Sirius XM Trying to Renegotiate Costly Deals

Business Week 2/12/2009

CEO Karmazin has talked to executives with Major League Baseball, the NFL, and Oprah Winfrey about their high-priced satellite radio contracts

In the midst of scrambling to keep his satellite radio company out of bankruptcy court, Sirius XM Radio (SIRI) CEO Mel Karmazin is trying desperately to renegotiate pricey programming deals with pro sports leagues and big-name talent like Oprah Winfrey.

For an executive who is known to lose sleep over an office lease that he considers too expensive, Karmazin is particularly bothered by the deal to air Major League Baseball games, a deal that costs his company $60 million a year, according to a radio industry source. As recently as last week, Karmazin met with top league officials in New York, including league COO Tim Brosnan, who negotiates television and radio deals. Talks apparently didn't go Karmazin's way. Brosnan declined to comment, other than to say "We have a binding agreement that we intend to honor." Karmazin inherited the baseball deal from XM, which merged with Sirius last year. The 11-year deal doesn't expire until 2015.

Patrick Reilly, a Sirius XM spokesman, declined to comment. Sirius XM is struggling to meet nearly $1 billion in debt obligations due this year, with the first installment due on Feb. 17 and another in May. The Wall Street Journal (NWS) reported Feb. 5 that EchoStar (SATS) has acquired a large chunk of Sirius XM debt in a bid to take over the company—a prospect that could make some of Sirius XM's talent more confident that the satellite broadcaster will avoid court protection.

Although Karmazin privately may be perturbed by having to pay for these programming deals, the consummate salesman is nothing but affable in his demeanor during these recent meetings, say sources who have attended.