I Am American Business

Mel Karmazin

Producer Notes

Daniel Acker | Bloomberg | Getty Images

You really don't expect a bustling and hip-looking radio network 36 floors up in a midtown Manhattan glass tower. It feels like you've left the corporate world behind when you step off the elevator. And the range of channels is obvious even in the waiting area by reception. We saw priests waiting to go on the Catholic channel, ladies with double wedding ring quilts about to go on the Martha channel and of course, lots of unidentified musicians. Even Nancy Sinatra walked by (not wearing go-go boots) on her way to the Sinatra channel. Howard Stern's area has its own entrance and its own security guard. We weren't allowed in, but we did see him cruising the halls after his show. He is very tall. Mel Karmazin was on a tight schedule, but seems to genuinely be having a great time doing his very best to turn Sirius into a success story. Just spending a day there gets you rooting for him and the network. There’s so much life and music there.

Video Interview

The Radio Business Has Been Extraordinarily Profitable
You Hit a Button and You Can Buy That Song
We Will Be Making Money
Howard Stern Has Been a Great Investment
The Pin I'm Wearing is a Logo for Autism Speaks

The "I Am" Q&A

What car do you drive?
I drive a Mercedes, with a Sirius satellite radio.

What's your favorite place to go?

What website do you like to visit?

What was your worst moment in business?
My worst moment in business? I can't really think of any worst moment, but I sort of love working and have more good memories than bad ones.

What's your favorite drink?

What's your favorite food?

What's your idea of fun?
Being at home with my wife and dog.

What's your idea of fun at work?
When I see our subscriber numbers in the morning, that makes me very happy each day.

What personal weaknesses do you forgive?
Making legitimate mistakes. I mean, that, I can understand and deserves forgiveness.

What business weaknesses do you forgive?
The same thing. People who made a decision, and they did it for the right reasons, and had the facts when they were making it, they just made the wrong decision. I'd be very good at forgiving that. People who are making decisions for the wrong reasons are not the ones I can forgive.

What movie star do you like?
I don't really go to the movies.

Who's a business hero of yours?
I'm not sure I have a business hero, but I certainly admire a lot of the things that, John Kluge did at Metromedia, and Jack Welch did, and respect a lot about what Bill Paley did.

What personal qualities do you admire in someone?

And in business?
Same, honesty.

Are you doing anything green, anything for the environment?
I drive a Hybrid car. We are actually in the process this summer of looking into ways to use solar energy because we live in Colorado, and gosh, we have more sunny days than any other state, so we are looking into that.

What was your greatest moment in business?
Certainly, the first time I went public was a very exciting thing, and being on the floor at the New York Stock Exchange and ringing the bell was a very exciting thing to me. But, you know, I've had some great opportunities and great memories of business over the years.

And in life?
Again, my two children, my wife and now my dog.

What's the most unusual thing in your wallet?
The most unusual thing in my wallet...probably my scuba diving card because I haven't been diving in so long.

What is your dream?
My dream is that my kids and people I care about live a happy and healthy life.

What is your present state of mind?
I'm feeling really good and really happy.


When I was reading the coverage in Sun Valley, there was a lot of talk about old media and new media. Where does Sirius fit?

Well, I don’t think that that’s the way to characterize media, but if you’re saying, “Are we part of the new digital world?” Yes, we’re part of the new digital world, and I would consider us new media. But we’re part of radio, and radio’s been around since 1928, so, you know, on one hand, we’re old, but on the other hand, we have the benefit of the new digital world. So, you know, like to think of ourselves as new media.

Well, let’s talk about that. Radio’s been around for a long time. There’s been an onslaught. What have been some of the things that radio’s had to face over the years, and why is it going to stick around?

Well, I don’t think it’s pejorative to call radio old media. It’s been around since 1928, when AM was there, and then when, FM first came along, people thought that AM radio would go away, and then when television came along, they thought that radio would go away. Then all of the people who put technology into vehicles, brought them in. So like, as an example, when they put a telephone in the car, people said, “Well gee, radio wouldn’t be around.” Then you put eight tracks in the car. So I think radio’s been around for a very long time, and I think radio will be around for a very long time in the future.

Has radio been a profitable business all along?

Yeah, I think the radio business has been, extraordinarily profitable. There is a great deal of free cash flow that’s generated in radio. In a typical radio company, about ninety five percent of your EBIDTA transfers into free cash flow, and radio is a free cash flow machine. It has some growth issues, you know, as newspapers do and some other old media, but it’s a great business.

So, you’re bringing up one of Sirius’ big milestones, last two quarters. Tell me what you’ve achieved.

So, you know, Sirius, in the fourth quarter of 2006, for the first time in its, history, achieved free cash flow. We think that free cash flow is the way to measure success in a company, and we believe that in the future, free cash flow will be something that investors in Sirius will be benefiting from.

And, obviously, the stock price hasn’t caught up. Can you talk a little bit about how...

Well, I’m frustrated, you know, but I think if you spoke to most CEO’s, nobody, even when the stock is high, you’re not happy with it. I think that there’s been a huge disconnect between the execution and the performance of the company over the last two years and the stock price, and I’m optimistic that, as we continue to perform, the stock price will reflect that performance.

So if you could say, “Wall Street, listen up!” what would you say to Wall Street?

