Enter the offices of Sirius Satellite Radio high above midtown Manhattan and you'll find an environment that's closer to outer space than terrestrial. Bright lights illuminate a two-story glass-enclosed lobby. Nearby, a videoscreen maps the orbit of three giant satellites. Typical corporate suits have been replaced by alien employees with purple mohawks and tattooed triceps. Half of the first floor is obscured by white plywood covering a major construction project that by January will yield Sirius' very, own Area 51: the studio for its crown jewel of content, Howard Stern, where (if you believe all the hype) anything can happen.
While the plywood will soon come down, the graffiti wall across from it is permanent. Here, celebrities jot down their John Hancocks once they've come for a visit. On this particular late summer day, members of the newly reunited death metal band Obituary, who looked more likely to flash a knife than a Sharpie, were making the rounds to promote their new album, Frozen in Time.
Only a rolling stone's throw from Radio City Music Hall and Rockefeller Center, the Sirius offices have become a must-see attraction for a variety of artists. "Even if they aren't appearing on a program, they just want to take a look around," beamed Scott Greenstein, Sirius president of entertainment and sports.
Be it high-powered executives like new CEO Mel Karmazin, on-air talent like Stern and Martha
Stewart, sports leagues from the NFL to Nascar, or subscribers--who will number three million by year's end--Sirius is attracting all the right people these days. And the man wielding the big magnet is Greenstein, 45, who joined the pay radio service nearly two years ago after having served as an indie film exec in Hollywood, most recently as chairman of USA Films. Greenstein, who oversees all of Sirius' marketing and programming, arrived with a reputation as an aggressive executive with a knack for creating news-breaking deals.
He hasn't disappointed. The one-time protege of Hollywood powerhouses Harvey Weinstein and Barry Diller, Greenstein almost immediately began spinning out sharp marketing campaigns and pulling in top names like Stern, whom he landed with an eye-popping five-year, $500 million contract. Greenstein also inked deals with a diverse roster of talent that runs from Eminem to Lance Armstrong, Jimmy Buffet and Tony Hawk.
More recently, the company--which has a long-term equipment alliance with Ford and Audi--extended deals with BMW and Sprint. The early returns: Sirius' subscription base nearly tripled in 2004, while revenue is set to hit $930 million this year.
What's more, Sirius has now become an established brand name that is arguably more closely aligned with satellite radio in the minds of consumers than its larger rival, XM Satellite Radio. True, XM may count more subscribers (4-4 million) and revenue ($500 million projected in 2005) and some of its own big deals, but Sirius' ability to rebound from early missteps and build a unique mix of mostly commercial-free music and talk on its 120 channels has generated a lot more juice.
In one year, Sirius tripled its brand awareness among consumers. Almost half (45%) of the U.S. adult population ages 18-55 could name Sirius unaided as of July 31, per a study conducted by DR/Added Value, Los Angeles, on behalf of the company.
Still a distant second to XM, which is projected to have six million subscribers by year's end, Sirius has become a company to watch; its stock price has doubled in the last year, trading earlier this month at $6 to $7 a share on Nasdaq. While the company recently disappointed Wall Street by posting a wider second-quarter loss of $177.5 million, from $136.8 million a year ago, revenue grew to $52.9 million from $13.2 million and subscribers were up 184% over the same 2004 period. If growth continues accordingly, Sirius is expected to turn a profit as soon as late next year.
"We'd written Sirius off until they started making aggressive moves." said Rob Enderle, a technology marketing analyst based in San Jose, Calif. "Howard Stern put them on the map. Inking him was a solid hit for them. Up until that point, XM was beating them soundly. In this world, it's about perception and even though XM has been better funded for a longer period of time, now Sirius has them on the defensive. This showcases the power of effective marketing."
a self-assured former M&A lawyer whose tastes run more to CNBC than Run-DMC, Greenstein took a moment away from the din of deal-making to reflect on his success. The setting was a conference room filled with a cache of pop culture paraphernalia worth a tidy sum on eBay: a Stratocaster signed by the members of Blink 182, an autographed copy of Coldplay's Parachutes and a skate deck bearing Tony Hawk's signature. "You have to break through," Greenstein said of winning over fans. "You have to be out there selling, but you need to do it in a way that it's at least, in some form, entertaining."
