Will Howard Stern go back to terrestrial radio?

One of Howard Stern’s favorite topics to discuss on the air is Howard Stern. Hardly an hour goes by that he isn’t talking about his personal life or his radio career. As a member of the media, it’s my favorite part of his show. But it also had me wondering what he’ll do once his contract with Sirius XM (SIRI) expires at the end of next year.

Debates will rage and if Stern stays true to form, he will leave it a mystery until the end. But his decision will be critical: Hanging in the balance is the future of the satellite radio business. Remember, Stern helped breathe life into satellite radio and helped Sirius defeat XM, which it then bought. If Stern leaves satellite radio, will it wither and die?

While satellite radio’s future may be dependent on Stern staying, you can be sure Sirius won’t be able to pay him the king’s ransom, $500 million over five years, that it paid the self-proclaimed “king of all media” to leave his New York radio home at K-Rock (WXRK-FM) and the stations that paid to carry his show around the U.S. While it’s not likely he’d leave satellite to go back to so-called free radio, I believe he will have to syndicate some part of his show to free radio to create more revenue for himself and for Sirius.

Here’s how it would work: Stern would do his usual show, typically five hours, and that could be diced down to three hours for distribution among stations around the U.S. Cursing and offensive chunks that would lead to fines would be edited out. Stations would get the disc jockey, publicity and listeners they crave. Sirius would get needed income and Stern would get the increased exposure he desires.

“Howard is not enhancing growth of satellite subscriptions anymore,” says Fred Moran, media and internet analyst at Benchmark Company, in an interview. “His being partially available on terrestrial radio would not likely cause any significant turnover in subscriptions or churn in customer subscriptions.”

In fact, it could serve to promote Sirius and add subscribers — something Sirius needs. With 18.4 million subscribers, Sirius lost about 186,000 listeners in its most recent quarter. Sirius could require free-radio stations carrying Stern’s edited show to runs advertisements offering the unedited version on Sirius.

Such a move would not be unprecedented. Opie and Anthony, who host their own talk radio program, did their show live for three hours on FM radio and then continued, uncensored, on XM. Moran argues Stern has brought the bulk of the audience he’s going to bring to Sirius already. Stern would surely jump at the chance to again rule FM and AM airwaves as long as he doesn’t have to give up the freedom he enjoys to speak without a censor button. Plus, it would feed his insatiable ego.

The million-dollar question is, what’s next for Stern? “It’s a topic I think about all the time,” Stern said this week on his Sirius show. “I don’t really know. I don’t.”

In a recent New York Daily News story, David Hinckley wrote that Stern has the ability to get folks to pay to hear him on the internet or through a paid podcast. Kurt Hanson, editor of the Radio And Internet Newsletter, told Hinckley that a Stern internet show could work and could potentially draw a big audience.

But asking an online audience to pay for more Howard is greedy and would anger his fans. They’re already paying to hear him on Sirius and can pay to see a video feed of his show, known as Howard TV, with extra video bits that radio listeners don’t get. Sure, some would be willing to pay for that online, but not enough to give a serious boost to Sirius’s profits. Those who can afford to pay up for Stern are the desperate radio stations seeing their audience defect to online radio or Apple (AAPL) iPods. Stern could plug that leak.

Michael Harrison, editor of the trade magazine Talkers, told Hinckley that Stern’s talent will still be in demand. “He has nothing to prove,” Harrison said. “He has total freedom. The only question is what he does with it.” Tom Taylor, editor of the trade sheet Radio-Info.com, told Hinckley, “Howard likes cliffhangers.”

Stern said this week, “It’s a cliffhanger for me too. I can’t wait to find out what I’m going to do. My life is a cliffhanger.”

I’ve interviewed Howard Stern twice since he left free radio while I worked at Bloomberg News. I was not able to get Stern on the phone this time to discuss his career, although I made calls and sent e-mails to his agent. That said, I’ll take him at his word that he doesn’t know what he’s going to do. The fun part for Stern’s audience will be tuning in to discover his next move. While he, his agent, and surely his audience, debate what’s next and best for Stern, I believe a syndicated PG-version of his show on free radio is the best way for him to grow his audience and for Sirius to increase its revenue and subscribers.

Stay tuned.