Wall Street, just take a look at us and pay attention.

What about offering, consumers the chance to buy music through Sirius?

I’ve looked at that business model a number of times, and I think that the idea of selling music is not something that I believe to be a profitable business, but if in fact, the consumers want it, and if in fact, that business model works it’s something that we would consider, but we think that there’s an awful lot of opportunities for the consumer to buy music. Some of our automobile partners are intrigued about the idea, that you’re driving in your car, you’re listening to a song, you hit a button, and you can buy that song. And that’s something that we can technically do, we just have to explore what the business model is to that.

Let’s talk about the explosion of content. What is it like being a consumer today?

I think being a consumer today is absolutely, the best place to have ever been in. It may not be great to be a media executive, because you’re finding an awful lot of competition, but the consumer is getting so many more choices, so many opportunities to get content when they want it, where they want it, how they want it. It’s great to be a consumer.

So you sometimes talk about the stock price like a grade in school. Tell me how you feel about the stock price.

Well, I think the stock price often is a grade, and I look at my Quotron all the time, and unfortunately, today, I’m failing, so I’m not particularly happy about that. But you know, again, I think that Wall Street will understand satellite radio. Right now, we’re not making money. We will be making money, and I think as we make money, people will recognize the value of our stock.

You once called it, I think, a report card?

Yeah. I mean, I enjoy being the CEO of a publicly traded company, and one of the reasons for that is that you do have a report card. And the report card is your stock price, and you feel very good when you go home and your stock is performing well, and you certainly don’t feel quite as good when your stock isn’t performing. So for whatever perverted reason, I love to be a CEO of a publicly traded company where that report card is very visible.

Great. Let’s talk about subscriber growth.

When I first joined Sirius, Sirius had about seven hundred thousand subscribers. And based on our last numbers that we reported, we had over six and a half million subscribers. So that growth rate has been phenomenal, and there really hasn’t been another media company, probably in history, that has grown that rapidly.

You came out of sales. How has that influenced your perspective in business?

Well, I majored in accounting, and I then went into sales. So I think the two things that I tend to have always focused on is generating revenue and controlling costs. And it’s been a great advantage to have the training that I had in both the cost side of the house as well as in the revenue-generating side of the house. So I think that the combination has worked out great for me.

You’re known as someone who watches the bottom line very tightly, and you’re also known as a fighter. How is that working here?

Well, when I joined the company, the reason I joined the company was to put in the business plan, you know? The service was here. It’s a great product. Consumers loved it. Content partners loved it. What we needed to do was to put in a business model that was going to create a path to free cash flow. And that’s what I’ve been doing since I’ve arrived, and I enjoy dealing with the commerce side of the house. There are people who like spending more time on the arts and crafts, but I feel more comfortable in the commerce side.

So, in principle, not speaking specifics, you believe in mergers?

Well, not necessarily. I think that if mergers can create efficiency, I believe in creating efficiency, because that’s good for investors. If the purpose is just to create a conglomerate, and to just become larger for the sake of being larger, I’m not a big fan of that. But I am a big fan of creating value for shareholders, and often mergers are a great way of doing that.

Can a focus on the stock price lead to decisions that are made for the wrong reason?

Obviously as a CEO of a company, you’re concerned about your stock price, but the decisions shouldn’t be made as to what’s right for your stock price. I think you have to make a decision as to what’s right for your business, and if you make the decision as to what’s right for your business, the stock price would follow.

Has your Howard Stern investment paid off?

Howard Stern has been a great investment for Sirius. Howard has brought in millions of additional subscribers. He has certainly more than paid for himself. He’s the best known, most successful radio personality, and Sirius is lucky to have him exclusively.

And has your interest in Howard been because of his editorial, or because of some of his other attractions?

My interest in Howard is because Howard generates a very large audience, and we can monetize that large audience.

Let’s talk about autism for a moment.

The pin I’m wearing is a logo for Autism Speaks. I have a grandchild that’s on the spectrum. Bob and Suzanne Wright founded Autism Speaks and asked me to be a founding board member, which I jumped at the opportunity of doing. We’re doing wonderful things and raising awareness of the tragedy of autism, and funding an awful lot of people who are doing research to try to find a cure for this problem. It’s affecting one in every hundred and fifty children today, so it’s a serious issue, and I’m proud to be part of helping to find some cure for it.

Do you think that philanthropy is a responsibility of CEO’s and business leaders?

You know, I hate to preach. I can’t speak for others. I think that one of the things that you’re fortunate enough is that you make an awful lot of money, and you have a lot of visibility. And I think that to be able to give something back makes me feel a whole lot better then not doing it. So, I enjoy doing it. My foundation gives away a lot of money. I think that’s one of the great opportunities of making money, is that you have the opportunity of being able to give it away, and particularly to causes that affect children.

Just concluding question. Are you having a good time at Sirius?

Oh, I love what I do. I have run small companies and run large companies. And the company I ran before I came here had a hundred and twenty thousand employees and did business in a hundred and fifty countries, and unfortunately, I wasn’t as able to be as hands-on, because the company was just so big. Here, we have about a thousand employees, and it’s focused on the radio business, and it’s focused in North America, so I just feel I can make a whole bunch more contribution in a company of this size than I could in one of the largest companies in the world. So, I’ve never had as much fun as I have being here at Sirius.