Mel Karmazin

Chief Executive Officer of Sirius Satellite Radio

Born Melvin Alan Karmazin, August 24, 1943, in New York, NY; married Sharon (a librarian and theatrical producer), 1971 (divorced, 1994); children: Dina, Craig. Education: Earned business administration degree from Pace College, 1967.

Addresses: Office—Sirius Satellite Radio, 1221 Avenue of the Americas, New York, NY 10020.

Career

Began career with Zlowe Co. as a typist, 1960, and became radio advertising buyer; advertising salesperson, WCBS-AM, 1967-70; advertising salesperson, Metromedia, 1970-75; general manager of WNEW-FM, 1975-81; president, Infinity Broadcasting, 1981-96; president, CBS Radio, 1996-2000; president and chief operating officer, Viacom, Inc., 2000-04; chief executive officer, Sirius Satellite Radio, 2004—.

Awards: Inducted into the Broadcasting Hall of Fame, 1996; recipient of the National Association of Broadcasters National Radio Award, 1997; inducted into the Radio Hall of Fame, 2003.

Sidelights

Mel Karmazin made Infinity Broadcasting one of the most profitable media companies in the United States in the 1990s. Known for his ruthless cost-cutting measures and talent for closing a deal, Karmazin was a key player in the historic shake up of the radio industry during that decade. To the general public, he may perhaps be better known as the man who brought radio shock-jock Howard Stern to national prominence. After a stint as the number-two person at Viacom, the powerful entertainment conglomerate, Karmazin joined Stern at Sirius Satellite Radio in 2004. The move surprised many in the industry, for Karmazin had previously dismissed satellite radio, with its fee-for-service business model, as irrelevant to free, over-the-airwaves radio. Some industry analysts saw Karmazin's move as the first nail in the coffin for traditional radio, which had grown increasingly homogenized in its music playlists and riddled with commercial breaks—ironically, the after-effects of that corporate consolidation that Karmazin himself had helped to engineer. "Some call Karmazin an opportunist, " noted Daren Fonda in a Time article about the career move, "or, more unkindly, a traitor to the old radio business—but nobody ever called him stupid."

Born in 1943, Karmazin grew up in the New York City borough of Queens, and more specifically in a public-housing project in Long Island City near the 59th Street Bridge. His father drove a taxi, and his mother worked in factory that made curtain rods. "My family had zero money, " Karmazin recalled in an interview with Marc Gunther in Fortune. "We never had a vacation. We never had a car." In high school, a supportive teacher put Karmazin in contact with a Manhattan advertising agency called Zlowe, where the 16-year-old was hired as a typist. The firm's founder recognized the teenager's ambition, and encouraged him to get a college degree.

For several years Karmazin took night classes at Pace College while working full-time as an advertising sales associate at Zlowe. He had a tenacious, driven personality ideally suited to the job, and after earning his degree in business administration in 1967, he was hired by a New York City station, WCBS-AM Radio, as a salesperson. The job involved selling local businesses commercial air-time on the station, and it paid $17, 500 plus commissions, a rather respectable salary at the time. Karmazin excelled in it, and soon began posting impressive sales numbers. He proved so talented at the job that the station was forced to adjust his commission rate when he quadrupled his base salary. His boss asserted that $70, 000 was too much for a salesperson to be making. "That was the dumbest thing I'd ever heard in my life, " Karmazin told Gunther in the Fortune interview. "I quit."

In 1970, Karmazin went to work for Metromedia, a broadcasting company that owned a number of small television stations as well as radio properties like WNEW-AM in New York City. Again, he displayed an uncanny knack for the job, and within five years was made general manager of WNEWFM, Metromedia's New York City rock station. Karmazin soon made the station an immensely profitable one thanks to his cost-cutting and promotional strategies, and some of his compensation came in the form of stock shares of Metromedia. He later said that it was those shares that made him a millionaire when Metromedia was sold to media tycoon Rupert Murdoch in 1986 for his fledgling FOX Network.

By then Karmazin had jumped ship to Infinity Broadcasting, a relatively new radio group started by two former colleagues of his at Metromedia. He joined the company in 1981, not long after he had been passed over for the job of Metromedia's radio division head, when Infinity was about to double its radio-station holdings to six. He agreed to take the job only if the founding partners let him be in charge, and they agreed. He spent the next several years building it into one of the most powerful corporate entities in broadcasting, to be rivaled only by Clear Channel Communications. Infinity eventually expanded to 180 stations, and Karmazin proved adept in acquiring what he commonly called "oceanfront properties, " or large-market stations in cities like New York and Los Angeles. Though some of these stations were bought for record-setting price tags, Karmazin was a former advertising sales executive who knew that such media properties had comparable overhead costs to Infinity stations in smaller markets, but the advertising rates they commanded for air time were much higher.

One of the stations Karmazin acquired was a New York City disco station with the call letters of WKTU-FM. Infinity paid $15.5 million for it in the early 1980s, which set a record as highest price ever paid for single station at the time. Karmazin turned it into WXRK-FM, a rock station popularly known as "K-Rock, " and in 1985 hired a somewhat controversial disc jockey named Howard Stern for its morning drive-time slot. Stern had recently been fired by another New York station for his vulgar on-air chatter, and Karmazin told Stern that it was okay if he kept his running commentary on issues of the day as well as various scatological topics, but barred him from ever mentioning Karmazin's name on the air unless he said something positive. WXRK began pulling in strong ratings numbers, and within a year Karmazin had decided to put Stern's morning show on the air in other radio markets. At the time, it was rare for a radio personality to have an audience outside of local market, but Stern's ribald humor began beating out the local competitor stations in cities like Los Angeles and Philadelphia.

