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CNN PEOPLE IN THE NEWS

Profiles of Martha Stewart, Howard Stern

Aired October 9, 2004 - 11:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


ERICA HILL, CNN ANCHOR, CNN LIVE SATURDAY: CNN Center in Atlanta, PEOPLE IN THE NEWS begin in a moment, but first stories now in the news.
America watched, but last night's presidential debate apparently changed few minds. Post-debate polls show President Bush and Democratic challenger Senator John Kerry remain in a statistical dead heat three weeks before the election.

Post-debate report, analysis and what the candidates are doing today in one hour coming up on "CNN Live Saturday".

Afghanistan's first direct democratic election is in crisis. All but two candidates in the presidential election are charging voter fraud. The challenge came after it was discovered finger ink used to prevent people from voting more than once could be easily washed off.

The United Nations is in crisis talks with the candidates.

More than a dozen people are dead after a bus crashed and overturned near Marriet (ph), Arkansas, that is outside Memphis, Tennessee. No other vehicles were involved. Thirty tourists were on a gambling junket from Chicago to Tunika (ph), Mississippi. The National Transportation Safety Board plans to join the investigation.

More news coming to you at the bottom of the hour, PEOPLE IN THE NEWS begins right now.

(BEGIN VIDEOTAPE)

ANNOUNCER: Next on PEOPLE IN THE NEWS, a different style of living for America's favorite home maker, doing time behind bars.

UNIDENTIFIED MALE: She was the absolute center of her world and that is literally impossible in prison.

ANNOUNCER: So, what will life be like at the prison nicknamed Camp Cupcake?

UNIDENTIFIED FEMALE: She'll have to have a job in the kitchen or in the library or landscaping, and she's not going to be deciding what they're planting.

ANNOUNCER: But the New Jersey native who built a media empire from scratch is already cooking up her come back.

UNIDENTIFIED MALE: She wants to do her time and get out so she can get on with the reality TV show with Mark Burnett.

ANNOUNCER: The rise and fall and perhaps rise again of Martha Stewart.

Then, he's the self proclaimed King of all Media.

HOWARD STERN, SHOCK JOCK: I am the King of all Media.

ANNOUNCER: People love him.

UNIDENTIFIED MALE: Nobody has more loyal fans.

ANNOUNCER: People hate him.

UNIDENTIFIED MALE: He has scraped the bottom of the barrel and just kind of sits there.

ANNOUNCER: Now, he's the man in the middle over the debate in indecency.

UNIDENTIFIED MALE: The reason Howard Stern is so popular is the very reason he's in so much trouble.

ANNOUNCER: The always outspoken Howard Stern.

Their stories, now, on PEOPLE IN THE NEWS.

(END VIDEOTAPE)

PAULA ZAHN, ANCHOR, PEOPLE IN THE NEWS: Hi. Welcome to PEOPLE IN THE NEWS. I'm Paula Zahn.

For Martha Stewart, the living is not so gracious anymore. The home making mogul began her serving her five-month sentence this week in at a federal prison in Alderson, West Virginia.

Her time behind bars, a culmination of a stock scandal that has seen her go from domestic diva to felony and now inmate. Here is Sharon Collins.

(BEGIN VIDEOTAPE)

SHARON COLLINS, CNN CORRESPONDENT: October 19, 1999, domestic diva, Martha Stewart, was celebrating on the floor of the New York Stock Exchange. It was a high energy, high-profit day. At the sound of the bell, her company, Martha Stewart Living Omnimedia went public. Shares doubled and by the end of the trading day, Martha Stewart was a billionaire on paper.

UNIDENTIFIED MALE: Selling at $38 right now.

COLLINS: She celebrated by serving orange juice and Brioche (ph) to money thirsty traders. It was a very Martha moment. MARTHA STEWART: It's a good thing.

COLLINS: Now things are not so good for Martha Stewart. This week, she entered the women's prison camp in Alderson, West Virginia, a remote minimum-security prison. She'll serve five months there, followed by five months of house arrest.

