Can Howard Stern Lure Sirius Listeners?

It took three 1,000-pound satellites to launch Sirius Satellite Radio Inc.’s subscription radio service two years ago.

Now the company is betting that one man -- shock jock Howard Stern -- can help the ailing company finally achieve liftoff.

The five-year, $500-million deal luring Stern from Viacom Inc.’s Infinity Broadcasting is fraught with huge financial risks for New York-based Sirius.

For the Stern deal to pay off, Sirius disclosed, he must lure to satellite radio at least 1 million of the 8 million listeners who now tune him in for free. That is nearly twice the 600,000 subscribers Sirius has now.

Stern’s signing marks the second splashy effort in the last year by Sirius to close the widening gap with its Washington-based competitor XM Satellite Radio Holdings Inc., which has 2.5 million subscribers.

Sirius agreed to give the National Football League $32 million in stock and $188 million in cash to carry games for the next seven years. New England Patriot quarterback Tom Brady and announcer John Madden are serving as TV spokesmen.

As in the NFL deal, Sirius is giving Stern an undisclosed combination of cash and stock, with Stern’s entire production costs estimated at $100 million a year.

In a conference call with analysts, Sirius Chief Executive Joseph P. Clayton predicted Stern would lure millions of new listeners when he starts on Jan. 1, 2006, calling Stern “the most effective person to shift traditional radio listenership to satellite radio -- in particular, to Sirius Satellite Radio.”

Some industry analysts aren’t so sure.

“It’s a big gamble,” said Scott C. Cleland, a media and technology analyst at Washington investment research firm Precursor Group. “I hope Howard Stern got a guaranteed salary. [It] doesn’t mean everybody will go out and buy a satellite radio.”

Sirius certainly could use the business. Just last year, Sirius flirted with a bankruptcy filing before investors led by Apollo Management recapitalized the company. Still, Sirius remains a distant second to rival XM.

Investors have seen Sirius’ stock tumble from a high of $66.50 in 2000 to less than $4. The stock was up 15% Wednesday on Nasdaq, however, at $3.87, on the strength of the Stern announcement.

Sirius said its private research suggested that as many as 28% of Stern’s fans would become satellite radio subscribers.

Already, company executives said they hoped to leverage that prospect to improve cash flow.

Unlike traditional free radio stations, whose signals travel only a few dozen miles or so, satellite services have national reach and have attracted more than 3 million paying customers.

Although both XM and Sirius have exceeded subscriber growth projections, analysts believe the two companies each will need 5 million to 6 million subscribers to break even.

Analysts forecast that as many as 4 million satellite radios will be sold in the next three years, but that number is still only a fraction of the 36.4 million analog radios sold last year, according to the Consumer Electronics Assn.

Sirius has been led for two years by Clayton. A onetime satellite TV executive, Clayton ran the North American operations of Global Crossing Ltd., the telecommunications company headed by Los Angeles financier Gary Winnick that filed for bankruptcy protection in 2002 amid an accounting scandal.

Sirius has never been profitable. It lost $226.2 million last year on revenue of $12.9 million.

The lifeblood of satellite radio is its crucial relationship with car manufacturers and radio equipment makers which are chiefly responsible for getting fancy satellite radio devices into the hands of consumers.

Sirius has exclusive partnership agreements with Ford Motor Co. and DaimlerChrysler, while XM boasts General Motors Corp. and Honda Motor Co. Sirius hopes that with more enticing content, car buyers will choose satellite radio as an option.

The services also are facing competition from new car entertainment options -- including digital over-the-air and in-dash MP3 players, fancier mobile phones and wireless data ventures such as GM’s OnStar vehicle security and travel advisory service.

In addition, Stern’s controversy could follow him to the satellite market. Booted off Clear Channel Communications Inc.’s radio stations after federal regulators proposed fining the company $495,000 for airing Stern’s sexually explicit broadcasts, Stern still could draw the scrutiny of lawmakers and regulators.

Clayton told analysts that listeners would be able to block Stern’s station if they did not want to hear his raunchy banter.

Still, some members of Congress already want to extend the Federal Communications Commission’s authority to subscription services such as satellite radio.

“Without a doubt, Sirius can be more competitive with Stern than without him,” said Dominic Ainscough, a media and entertainment analyst at the Yankee Group consulting firm in Boston. “But part of Stern’s success at Viacom was testing the boundaries and railing against the FCC. His fans are going to expect even more shocking content on Sirius.”

Times staff writer John O’Dell contributed to this report.