“There would be no question that I would be perfect to run it,” Karmazin said. “But there is no chance that I will ever take another job outside of Sirius XM. I just renewed my contract. It’s exactly what I want.”

Exactly what he wants, except maybe for that perennially-under-a-dollar share price–though according to Karmazin, that’s going to change. “I think today, you’ll start to see quarter after quarter of growth,” he said. “You’ll see us making free cash flow. You’ll see us with…over $2.5 billion of revenue. We’ll start to make money, and we’ll start to keep investing in content. And I think our future will be great.”

Unassuming guy, that Karmazin…

Absent one-time charges, the company broke even for the quarter. Analysts had been expecting a two-cent loss on revenue of $609 million.

Good news, but it was tempered with a bit of bad. Because Sirius’s (SIRI) subscriber growth is slowing. The company ended the quarter with 18.5 million total subscribers. That’s up 103,000 from the second quarter, but down 2.1 percent from a year earlier.

“We are very pleased with what we accomplished during the third quarter, especially when considering the macroeconomic issues affecting consumers and the auto industry,” Sirius CEO Mel Karmazin said in a statement.

“We managed to grow revenue, grow ARPU, reduce operating costs, increase adjusted income from operations significantly, and refinance higher cost debt,” Karmazin added. “We look forward to continuing this performance. We grew subscribers and improved churn in the quarter, and we are well positioned to take advantage of an economic rebound. We expect to grow subscribers, revenue, and cash flow next year regardless of the magnitude of any recovery.”

“At the end of the June quarter, Apple was having difficulty keeping the iPhone 3GS in stock; the product seems to have exceeded Apple’s internal expectations,” Munster writes in a research note today, explaining that he sees two primary reasons for the uptick in demand.

In the first place, according to Munster, “Apple’s App Store has been a huge success (65k+ apps and 1.5b+g downloads), and app developers (like Sirius/XM, ESPN, etc.) are promoting their apps, and meanwhile providing free advertising for the iPhone platform (which spurs more iPhone sales, app downloads, and the cycle continues)….”

Second, Munster continues, “The smart phone industry has effectively crowned the iPhone and its App Store the gold standard among touchscreen mobile experiences, and competitors are trying to copy the device and its software. In so doing, the iPhone’s competitors are actually promoting the iPhone, and we believe, driving sales of the device similar to the manner in which competing MP3 players drove sales of the iPod as the gold standard in 2004 by defining themselves in comparison to it.”

Hard to disagree with that assessment given that some of the handset ads we’ve seen recently, particularly from Palm (PALM) and Sprint (S)–see ad above–which, though they insist the Pre was never intended as an Apple (AAPL) iPhone killer, can’t help but compare the two devices in their marketing materials.

The Open Book Alliance formally launched the manifesto this past week with which it’s challenging Google’s settlement with authors and publishers. The organization now has a Web site and quite an array of allies–which include, of course, Microsoft (MSFT), Yahoo (YHOO) and Amazon (AMZN). And as if Google doesn’t have enough on its plate, turns out that all along, Microsoft has been holding regular “Screw Google” meetings, the bastards. Uh, I thought that’s what people pay good money to learn in Business School. On a happier note, Howard Stern fans everywhere were happy to learn that Sirius XM (SIRI) has debuted a device that can turn an iPhone or iPod touch into a full-fledged satellite radio.

Over in Personal Technology, Walt reviewed Snow Leopard and found it to be an improvement on its predecessor, but with a lot of the upgrades under the hood invisible to most users. Not the typical object of desire we’re trained to expect out of Apple. In Mossberg’s Mailbox, Walt answers reader email about choosing a vendor to buy a computer online and setting parental controls in Firefox. In The Mossberg Solution, Katie Boehret explores the trials and tribulations of BlackBerry and iPhone users switching one for the other.

More next week.

Dubbed SkyDock, the $119.99 peripheral uses iPhone OS 3’s support for third-party hardware to transform Apple (AAPL) handsets into full-fledged satellite radios. Designed to run off a car’s cigarette power adapter, the SkyDock charges your iPhone while you listen to it. It works in concert with the Sirius/XM iPhone app and supports the ability to tag songs for download from iTunes. Better yet, it gives users access to all XM and”The Best of SIRIUS” channels, even those the company infamously excludes from its online feed, like Howard Stern, MLB Play-by-Play and NFL Play-by-Play.