JEFFREY TOOBIN, CNN LEGAL ANALYST: Martha Stewart lived in a bubble where she was the absolute center of her world and that is literally impossible in prison. She is just another number in prison, and that's going to be the biggest change of all.

COLLINS: The sentence is a result of charges stemming from her sale of ImClone stock in 2001, a sale that occurred just one day before the FDA decided not to review their highly touted cancer drug. She was found guilty on two counts of making false statements, one count of obstruction of justice and one count of conspiracy.

TOOBIN: The irony in this case is she was convicted of lying to cover up a stock transaction, which the government conceded was not a criminal offense.

COLLINS: Throughout her ordeal, Stewart has always maintained her innocence and her composure in public, even when she was convicted.

SHARON COTHAR, STAFF CORRESPONDENT, "PEOPLE" MAGAZINE: It was a very, very tense courtroom. She was amazingly solid. Her daughter fainted, but she didn't show any emotion, other than a brief gulp when she heard the first guilty.

COLLINS: After her conviction, and sentencing, Stewart was still seen out and about in New York while her appeal was pending.

COTHAR: She's been going to Yankee games, going out to restaurants, where she would obviously be seen, attending book parties. She has not spent much time under a shell.

COLLINS: But at a press conference on September 15th, Stewart announced she would give up her freedom, forego her stay of appeal and begin her sentence immediately.

STEWART: I suppose the best word to use for this very harsh and difficult decision is "finality" and my intense desire and need to put this nightmare behind me, both personally and professionally.

ANDY SERWER, EDITOR AT LARGE, "FORTUNE": I think Martha going to prison early is only going to help her. Her advisors and people on Wall Street have been telling her this for months. Put your problems behind you so you can get on with the business of your company, never mind your life.

COLLINS: Also at the press conference, she gave a detailed list of the things she would miss the most.

STEWART: And I will miss all of my pets. SERWER: She enumerated all sorts of animals.

STEWART: My canaries.

SERWER: Chickens, ducks, and dogs.

STEWART: My seven lively cats.

SERWER: She didn't mention family members. She didn't mention her own daughter, which struck people a lot of people as kind of bizarre, but a lot of what Martha does is, frankly, different. She's a very singular person.

COLLINS: A singular person whose story of triumph has turn into more of a tragedy, from middle class suburbs to lavish homes, and now behind bars. It's been a dramatic rise and fall for a woman who came to embody the American dream.

Martha's story begins the way millions of American stories have begun, with a story of courage a century ago. Martha's Polish grandparents sailed by the Statue of Liberty into New York Harbor in 1906. The new immigrants set up home first in Newark.

Later, Martha's father would move to Nutley, New Jersey, just 20 minutes from Manhattan. Martha and her five siblings grew up in a modest three-bedroom home. Martha and everyone else knew who was in charge at 86 Elm Street, her father, Eddie Kostyra.

CHRISTOPHER BYRON, BIOGRAPHER: He clearly had a severe drinking problem. He was unable to hold a job for any particular length of time.

Martha's friends did not want to go in the Kostyra house, because there was constant yelling in there. Martha's ex-husband, Andrew Stewart, referred to him as a Willy Loman figure who just sort of stumbled downhill through life and until he finally wound up at the ultimate dead end job.

Like, Willy, Edward Kostyra was a salesman, he had dreamed about being a doctor, but ended up commuting to New York City, selling pharmaceuticals. A financial failure, Eddie Kostyra was a stern father, demanding perfection from his children, even in the garden.

STEWART: I remember the first day I was put out there, on the garden path. We had a cobblestone path in our garden. It had weeds in it. He said take out all the grass. I think I was three. I sat out there all day. And became his pet because of that.

COLLINS: With her father's drive for perfection, she also became every teacher's pet at her elementary school. And in high school, it was more of the same. An A student, her yearbook quote reads, I do what I please, and I do it with ease.

Coming up next, a nation gets its first look at Martha.

BYRON: Martha was chosen one of "Glamour" magazines best-dress college girls of the year.

