John Malone’s Radio Play: Liberty Rescues Sirius

The news: It’s official – Sirius XM satellite radio goes to cable billionaire John Malone’s Liberty Media. Or rather, Liberty Media gets 40 percent of Sirius stock and a couple of board seats; Sirius XM gets commitments for $530 million in loans, including enough to make a $175 million debt payment due today, and the bankruptcy wolf backs away from the door.

The Space 2.0 Connection: This proves the satellite radio business model. If John Malone invests in something, it will make money.

Cecilia Kang in the Washington Post notes:

Sirius has never turned a profit and has heavy costs associated with its deals for talent, including shock jock Howard Stern, who is paid $100 million a year for his Sirius show. The company’s biggest assets are its 20 million radio subscribers and nearly $2 billion in annual revenue.

Englewood, Colo.-based Liberty Media, founded by former TCI chief John Malone, owns DirecTV and cable programmers QVC and Discover, among others.

Sarah Lacy at TechCrunch is dubious:

In what may be the most disingenuous quote in a press release ever Maffei said, “We have been impressed with the company, its operations and management team.” Really? Because I see a company that concocted an unsustainable business model where people pay less than a dollar a day for content, while it pays out $100 million-a-year contracts to celebrity talent. I see a company growing its revenues in double digits that can’t even pay the minimums on its debt. I see a company that was too wrapped up in the ego of winning than proving a business model. And perhaps most dire, a company way too dependent on the auto industry for generating new subscribers.

Lacy also sees (and this writer concurs) many billions of satellite assets and business evangelism being snapped up at a bargain-basement price. Liberty founder John Malone may be the smartest guy in the communications business, and when he invests in an asset, the smart money tends to follow.