October on
concerns of slower growth from the auto sector, which has been
the engine of growth for satellite radio, Moran noted. “This is
the kind of deal that could rekindle enthusiasm and stimulate
sales later this year,” he said.
XM said the Oprah deal will not affect its target to break
even on a cash flow basis by the end of this year. The company,
which currently has more than 6 million subscribers, said its
goal to reach 9 million subscribers by the end of the year was
Sirius, by comparison, has more than 3 million subscribers.
XM has lost some market share for new subscribers in the
fourth quarter leading up to the launch of Sirius’ Stern
program. Coupled with the woes of General Motors Corp., XM’s
exclusive partner in the automotive market, some on Wall Street
expressed concerns that XM’s subscriber growth could slow
further in the first half of this year.
“General Motors has been a terrific partner,” XM’s Panero
said. “There will always be ebbs and flows in the auto market.
But we have a number of deals with other automakers such as
Honda, Toyota and Nissan.
“We expected the fourth quarter would be competitive,” he
added. “But it’s my belief that we will return to a more normal
market share in the first and second quarters. We’re already
seeing signs of that.”
XM has an exclusive deal with Major League Baseball, whose
spring training opens this month. Last year, baseball
programming was a major driver of growth for XM.
Shares of XM rose $1.71, or 7 percent, to $26.32 in early
Nasdaq trading after rising as much as 10 percent shortly after
the market opened. Sirius shares rose 3 cents to $6.01.