What is a subscriber? And what is not a subscriber? That was the key issue in Howard Stern’s legal battle with his employer, SiriusXM Radio. And the one doing the counting was a New York judge, who let out some juicy details of Stern’s contract.
In the course of writing her decision, Judge Barbara Kapnick of the Supreme Court of the State of New York in Manhattan (a trial level court in New York) revealed just how much money was at stake, including some contract details which had been kept secret while the case was pending.
Stern’s lawsuit filed last year had claimed that the satellite radio company had stiffed him on incentive stock bonuses for helping it exceed subscriber targets. SiriusXM responded that Stern had been paid all that he was owed and asked Judge Kapnick to dismiss the suit, which she has now done.
After signing with the former Sirius Satellite Radio in October 2004 and beginning to broadcast his show on a satellite channel from January 2006 on, Stern was in line for “Performance Based Compensation” each of five years if the number of Sirius subscribers exceeded internal growth projections by millions of subscribers. The bonus for each year was $75 million in stock (with an additional $7.5 million for his agent, Don Buchwald) – but only if the targets were hit.
Coming out of the starting gate Stern exceeded the target at the end of 2006. And RBR-TVBR had reported that by the time Stern actually received the bonus in 2007 the stock was worth more than $100 million. Not a bad bonus.
The number of Sirius subscribers did not hit the second contract target by the end of 2007, so Stern did not receive a bonus for that year. That tally is not disputed.
However, in 2008 Sirius and rival XM merged. According to Stern’s lawsuit that had been anticipated as a possibility at the time of his contract signing – and was, in fact, due in part to his being on Sirius to pressure XM – so all of the subscribers from both sides of the merged company should count toward the targets in his contract.
Judge Kapnick noted that if only subscribers to the Sirius service are counted the tallies do not trigger the additional bonuses. Even if the one million or so XM subscribers to the “Best of Sirius” package, including Stern’s show, are counted the targets are still not hit.
“However, if the more than nine million original XM Radio subscribers are counted, all five Performance Based Compensation provisions are triggered and SiriusXM would owe One Twelve [Stern’s company] an additional $300 million, and Buchwald an additional $30 million,” the judge noted.
She also noted that Stern received a payment of $25 million and Buchwald $2.5 million when the merger with XM took place, which had been spelled out in the original contract. The judge didn’t buy the argument that additional compensation was due by counting subscribers to the XM service against the Sirius targets spelled out in Stern’s contract. “To find in plaintiffs’ favor, then, would require this Court to ignore this explicitly distinct treatment of subscribers acquired by merger,” Judge Kapnick wrote as she ruled in favor of SiriusXM and dismissed the lawsuit.
As you would expect, Stern said on his SiriusXM show Tuesday (4/17) that he planned to appeal. But for now he won’t be seeing any $300 million in additional payment.
