UPDATE: Howard Stern To Stay With Sirius Another Five Years

Howard Stern, the popular and controversial radio talk show host, said on his Sirius XM Radio Inc. (SIRI) show Thursday that he has signed a five-year deal to remain with the satellite radio broadcaster.

Terms of the contract haven't been disclosed, but Stern has said repeatedly that he wouldn't take a pay cut. He alluded to a more "flexible" schedule in his new contract, which perhaps means fewer days, fewer hours and even more than the many weeks of vacation he currently enjoys. Sirius declined comment beyond what Stern said on his show and its own brief press release.

His current contract, signed in 2005, brought him to Sirius in 2006, along with millions of subscribers that arguably saved Sirius from collapse. That pact, which runs through the end of this month, was worth $500 million plus stock options.

Stern is perhaps worth more than his current deal to the company if a big chunk of the subscribers he brought to Sirius would cancel their service when he leaves. It takes fewer than 1 million subscribers to pay the $100 million Stern costs Sirius annually, and conservative estimates posit at least 2 million to 3 million subscribers signed up just to hear his show.

Sirius shares gained 5.7% to close Thursday at $1.39 apiece, adding over $300 million to the company's market capitalization.

Stern, 56, said on his show that deals with his supporting cast and crew have not yet been signed, but he expected that most of them would return when the show resumes early next year. The last live Howard Stern Show of the year was slated to air next Thursday.

There had been speculation that Stern would not return, opting instead to either retire or take his ribald show to another medium, perhaps Apple Inc.'s (AAPL) iTunes. Stern, who has used last-minute threats of leaving as a negotiating tactic with previous employers, said there were no "heavy discussions" with Apple.

Stern said two large radio companies approached him to return to the censored, terrestrial-radio airwaves where he rose to fame, but Stern said he promptly turned them down, citing the lack of freedom, constant commercial interruptions. Stern, whose terrestrial radio career was marked by run-ins over indecency with the Federal Communications, and his employers, didn't identify the two companies.

His previous employer, CBS Corp.'s (CBS, CBSA) radio division, sold stations and watched advertising revenue fall as it struggled with Stern's departure. The division saw adjusted annual operating income drop over $100 million from 2005 to 2006 with the loss of the Stern Show.

Stern said he was pursued by multiple Internet radio players, which were looking to "jump start" their businesses in the same way Sirius had with Stern five years ago. Stern said he didn't feel his work was finished at Sirius, but said the future of automobile radio will include legitimate Internet-radio offerings that compete for listeners with subscription-based satellite and free terrestrial radio.

The deal to get Stern helped Sirius, then separate from competitor XM Satellite Radio and struggling mightily, go from fewer than 1 million subscribers to several million. Stern's signing also prompted long-time associate and radio industry heavyweight Mel Karmazin to join Sirius as chief executive.

Eventually, Sirius gained the upper hand and was able to merge with larger XM in a drawn-out deal that closed in 2008. The combined company recently reached 20 million subscribers and appears to no longer be in danger of going under, thanks to a cash infusion from billionaire media mogul John Malone's Liberty Media Corp. early last year. Now the second-largest subscription entertainment business in the U.S. behind Comcast Corp. (CMCSA, CMCSK), its cash-flow outlook has brightened considerably and now won't dim because of Stern leaving.

A Liberty Media spokeswoman declined to comment.

Joel Hollander, former head of CBS Radio, said he wasn't surprised that Stern is staying put.

"Satellite radio looks like a good ongoing business right now," said Hollander. "They have recurring revenue generation of close to $3 billion a year. It's part of the audio platforms out there that are successful, and they probably can grow some."

-By Maxwell Murphy, Dow Jones Newswires; 212-416-2171; maxwell.murphy@dowjones.com

--Nat Worden contributed to this article.

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