A wise move for Sirius and one that will no doubt go over quite well with folks who are interested in listening to its programming, but unwilling to pay for a full sat-radio upgrade to do so. No word yet on a firm release date. The device has, however, been granted preliminary approval by the FCC which is still evaluating it.

Below, the official release:

SIRIUS XM RADIO INTRODUCES THE FIRST DEVICE TO RECEIVE LIVE SATELLITE RADIO CONTROLLED BY THE iPOD TOUCH AND iPHONE

XM SkyDock™ allows customers to enjoy live XM and “The Best of SIRIUS” in their vehicles using the iPod touch or iPhone

NEW YORK–August 26, 2009–SIRIUS XM Radio (NASDAQ: SIRI) today introduced XM SkyDock, the first satellite radio controlled by an iPod touch or iPhone. The XM SkyDock is also one of the first products to take advantage of the new hardware control capabilities of iPhone OS 3.0.

Designed for easy use through the existing vehicle audio system, SkyDock has a built-in XM tuner controlled by a free App that users download from the App Store. The App allows control of the XM tuner using the capabilities of the iPod touch or iPhone Multi-Touch user interface. SkyDock will also charge iPod touch and iPhone devices while listening to live satellite radio.

“XM SkyDock will allow millions of users to add live SIRIUS XM Radio capability to their iPod touch or iPhone while in their vehicle,” said Bob Law, Group Vice President and General Manager, After Market Division, SIRIUS XM Radio. “XM SkyDock makes their favorite programming from XM and ‘The Best of SIRIUS’ available to iPod touch and iPhone users anywhere they drive, coast to coast.”

Listeners can use their iPod touch and iPhone to listen to all their favorite sports, talk, news, entertainment and commercial-free music programming, including Oprah Radio, MLB Home Plate, the PGA TOUR Network, Opie & Anthony, Bob Edwards, Jamie Foxx and Blue Collar Comedy. For the first time, subscribers can also listen to the complete “Best of SIRIUS” package, including Howard Stern and his two 24/7 channels, Martha Stewart Living Radio, SIRIUS NASCAR Radio, sports play-by-play and the Playboy Radio channel, all controlled by the iPod touch and iPhone.

Listeners can also tag songs they hear on XM’s music channels for later purchase from the iTunes Store–including songs on XM’s 24/7 artist branded commercial-free channels such as Jimmy Buffett’s Radio Margaritaville, Elvis Radio, Eminem’s Shade 45, The Grateful Dead Channel, B.B. King’s Bluesville, Willie Nelson’s Willie’s Place, Siriusly Sinatra and Bruce Springsteen’s E Street Radio. Other features include game alerts and sports ticker, artist and song alerts as well as a stock ticker.

The XM SkyDock is a perfect companion to the SIRIUS XM Premium Online App, which allows subscribers to receive SIRIUS XM’s Premium Internet service on their iPhone and iPod touch when they are out of the vehicle and on-the-go, at home, or at the office.

XM SkyDock comes with SIRIUS XM’s patent-pending PowerConnect™ technology, which simplifies Do-It-Yourself vehicle installation, working through the existing vehicle radio and making it easy to move from vehicle to vehicle. An Aux In Cable is a standard in-box accessory to facilitate Aux In connections in vehicles with Aux In capability. SkyDock’s flexible stalk optimizes the iPod touch or iPhone placement in the vehicle. Customers can view the touch-screen interface in portrait or landscape modes. Accessories include Magnetic Mount Antenna and spacers to accommodate the various iPod touch and iPhone product generations.

XM SkyDock is compatible with iPod touch (1st generation), iPod touch (2nd generation), iPhone, iPhone 3G and iPhone 3GS. All models require iPhone OS 3.0 or later.

XM SkyDock will be sold in stores and will also be available at www.shop.xmradio.com with an MSRP $119.99 in fall 2009. The XM SkyDock App will be available at the same time.

This device has been granted preliminary approval by the Federal Communications Commission but is still undergoing evaluation by the Commission.

For more information on XM, please visit www.xmradio.com.

Why? A few reasons. First, there’s the government’s “cash for clunkers” program, which will likely stimulate new car sales and new Sirius subscriptions thanks to the satellite radio trials often packaged with new cars.