Rather than dance around their core target of men 25-45, Greenstein and his marketing team delivered some eye-catching celebrity ads. For the 2004 holiday season, sultry sex symbol Pam Anderson starred in a smutty, double entendre-laden series of ads. This year, they turned to "It girl" Eva Longoria of Desperate Housewives fame. If anything else, it's helped serve up much-needed water cooler buzz.
When Greenstein signed the $220 million broadcast deal with the National Football League, he brought in one of sports' best assets--John Madden--to lend credibility and preach the gospel of satellite radio to sports fans. Sirius paired Madden with New England Patriots quarterback Tom Brady, a Madison Avenue lave in his own right, to deliver the soft sell in TV ads. Creative had Brady telling viewers that Sirius is his "favorite receiver," much to the disappointment of the wide receivers on the Patriots.
Sirius spent $33 million on measured media in 2004 and $7 million for the first half of this year, per Nielsen MonitorPlus. But those numbers don't begin to approach the millions of untracked impressions the brand receives because of one very big mouth.
Nary 10 minutes of Howard Stern's four-hour syndicated morning radio show go by without him mentioning his excitement about satellite radio. Actually, Stern has taken to sounding out the syllables "ugh-ah-ugh" rather than calling Sirius by name, so as not to tread too much on his current terrestrial radio bosses. In many ways his show is one long commercial for the pay service, which posts a real-time countdown on its Web site of the months, days, hours--even seconds--until Stern's arrival.
"Our awareness is phenomenal, far better than our competitors. It dramatically shot up once Howard signed on," said Karmazin, former Viacom president. "He was a very important factor in me joining the company."
Stern has also done his part by appearing on David Letterman's show and staging a rally in New York's Union Square Park in November 2004, snarling traffic as the masses assembled for free Sirius-enabled radios. "I think he's a comedic icon and a legend," said Greenstein of his prize acquisition. "I am also excited that his marketing acumen is as good as anyone's.
He is a great promoter of Howard and his brand to his audience in a unique and credible way." Greenstein gives Stern much of the credit for the street stunt, whose aim was to warm listeners to the idea of paying $12.95 a month to listen to content they'd once gotten for free.
Will they follow? Stern's fan base of 12 million is devoted and passionate and Bridge Ratings & Research, a Glendale, Calif.-based ratings firm, is projecting that by February 2006 some 1.4 million of them will make the switch to Sirius. The service will foment the march with a "give Howard for the holidays" push later this year.
Though he downplays his ability to pull in big names, Stern, for one, thinks Greenstein deserves praise. "I can't believe someone as illiterate as me is about to quote someone," Stern said, "but here goes: C.E. Montague once said that there is no limit to what a man can do so long as he does not care a straw who gets the credit for it. Scott, it's OK; for once, take the credit."
Greenstein is really no stranger to accolades. Under his watch at USA Films, he outbid competitors for the drug underworld caper Traffic that would go on to win four Academy Awards. While co-president of October Films, he helped acquire and market such critically acclaimed films as The Apostle and The Last Days. At Miramax, where he was often referred to in the trade press as "the third Weinstein" brother, Greenstein landed the The English Patient, which pulled in nine Academy Awards.
Some unkind portraits of Greenstein were painted in Down and Dirty Pictures: Miramax, Sundance and the Rise of Independent Film (Simon & Schuster, 2004). The book characterized him as an "attack dog" and a "crime scene laundryman who wipes the blood off the walls."
More than just cleaning up after the Weinsteins in Hollywood, Greenstein learned that the finer side of deal-making is in the details. And in some ways, he is more proud of landing picks like cycling great Armstrong who appears on Faction (Sirius' Channel 28)--which targets sports enthusiasts via personalities like surfer Kelly Slater and skier Bode Miller--than some of Sirius' other boldface names. "A lot of the big names we have that generate a lot of publicity were not necessarily expensive deals," said Greenstein, an avid skier and tennis player. "Radio for years and years looked at the same pool of talent. I always believed there were other people in the world that could do radio shows."
In this vein, he's tapped a diverse array of interesting, if unexpected, personalities like Vincent "Big Pussy" Pastore for the Wise Guy Show (a celebration of life, the arts and meatballs), Bill Walton, Richard Simmons, Bill Bradley, Fred Schneider of the B-52s, as well as known properties like Cosmopolitan magazine for female listeners.
"He's probably one of the most creative guys I've ever worked with," said Mary Pat Ryan, evp-marketing. "He has relentless energy about what new things we can bring to our customers. He sees how music and entertainment come together, and looks at the world of content in an unusual and innovative way that benefits our listeners."