Martha Stewart carefully creates the picture of perfection. When PEOPLE IN THE NEWS continues.

(COMMERCIAL BREAK)

ANNOUNCER: We now return to PEOPLE IN THE NEWS.

COLLINS: In the '60s, Martha Kostyra was deep into her studies Barnard, an elite college in New York City. Just 20 minutes from her childhood home, it was a world away in sophistication.

To help pay school bills, Martha applied and was chosen to appear in "Glamour" magazine's best dressed college girls of 1961. It was a big break for the small-town girl and got her noticed. She modeled for Tareyton Cigarettes, was a Breck Girl and made a Lifebuoy soap commercial.

BYRON: She didn't do her own voice on Lifebuoy, because she still had a Jersey accent, so they did a voice dub for her.

COLLINS: That much photographed girl from Jersey was about to tell a serious change in her life. She tells "Glamour" magazine, "Life pleases her, in particular, a young man named Andy."

Years later, when Martha published her "Weddings" book, she shared with the world a snapshot of her Andy, the man she married in 1961. Andrew Stewart was a law student and Martha was 19 years old.

After marriage, Martha stepped off the model runway and on to the floor of the New York Stock Exchange. It was the late '60s, the market was strong, and Martha's father-in-law, a broker, encouraged her to try her luck. Biographer Christopher Byron says Stewart was one of the first females on the floor.

BYRON: She was a stock broker in a mini skirt and drop dead blonde looks and did really well.

COLLINS: The next stop for the Stewarts, suburban Connecticut. They slapped down $34,000 for an old dilapidated house in Westport, renovated it themselves, and dubbed it Turkey Hill Farm.

From this meager beginning grew a domestic multimedia corporation. The company's foundation was scrumptious food. Headquarters was the kitchen at Turkey Hill Farm.

Martha, the former model and stock trader, had a new career in mind, catering. She baked breads, whipped up mousse, and set pretty tables. The former straight A student learned to present the perfect party.

In 1982, Stewart's first book, "Entertaining," the first-ever, full-color cookbook, was published by Westport's hostess extraordinaire. More than 1 million copies of the book had sold. She dedicated the book to her father, for instilling in her a love for all things beautiful and to Alexis, her daughter, for her patience. "BusinessWeek" writer Diane Brady says Alexis tolerated quite a lot at Turkey Hill Farm.

DIANE BRADY, "BUSINESSWEEK": Her daughter essentially has told me there's not 10 seconds when her mother has not thought about the business.

COLLINS: Martha has said, Alexis and others were used to her jam-packed calendar.

STEWART: They're pretty used to my workaholic schedule. My life is my work and my work is my life.

COLLINS: In 1987, her life and work collided head on. Her marriage was over. Andrew Stewart left Turkey Hill Farm. Six years later, Andy married Robin Fairclough (ph), once a flower consultant to Martha.

Martha has said for years she blamed herself for the divorce and she wondered, what did I do wrong? For Martha, the only answer was to keep on working, writing more books and with Time Warner, she created a new magazine, "Martha Stewart Living."

On the cover, Martha, inside, more Martha. Martha was everywhere. The big question, would anyone want to buy that much Martha? The answer, a big yes. There were millions of people eager to live in Martha's world.

BRADY: She sort of hits a common nerve in a lot of people. A friend of mine calls it homemaker porn, essentially, it is aspiring to a lifestyle that you can't have. It's a fantasy world.

STEWART: Just like people, roses need to be fed and watered.

COLLINS: Almost immediately, Stewart branched out to TV, landing a deal with NBC's "Today" show.

UNIDENTIFIED FEMALE: Martha is here this morning with an assortment of beautiful roses and some tips on how to make arrange flowers from her new magazine, "Martha Stewart Living."

COLLINS: Within the first year, Time Warner and Stewart had a weekly show in syndication. The little girl who learned perfection from her stern father was now bringing that perfection to America in every manner possible. Millions of Martha smiles later and "Time" magazine declared Stewart one of the most influential people of 1996.