Then there are rumors of new iPod-related hardware that may or may not debut at the company’s holiday gift-guide event next week. Scheduled for Wednesday, that gathering promises “a new line-up of accessories…for the home, office, vehicle and beyond.” This has led some folks to speculate that we’ll soon see a Sirius dock for the iPod/iPhone.

From XMFan, which claims to have insider details on the device.

The XM SkyDock is a docking station for your iPod Touch or iPhone that turns it into a SATELLITE XM Radio receiver! Included is an XM antenna, power cord (also featuring the new transmitter technology), and docking station that turns your iPod/iPhone into an actual XM Satellite Radio receiver using the SiriusXM app.

XMFan says the dock is expected to retail for under $100 and speculates that it could drive a lot of new subscriptions. I suppose we’ll find out next week–if the device is actually announced.

[Image Credit: XMfan]

“Reaching more than 1 million downloads so quickly is a strong testament to our world-class programming and Sirius XM’s instant brand recognition,” Scott Greenstein, president and chief content officer, said in a release trumpeting the milestone. “Our goal is to give people access to the best audio entertainment wherever they go with what we think is the best music and audio entertainment application available on the App Store.”

The app, which debuted on June 18, quickly became the top free offering in the the App Store’s music category and has held that spot for some time now. So it’s certainly one of the more popular music apps available. That said, it’s also one of the most poorly rated. Sirius XM’s app has an average rating of just two stars out of a possible five. Of its 56,952 user reviews, just 8,822 give it five stars. But 37,818 rate it a single star. And most of those do so citing Stern’s absence as the reason. So while it’s true that Sirius XM Premium Online is the the top free app in the music category, it’s also seems to be its leading disappointment. Makes you wonder how many of those one million downloads were deleted, either after the user noticed Stern’s absence or the $2.99/month subscription fee.

In a filing with the Securities and Exchange Commission, Sirius XM said it will raise Karmazin’s base salary to $1.5 million from $1.25 million beginning on Jan. 1, 2010, and grant him an option to purchase 120 million shares at an exercise price of 43 cents a share. His reward for steering the company clear of bankruptcy after driving it right up to its very edge, I suppose.

Sirius (SIRI) investors who’ve seen their stock plunge to 46 cents from $2 a share can be forgiven for questioning the wisdom of such a move and wondering if perhaps there wasn’t a better use for a quarter of a million dollars at a time when the company is buried in debt. But there’s nothing much to be done about it now. Suffice it to say, the odds of Karmazin being forced out at this point are likely pretty slim.

PREVIOUSLY:

• Fee Increase Coming for Sirius XM Subscribers [Internal Doc]
• Sirius Founder: You’re 10 Years Too Late, Karmazin
• Call Me Mel “Save-My-Own-Keister” Karmazin
• Sirius-EchoStar-Liberty: Ménage-à-Blah
• Sirius: Give Me Liberty or Give Me Ergen
• A Bankruptcy Filing, Mel? Surely You Can’t Be Sirius…
• Sirius Rolls Out New 24 Hour Investor Keening Channel
• Sirius Debt Problems? Call EchoStar! No Upfront Fees!
• Sirius XM: The Beginning of the End or the End of the Beginning?
• Your Report Card Is Your Stock Price? Guess Sirius Is Making Straight $.13’s…
• Trade You 77 shares of SIRI for 1 Month of “Sirius Everything”

US Music Royalty Fee Overview
As an ongoing part of our business, SIRIUS XM must pay copyright music royalties to music companies and music publishers. These royalties have risen dramatically over the past few years, as a result of decisions of the Copyright Royalty Board (CRB). SIRIUS XM has tried to keep these fees as low as possible but in the end, the company has very limited influence over these payments. The FCC decision approving the merger between SIRIUS and XM allows the company to pass through to Subscribers any federally mandated increases in music royalties that we must pay, since March 20, 2007. The FCC decision allows us to pass through this fee increase to our Subscribers and the company has chosen to do this with the U.S. Music Royalty Fee.

The US Music Royalty Fee will be applied to all music subscriptions that SIRIUS XM offers. The fee will be implemented on July 29th, 2009. The existing Subscriber base will receive this fee on their first billing after this date. The fee will be applied to all satellite plans with music content on a Monthly, Quarterly, Semi-Annual and all Annual Savings Plans. Lifetime Subscribers, who have purchased prior to July 29th, will never receive the US Music Royalty Fee. Since the online products are not satellite based they will not incur the U.S. Music Royalty Fee. Once the fee is introduced on July 29th, any new activation or conversion will include the fee. As we go through this training, you will gain a better understanding of how this fee is applied and how to explain it to the Subscribers. We will be going through different scenarios so you can understand why we are passing this fee onto our Subscribers, how to diffuse irate Subscribers, and how the Subscriber can truly benefit by adding longer term plans.

