Business Matters: If Big Radio Had Pandora's Royalty Rate, It Would Owe Billions
Business Matters: If Big Radio Had Pandora's Royalty Rate, It Would Owe Billions

It's a new era for Sirius XM Radio. The company announced Wednesday that James E. Meyer has been named company's interim CEO, effective immediately. Meyer, the president of sales and operations, takes over for Mel Karmazin, who had previously planned to step down in February. Meyer has also joined the company's board of directors.

Karmazin resigned his role as CEO and his membership on the company's board of directors. The longtime radio and media executive took over at Sirius in November 2004 after serving as president/COO of Viacom. Karmazin opted not to renew his employment contract with Sirius XM.

Sirius XM flourished under Karmazin's leadership. Howard Stern followed Karmazin from Viacom to Sirius in 2006 for a reported $500 million. The 2008 merger of Sirius and XM combined the two struggling satellite radio companies and put Sirius XM on a sustainable financial path. Cash flow from operations has gone from -$152 million in 2008, the year of the merger, to $513 million in the first nine months of 2012.

The next CEO will face a different set of challenges, including Pandora, Apple, iHeartRadio, Spotify and other options that will only elevate as 3G and 4G coverage increase around the country. Sirius XM will also face new technologies for the automobile that will give people more opportunities to listen to things other than satellite radio. Gracenote-powered voice recognition software in Ford cars is one example. The company will also have to pay higher statutory royalty rates to SoundExchange starting next year, which Billboard estimates could cost the company roughly $1 billion to $1.2 billion over the next five years. Those royalties will slowly eat into the companies improving financial health.

Gregory Maffei, a Siriux XM board member and chief executive of Liberty Media (it owns 40% of Sirius XM) will head a search committee for a new CEO.