She now had all the trappings of fame, including sneering critics. In his unauthorized biography of Stewart, Byron has cataloged some good things and a lot more downright unpleasant things about his Connecticut neighbor.

BYRON: She's very, very short tempered with people. As she has gotten older it has gotten more so. Countless sources have told us the same thing; that she's extremely difficult to deal with.

COLLINS: But Stewart doesn't quite see herself that way.

TOOBIN: She said to me, "I've never not been nice to anyone."

Look, who among us could even say that? But for her to say it shows that she really, in part, doesn't get how she is viewed in the world.

COLLINS: For many years, Martha used her home in Westport as her TV studio until neighbors rebelled.

BYRON: They went crazy. You were getting 16-wheeler tractor- trailer trucks coming up here. Sometimes there was traffic jams.

That's her house right there.

COLLINS: Eventually, the neighborhood became hostile.

BYRON: This is like the DMZ in Beirut. These walls just arose.

That next beach over is where we're going to go. People in this area, plenty of them, would tell you she comes out here, walks around here at 4:00 in the morning with her dogs.

BRADY: It's poignant. It's well known that she has all these homes. She lives in alone with her many dogs and pets. She may have all these houses, but I doubt she spends much quality time in them, because she's too busy.

COLLINS: Coming up next on PEOPLE IN THE NEWS. Martha Stewart takes her brand global, only to see her empire shattered by a stock scandal.

BYRON: This is a billion-dollar business that's gone up in smoke in no time at all.

(COMMERCIAL BREAK)

ANNOUNCER: Welcome back to PEOPLE IN THE NEWS.

COLLINS: As the '90s came to a close, for Martha Stewart, it seemed business was everything and everywhere. Stewart found the road to fortune wherever she traveled.

BRADY: I think the temptation for any successful entrepreneur is to always go global.

COLLINS: The Martha Stewart brand was seen in merchandising, magazines, the Internet, on radio and television. In 1999, Stewart took the big leap, taking her company, Martha Stewart Living Omnimedia, public on the New York Stock Exchange.

Her gamble was an instant success, partly because of her marketing vision, which included Kmart. Stewart has been associated with Kmart since 1987 and she's been very successful. Her goal has been to bring affordable style to the masses.

STEWART: It's good. It's useful. It's appealing. It's attractive. And it's cheap.

COLLINS: Now that she's in prison, Stewart's company and her future are in question.

SERWER: Martha Stewart is seen as somewhat tainted goods and advertisers have been pulling away. Having said that, the Martha Stewart brand is starting to get a little bit long in the tooth. And there have been new entries into this area that have taken away a lot of the vim and vigor that she once had.

COLLINS: Since her conviction, Stewart has had to resign as a board member and officer at the company she founded. And Martha Stewart Living Omnimedia has already lost $40 million in the first half of 2004. Despite the numbers, Omnimedia stock has witnessed recent rallies.

SERWER: The thinking was that Martha Stewart is going to put her problems behind her, which is a real positive. Having said that, I think there's the realization now that she and her company still face a lot of trouble and a lot of problems.

COLLINS: The toll the stock scandal has taken is ironic, considering what she made on the deal.

TOOBIN: She sold approximately $250,000 worth of stock, which was 0.06 percent of her net worth. And she saved about $40,000 by selling on the day that she did. That is what she saved. And she lost hundreds of millions of dollars, her reputation and her time in prison now.

COLLINS: But even the prospect of prison hasn't slowed Stewart down over the past few months. This past weekend, Stewart jetted down to the Bahamas for one last get away before serving time.

SERWER: Martha Stewart has always kept a very high profile throughout this ordeal. She's not shunning the spotlight, which I think is to her credit in a way. There's no reason to sort of sit back at home and weep. Maybe a little reflection on the fact that she may, in fact, be guilty might be appropriate.

COLLINS: Now, Stewart will have plenty of time to reflect on what she's done. As she says goodbye to her gracious living and hello to a five-month stay in Alderson, West Virginia, tucked away in the Allegheny foothills, the Alderson federal prison camp has been home to other famous inmates, singer Billie Holiday, Manson family member, Squeaky Fromme, and World War II collaborator, Tokyo Rose.