FAQ

Below are examples questions you may receive from Subscribers regarding the US Music Royalty Fee. Use Answers below (as verbatim) when answering questions about why there is a US Music Royalty Fee or costs associated with the US Music Royalty Fee.

What is this US Music Royalty Fee?
Unlike land based radio, both SIRIUS and XM are required to pay copyright music royalties to recording artists, musicians and recording companies who hold copyrights to lyrics and music.

Why are you increasing your price?
We are not increasing our base price which will remain at $12.95/month for most Subscribers.

Why are you charging me this fee?
US Music Royalty rights were established by Congress and are a product of the copyright ACT, the copyright royalty board which sets the rates SIRIUS XM must pay the music industry has increased the rates dramatically. Unfortunately we can no longer absorb these increased costs.

Who makes up the Copyright Royalty Board (CRB)?
The Copyright Royalty Board consists of three Copyright Royalty Judges who determine rates and terms for copyright statutory licenses and make determinations on distribution of statutory license royalties collected by the United States Copyright Office of the Library of Congress. The Board, made up of three permanent copyright royalty judges, was created under the Copyright Royalty and Distribution Reform Act of 2004, These administrative judges are appointed by the Librarian of Congress

Why does it cost so much?
The Copyright Royalty Board which sets the rates SIRIUS XM must pay the music industry have increased the rates dramatically. Unfortunately the Company can no longer absorb these increased costs and must pass them on to subscribers as a US Music Royalty Fee. Is there any way to avoid this charge? Absolutely, for our Subscribers who previously purchased a long term plan, we will continue to absorb these costs until the next renewal date. If you renew and extend your current subscription before July 29, 2009 we will continue to absorb these increased royalty costs until your next renewal date. I can tell you about some our great savings plans.

FCC Ruling stated you can’t raise your price, why are you doing it?
This fee is consistent with our commitment not to raise the base price of specific service plans for three years after the merger. The FCC did however permit us to add this fee to our price beginning July 29, 2009.

How does this relate to the March Increase?
It is unrelated; the US Music Royalty Fee is to recover royalty cost increases that are outside of the control of SIRIUS XM.

I just locked in for MRD, why are you increasing it again?
If you purchased a multi-month plan to lock in a lower price or to retain free streaming, the US Music Royalty Fee will not affect you until the next renewal date for the Plan you purchased.

Who gets the money?
The US Music Royalty Fee will be used to offset payments from SIRIUS XM to the music industry.

Do you foresee any changes in the fee?
The Copyright Royalty Board sets the fees that SIRIUS XM is required to pay. The fee is expected to increase by one half percent per year through 2012.

Why did you decide to charge a US Music Royalty Fee rather than adding the increase to the subscription fee?
The FCC order requires that we detail the royalty increase for our Subscribers.

Why is the US MRF taxed?
Under applicable tax regulations, it has been determined that the US MRF is a taxable charge.

I only listen to news and talk radio, so why should I be charged the US MRF?
I understand, however, it would be impossible to calculate the US Music Royalty Fee based on individual listening patterns of our Subscribers.

You recently increased the price of my second radio by $2.00. Now you are adding a US MRF of $.97. Isn’t this too much?
The discounted second radio price of $8.99 is still a 30% savings over our standard fee. The addition of a US Music Royalty Fee is necessary due to the dramatic increase in royalties that we have been forced to pay the music industry.

Was I paying this fee previously as part of my subscription price and now am I paying for it separately?
Until July 29, 2009 the FCC required SIRIUS XM to pay the royalty increases, however the order provided the ability for us to pass along these royalty cost increases beginning July 29, 2009.

If I have an A La Carte subscription am I only paying the fee on the music channels?
That’s a great question, SIRIUS -XM is obligated to pay the US Music Royalty Fee based on the content available in packages, unfortunately we are not able to customize the fee for individual Subscribers.

Is there a way to reduce this cost–can I switch my subscription package to mostly music
You may switch to a mostly music package, which will save you $.45 a month in US Music Royalty Fees, but if you do that, you will be giving up over xx channels (different for SIRIUS and XM) of great programming. However, let me tell you about some of our great savings plan which will allow you to delay the US Music Royalty Fee for the term of that plan.