Karmazin found that Stern was somewhat of a financial liability, with the Federal Communications Commission (FCC) officials regularly fining Infinity when Stern's show crossed the line into sexual or otherwise offensive content. Karmazin and the station regularly went to bat for Stern, challenging the FCC fines in lengthy legal battles, but eventually Infinity paid a lump sum of $1.7 million to settle the dispute. Karmazin had less trouble with Don Imus, another New York radio host whom he also turned into a nationally known media personality. Both Stern and Imus boosted Infinity's profile, and the company emerged as a solidly performing stock during the 1990s. Its share price climbed an average of 58 percent annually, and the company's profits were used to buy even more stations. Infinity's growth was due to new FCC ownership rules for radio and television stations, enacted as part of the Telecommunications Reform Act of 1996. The new rules rescinded the previous limit on how many stations one company could own, and even allowed for up to eight media properties in one city alone. The change made both Infinity and Clear Channel the leading players in the industry.

The Infinity radio group changed hands in 1996, when Westinghouse Electric Corporation, the parent company of CBS, bought it for $4.9 billion. Karmazin was named the head of CBS Radio, a prestigious and venerable network of stations. Long known in the industry as a ruthlessly budget-conscious executive, Karmazin brought that same management style to CBS Radio, and his tactics even included auditing the phone bills at radio stations and then excoriating the station managers for making too many personal calls. After three years of immense profits, Westinghouse, which had changed its name to the CBS Corporation, entered into a deal with Viacom, the entertainment giant that owned Paramount Pictures as well as MTV Networks. The merger, completed in 2000, made Viacom the second largest entertainment company in the world.

Viacom's immense growth had been largely the work of Sumner Redstone, who made his early fortune building multiplex cinemas in the 1970s. With the merger, Karmazin became president and chief operating officer under the terms of his three-year contract, but from the start media pundits and Wall Street analysts wondered if he and Redstone had some issues working together. Karmazin was known as an intensely involved manager, and though Redstone was not, the Viacom chair was reportedly displeased with the amount of control he had given over to Karmazin. When the contract was renewed for one year in late 2003, Karmazin indeed conceded some power, but he had also managed to protect himself from being fired outright by Redstone.

On the first day of June in 2004, Karmazin announced he was resigning for personal and professional reasons. Later that year, on November 18, Sirius Satellite Radio named him its new chief executive officer. The move followed the headlinemaking news of Howard Stern's departure from Infinity just six weeks earlier. Sirius was one of two satellite-radio companies gaining thousands of new listeners every month, along with XM. Satellite radio users had to buy a special receiver for their home, automobile, or personal stereo, and then pay a monthly fee for access. But satellite radio was dazzling in its variety: there were dozens of channels and formats, ranging from stations that pumped out 1970s disco hits to others that broadcast only unsigned bands; other stations featured Afro-pop or opera, and the service was rounded out by an array of talk and news-radio stations. Part of Stern's decision, he said, was that satellite radio was free from FCC interference over content. Karmazin was likely tired out by his battles with the government agency, too, having endured a lengthy grilling before a Congressional committee over the Super Bowl XXXVIII halftime show in early 2004, thanks to a "wardrobe malfunction" on singer Janet Jackson's costume that exposed one of her breasts. The game, traditionally one of the most-watched television events of the year, aired on CBS but the halftime show was produced by MTV Networks, which was owned by Viacom.

Karmazin had once ridiculed satellite radio as anything but a threat to free, over-the-airwaves broadcast radio, but thanks to the consolidation of the U.S. radio market in which he had played such a key role during the 1990s, listeners had been tuning out in large numbers. Many voiced complaints that radio had become bland and overly corporate-monitored, with stations sticking to a shock-jock talk format or else a musical one restricted to a short playlist and endless commercials. Though Sirius, launched in 2002 a year after XM, was in second-place in the satellite-radio market, both companies were drawing thousands of new subscribers every month; by March of 2005, Sirius XM boasted 1.45 million subscribers, though that remained far behind XM's 3.77 million listeners.

Karmazin set out to change that with his characteristic vigor. One of the first major deals he scored was with domestic diva Martha Stewart, recently released from prison, for a 24-hour lifestyle channel on Sirius that was set to debut in late 2005; one of the channel's time slots would even feature the formidable homemaking tycoon taking calls from listeners. Karmazin also managed to grab the NASCAR stock-car racing deal from XM, and that was scheduled to move to Sirius in 2007. Competition between the two companies was fierce, Karmazin conceded, but satellite radio was the future, he believed. "I see a duopoly, like Coke and Pepsi, " he told Institutional Investor's Steven Brull. "It's a big market. Both companies will be financially very successful."

Karmazin is himself financially successful. His Sirius compensation package is estimated at $1.25 million annually, plus 30 million stock options in the company, and he was reportedly paid $35.4 million to walk away from Viacom. He reportedly never even cashed his Viacom paychecks, which were deposited instead into the bank account of his charitable foundation run by his daughter, Dina. Divorced from Sharon, a librarian turned Broadway producer, Karmazin is also the father of Craig, a budding radio mogul whose Good Karma Broadcasting owns a number of old-school, terrestrial-based radio stations.

Sources

Periodicals

Broadcasting & Cable, February 16, 2004, p. 8.

Crain's New York Business, November 24, 1997, p. 1.

Fortune, April 14, 1997, p. 110; April 16, 2001, p. 122.

Institutional Investor (International Edition), June 2005, p. 14.

Mediaweek, November 15, 1993, p. 22.

New York Times, January 27, 2003, p. C1.

Time, May 9, 2005, p. A6.

Online

"Karmazin's Exit: Old Plot, Same Ending, " Business Week Online, http://www.businessweek.com/ bwdaily/dnflash/jun2004/nf2004062_7946_ db035.htm (August 4, 2005).

—CarolBrennan