While the prison lay out resembles a college campus, Martha Stewart shouldn't expect a dorm party.

COTHAR: She is not going to have a private room or really any privacy at all. She'll have to wear prison issued khakis.

UNIDENTIFIED FEMALE: Free Martha!

COTHAR: Submit to a strip search and basically have someone else dictating what she does 24 hours a day. And it is not Club Med. It is not cushy. There's no tennis courts. She'll have to have a job in the kitchen or in the library or in landscaping and she's not going to be deciding what they're planting.

COLLINS: The question now, after serving five months behind bars, can Martha Stewart return to the life that she created?

TOOBIN: Martha has big problems in mounting a comeback. She's in her mid-60s. She is starting over at a time when most people are winding down. Disappearing to go to prison makes it very hard to maintain the image that you had.

COLLINS: Others contend her brand is completely dead.

BYRON: Martha Stewart has lost the most precious thing she ever had which was her reputation and her good name. That's gone.

COLLINS: But the one-woman marketing machine is already looking to jumpstart her image when she's released next year. She has a reality TV in the works with "Survivor" and "Apprentice" creator Mark Burnett.

SERWER: The buzz about the reality show is quite mixed quite frankly.

On the plus side, it is Mark Burnett. He has a golden touch. However, now people are starting to scratch their heads and say people want to see "Survivor" or Donald Trump. Wait a minute, are they really going to want to see Martha in a reality show?

COLLINS: The reality facing Martha Stewart now? Prison life. And the question, can she whip up a recipe for a rebound?

SERWER: I think Martha can make a come comeback. If she does, it will be one of the greatest comebacks in history of America business.

COTHAR: I don't think Martha Stewart will be idle. There is still tremendous consumer loyalty for Martha Stewart standards, what she sees as the perfect bed sheet, America still sees as the perfect bed sheet.

COLLINS: Even though Martha Stewart's immediate future looks pretty bleak, don't count her out.

STEWART: I will be back. I will be back.

(END VIDEOTAPE)

ZAHN: Well, it's not all bad news for Martha Stewart. Sure, she's in prison but she also just signed a new and lucrative contract extension with her company. It's a five-year deal that guarantees Stewart an annual salary of $900,000, plus bonuses. That's quite a contrast from the 12 to 40 cents an hour she'll earn working menial jobs in prison.

ANNOUNCER: When we return, the king of shock jocks, shocks again.

HOWARD STERN: When they took me off radio stations. It is getting harder and harder to do business.

ANNOUNCER: Howard Stern and the battle over indecency, when PEOPLE IN THE NEWS continues.

ERIC HALL, CNN CORRESPONDENT: I'm Erica Hill live at the CNN center in Atlanta. PEOPLE IN THE NEWS will continue in a moment, but first, stories now in the news. It is being called a breakthrough plan to restore peace in a volatile Baghdad neighborhood. Iraq's interim government and the Mehdi military have announced a deal for a weapons hand over and unofficial cease fire in the Sadr city neighborhood of Baghdad. The plan calls for the militia to start disarming Monday.

Australia's prime minister has won a fourth consecutive term. John Howard and his ruling coalition looked set to win at least 80 seats in the 150 seat House of Representatives. The victory is seen as a sweeping endorsement of Howard's conservative government.

Weather watchers are keeping an eye on what is now tropical depression Matthew. It formed into a tropical storm in the western Gulf of Mexico yesterday, but (INTELLIGIBLE) already heavy rain though is following along Louisiana, Alabama and Mississippi coast. Matthew is the 13th named storm of the Atlantic hurricane season.

At the top of the hour, Fredricka Whitfield will have a complete wrap of the day's news, including the latest from the Bush and Kerry campaigns as they hit the trail again. PEOPLE IN THE NEWS continues right now.

ANNOUNCER: We now return to PEOPLE IN THE NEWS.