I have an online radio subscription; do I pay a royalty fee on that?
No, the music royalties associated with satellite delivery and internet delivery of music content are different. The royalties associated with internet listening is absorbed in the subscription price.

I have 2 subscriptions a Best of and a SIRIUS Everything why is the fee the same on both subscriptions?

The US Music Royalty Fee is based on music; the channels included in the Best of portion of your package do not include large amounts of music, so no US Music Royalty fee is due on that portion of your subscription.

UPDATE: Looks like someone leaked this doc to XMFan as well. Lot’s of interesting discussion there, if you’re interested in reading further.

But the same cannot be said for Martine Rothblatt, the entrepreneur who founded Sirius (SIRI) nearly 20 years ago. She feels Sirius’s chances for real success may have died years ago–dealt a mortal blow by the FCC, which delayed its launch, depriving it of the competitive advantage it might have had over MP3 players like the iPod and later free Internet radio services.

“There has been a huge growth in terrestrial alternatives,” Rothblatt told Fortune. “As we move from third-generation to fourth-generation cellular, there’s going to be ever more bandwidth available to distribute content totally via terrestrial cellular infrastructure. And that will leave fewer and fewer unique market attributes to satellite radio. Technologies have their ideal times and places, and in my opinion the better time for satellite radio was 10 years ago.”

So much for that first-mover advantage…

A grim assessment for Sirius, which had just seemed to be getting an edge on its daunting troubles. But Rothblatt has a point. Internet radio is gaining traction and once cellular networks evolve to the point where they can deliver it to cars and other devices, how can satellite compete? Howard Stern’s going to retire sooner or later…

PREVIOUSLY:

• Sirius to Shareholders: Put Down the Mylanta
• Call Me Mel “Save-My-Own-Keister” Karmazin
• Sirius-EchoStar-Liberty: Ménage-à-Blah
• Sirius: Give Me Liberty or Give Me Ergen
• A Bankruptcy Filing, Mel? Surely You Can’t Be Sirius…
• Sirius Rolls Out New 24 Hour Investor Keening Channel
• Sirius Debt Problems? Call EchoStar! No Upfront Fees!
• Sirius XM: The Beginning of the End or the End of the Beginning?
• Your Report Card Is Your Stock Price? Guess Sirius Is Making Straight $.13’s…
• Trade You 77 shares of SIRI for 1 Month of “Sirius Everything”

A wise move, since Sirius needs to drive sales and consumers are cutting back on the purchase of new cars, one of the company’s main sources of new subscribers. Indeed, in its latest quarter, Sirius said net subscriber growth slowed markedly, falling to 82,900 from 1.1 million.

Good thing too, because that uncertainty was pretty worrisome. Buried in the company’s recent Notification of Late Filing with the SEC, along with the now standard warning about the souring economy’s effect on business, was this little disclosure:

Management has not yet completed its evaluation as to whether substantial doubt exists relative to the Company’s ability to continue as a going concern for a reasonable period of time. A significant element of that evaluation relates to uncertainties associated with funding of amounts stipulated in the aforementioned Investment Agreements. These uncertainties may not be resolved by the time the Company files its Form 10-K with the Securities and Exchange Commission. In the event such uncertainties remain unresolved, management anticipates that KPMG LLP’s auditors’ report relative to the Company’s 2008 consolidated financial statements will contain an explanatory paragraph indicating substantial doubt about the Company’s ability to continue as a going concern.

In addition to resulting in termination of further funding pursuant to the Investment Agreements, the inclusion of such a paragraph by KPMG LLP would result in a default under certain indebtedness of the Company, XM Holdings and XM Satellite Radio Inc. (“XM Inc.”) which defaults, if not cured or waived prior to the expiration of the applicable grace period, would result in an event of default under other indebtedness of the Company, XM Holdings and XM Inc. Such events of default, if they occur, provide the lenders the right to demand all amounts due under the respective agreements immediately due and payable.

What this means is that if KPMG’s assessment of the company is that it’s not able to continue as a “going concern” and the company had not at that time resolved its debt issues, it would automatically default. Presumably, now that Sirius (SIRI) has closed the Liberty (LINTA) deal, that’s no longer a possibility. Looming crisis averted.