Sirius paying Stern an $83 million bonus

Sirius Satellite Radio Inc. (NASDAQ:SIRI) said that due to exceeding its pre-Howard Stern subscriber estimates for the year ended 2006 by over two million subscribers, it will pay the radio celebrity a bonus worth about $82.9 million in about 22 million shares.

This is exactly what Sirius had hoped for when it signed Howard Stern in the first place. If there was ever a radio personality to match Oprah's TV status, Stern is definitely the one. When Sirius signed Stern in 2004 for a $500 million over five years contract, it had 600,000 subscribers.

Stern's contract also provided for a bonus option. Back then the estimated number of subscribers at the end of 2006 was 3.5 million. Lucky for Stern, last week Sirius reported more than 6 million subscribers -- a sign either analysts underestimated the number, or that his impact was indeed so effectual.

Karmazin did the jig, of course, touting a successful strategy. But who's the real winner here? Undoubtedly, all the paid celebs are doing very well with payoffs from XM Satellite Radio Holdings Inc. (NASDAQ:XMSR) and Sirius as that has been their strategy -- getting celebrities to attract subscribers. But are the companies better off for it?

Both SIRI and XMSR shares are down. In the last year, SIRI lost 42% of its value and XMSR 49%, underperforming the market significantly. While XM recently missed on subscriber growth, Sirius announced a first quarter of free cash flow.