Still, the amount that Greenstein & Co. have spent has come under fire from Wall Street. Stern's half-billion payout over five years and the $220 million, seven-year NFL pact would usher in a $100 million annual deal for five years with Nascar beginning in 2007. Millions more have secured pacts with the NBA, NCAA and NHL, the English Premier League, Arena Football and horse racing.
Karmazin justifies the spending spree in one sentence: "Compelling programming doesn't come cheap."
Taking into account that the scrappy Sirius launched nationally roughly a year behind XM, Sirius' growth remains respectable and its 1.5% average churn rate (of people leaving the service) is lower than that of cable TV. "Sirius is legitimate. The trick is not to peg their numbers versus XM to the same date, since Sirius is a year or more behind XM. You have to peg them to the point they are in their lifecycle," said Laura Behrens, an analyst at the Gartner Group, Stamford, Conn.
Unlike XM, Sirius had a number of aborted launch attempts; its introduction was delayed a year by technological glitches like chip-set problems in its receivers, until it took off in July 2002. Meanwhile, XM was soaring since its November 2001 debut, signing deals with DirecTV and General Motors, and winning subscribers. XM's inventive $100 million campaign, "Radio to the Power of X," via TBWA/Chiat/Day, New York, featured instruments, sporting equipment and musicians like David Bowie and B.B. King falling to earth and into people's homes and cars.
Just prior to its unveiling, Sirius' former CEO, David Margolese, stepped down, ushering in successor Joe Clayton--a cult hero who successfully launched satellite TV for RCA--and who has since been replaced by Karmazin.
"When you look back, it's almost like the chicken and the egg. You wouldn't want to have all this content and not have everything be perfect," said Greenstein.
XM still would prefer to paint Sirius as a distant runnerup in a two-horse race. "While it's relatively easy to generate hype, what's important is generating subscribers," said David Butler, an XM rep in Washington. Prestige properties like Major League Baseball have been also been a coup, as 23% of XM's subscribers said they selected the service to receive MLB games. XM also recently locked in the NHL to an exclusive deal beginning in 2007.
Gartner's Behrens said the battle between the two warriors is exaggerated. "People tend to paint business in black and white by saying there can only be one player, that Sirius can only survive if they overtake XM. That's not true. It's just like there is room for two colas in the world, only at this point in time XM is more like Coke and Sirius is more like 7 UP."
Sirius will try and close the gap this quarter with a $15 million-plus marketing campaign, created by Doner, Southfield, Mich., promoting the superiority of its content. The ads, helmed by Rob Cohen who directed The Fast and the Furious, attempt to bring the viewer inside the radio.
"Why is Sirius the choice in satellite radio?" asks a voiceover in one ad. "It feels like you've got every song ever made," answers a woman in a Jeep. Another guy in a car offers: "No bleeps, you know what I mean," while three guys tailgating testify, "If it involves a uniform, a stick or a ball--bam, it's in there." Another man sums it up: "It's flat out better than regular radio."
Ryan, who has been at Sirius for three years, says the campaign is aimed at demystifying satellite radio, something the previous "It's--on" effort, via Crispin Porter + Bogusky, Miami, failed to do in 2003. Those ads played up the genre's commercial-free music aspect, but left consumers confused. "It had high emotional appeal but didn't answer enough questions," said Ryan,
These days, Sirius can talk to a more educated consumer and now offers a wider array of available satellite radio receivers, which average around $99. The new portable Sirius $50, for example, can store and play back 50 hours of music. Sirius couches it as an iPod "without all the work." Pioneer, JVC, Audiovox and others also sell a range of Sirius receivers.
Outside of traditional auto partners like Ford and Hertz, there've been some new names in Sirius' orbit: Sprint signed a deal to serve up Sirius content through cell phones; Starwood's W Hotels now offers in-room service at select properties and satellite player Dish TV is also a partner. Next up: Sirius-provided videos for cars equipped with TVs.
"You're going to see us continue to take our content and make it available to the consumer wherever they want to get it: online, cellphones, satellite TV," said the always-confident Karmazin. "We're going to be known as the best radio content in the world by more people five years from now than we are today, and Scott's going to help lead us there."
Greenstein, who just signed a five-year contract, welcomes the challenge to keep the company flying. "I want it to feel like this is the early days of MTV or Miramax, where there's a real sense of creation of something exciting that will last for a long time."
If his early successes are any indication, Sirius will deliver on that promise.
Photograph by Frank Veronsky