ZAHN: Welcome back to PEOPLE IN THE NEWS. Radio rocked. In a landmark deal, America's number one shock jock is jumping to satellite radio. Howard Stern announced this week that he has signed a five- year multimillion dollar contract with Sirius satellite radio beginning in 2006. Stern says commercial radio is no longer a safe haven for personalities like himself and he blames the FCC's crack down on indecency following Janet Jackson's wardrobe malfunction at the Super Bowl. The self-proclaimed king of all media has often run afoul of Federal regulators. Mike Mockler has more on Stern and the debate over indecency, but first a warning. Some of the following material is of an adult nature.

(BEGIN VIDEOTAPE)

MIKE MOCKLER, CNN ANCHOR: Listen.

HOWARD STERN: Hey, G-man (ph) you're on the air.

MOCKLER: This is Howard Stern.

CALLER: Hey, what's going on, Howard? They're cutting off your show. MOCKLER: ... speaking on his radio show.

STERN: Are they bleeping?

CALLER: They're cutting it all up.

STERN: I don't know why. I didn't do anything wrong.

MOCKLER: Listen closer. What do you hear? Do you hear one of the most influential voices in the history of radio?

RICHARD ROEPER, COLUMNIST, CHICAGO SUN-TIMES: He's funny. He's smart and he says a lot of things on the radio that most people just think, but don't have the guts to say.

MOCKLER: Do you hear a so-called shock jock, outrageous and offensive?

STERN: Breast implants, girls? No? Well, hello.

L. BRENT BOZELL III, PRES., PARENTS TELEVISION COUNCIL: He has scraped the bottom of the barrel and he just kind of sits there. It's pathetic.

MOCKLER: Or can you hear something else, something below the surface -- an ongoing debate over indecency and questions of free speech.

KEN PAULSON, FORMER EXECUTIVE DIRECTOR, FIRST AMENDMENT CENTER: Howard Stern is not a hero of the first amendment. He's a very savvy user of the first amendment.

STERN: Something going on with the FCC.

MOCKLER: For more than two decades, Howard Stern and controversy have been inseparable. He has pushed the limits of what can and can't be said on broadcast radio and racked up plenty of FCC fines in the process. Now he's rocking the radio world once again, moving his show to satellite, in what could be a seismic shift for the radio industry.

STERN: My show has been changed by the government. There's huge chunks of the show that are removed. If you listen to my show now, it's not what it was 10 years ago. They keep chopping it up. They keep hacking it up. Every time (INTELLIGIBLE) writes and complains about the show, they get their way. I know some people find this hard to believe, but we've actually come up with cash this time.

MOCKLER: Howard Stern says he wanted to be on the radio since he was five and stuck in traffic with his father.

PETER CASTRO, ASST MANAGING EDITOR, PEOPLE MAGAZINE: He remembers seeing how sad and how bored his father looked, listening to the news, sitting in that car in traffic and it dawned on him, what if somebody had a radio show that made people laugh?

MOCKLER: Stern grew up on Long Island in a household where no holds bar conversation was the norm. "People" magazine's Peter Castro interviewed Stern and his family in 1993.

CASTRO: Within the first 30 seconds, the father was already telling me about the terrible gas problem that little Howard had and I thought, are these people putting me on? Then I realized you know what, no, they're not acting. This is what these people are really like, which explains why he turned out the way he did.

MOCKLER: Stern attended Boston University, where he met his future wife, Allison. He also got his first radio show which lasted one day.

STERN: And I started to do an outrageous radio show with three other guys and I got fired on my college radio station and at some point, my father said to me, why don't you go, try to be a straight disk jockey? You got to learn how to do it straight before you get on and start doing some nutty things. It was good advice. I mean for a year or two I played it very straight. It was very stifling.

MOCKLER: Stern soon discovered playing it straight wasn't the right path for him.

STERN: I wasn't going out there and really letting lose. I was worried about image and I was worried about pleasing my boss. I even had program directors telling me don't talk to women because you sound weak when you talk to women on the phone. Talk to -- I was listening to everybody. I said, that's it. I'm not listening to anybody. I know what I got to do and I'm going all the way. By the end of 1993, I will be in over 200 cities in the United States of America.

MOCKLER: A different Stern emerged. He was funny, bawdy and offensive. He spoke whatever was on his mind.

STERN: I'll tell you the truth. I said what I said and nobody else has to apologize for me.

MOCKLER: He even joked about a miscarriage his wife had, an event dramatized in "Private Parts," the movie based on Stern's autobiographical book.

STERN: Howey, Jr., no bigger than the size of an...

UNIDENTIFIED FEMALE: Was it a boy?

STERN: It was a boy, yes.

MOCKLER: Stern became known as a so-called shock jock, a label he rejected.

STERN: I'm a comedian. These guys, I don't know, they get on, they go, you're a communist, egg sucking pig and that's their style of radio. I'm not into that. So I don't really attack people. I make fun of situations. What's your name?

CALLER: Jeff Panser (ph).

STERN: Jeff Pansy? CALLER: Panser, Howard.

MOCKLER: Sterns brand of comedy caught on. By 1982, he reached the top of the radio world. He was hired by WNBC in New York.

STERN: Mr. show business with you, Howard Stern.

MICHAEL HARRISON, EDITOR, TALKERS MAGAZINE: They had a 50,000 watt signal that covered the whole northeast and it had the NBC call letters.

STERN: 3:22 at WNBC.

HARRISON: WNBC was a giant prestigious radio station and it was also the establishment.

STERN: The point is I am the star of the radio station. I have the highest ratings on the station. I own this station.

MOCKLER: But Stern's brand of radio didn't mesh with his corporate management's. Despite being number one in the ratings, Stern was fired.

STERN: It was the best thing that ever happened to me, getting fired from there. And to be honest with you, I really don't even care what happened at NBC. I'm proud to be away from them. And it's just great to be out of there. The place is a loony bin.

MOCKLER: Stern was hired by a rival station and soon beat WNBC in the ratings. His crown was secure. He was the king of New York radio. When Howard Stern's story continues...

STERN: Well, my career is over.

MOCKLER: Stern battles the FCC and shows off his "Private Parts."

(COMMERCIAL BREAK)

MOCKLER: Howard Stern's fans love him.

UNIDENTIFIED MALE. He takes the cake of all media.

STERN: The audience never gets tired of me. They love me, don't you? Let me hear the audience. Those are my people.

MOCKLER: They flock to his personal appearances.

ROEPER: We're talking about people who listen to him not just day in and day out, but for two or three hours every single day.

UNIDENTIFIED MALE: Howard's the greatest.

MOCKLER: They make phony phone calls to media outlets proclaiming his name.

CALLER: It is believed now that the earthquake was started because Benji fell on his fat ass when he was going in the Howard Stern show studio.

UNIDENTIFIED MALE: OK.

STERN: I love phony phone calls. I think it's an art form.

MOCKLER: An estimated 8 million listeners tune into Howard Stern's morning show every week, which is syndicated across the country on 45 radio stations and also aired on cable TV.

HARRISON: Howard Stern can actually get people to stop what they're doing and go and buy something.

STERN: These diamonds are big.

HARRISON: That's really how we measure radio power. So, Stern, from that regard, is probably the most powerful person on the radio today.

MOCKLER: Stern's show features a mix of topical humor, social commentary and celebrities.

ROEPER: His celebrity interviews are fantastic because he asks the question that most people are just too polite. They ask the usual suck up questions.

STERN: You were on heroin? What would you do, you cook it up in a spoon?

UNIDENTIFIED FEMALE: No was sort of a nurse. No, I didn't do that. The boys did that.

STERN: What did you do?

UNIDENTIFIED FEMALE: I went to rehab.

ROEPER: Who would you rather see interview Michael Jackson other than Howard Stern? Would you not tune in for an hour of Howard Stern at Michael Jackson?

STERN: Here he is, his name is Will the farter or Will the fart man.

MOCKLER: The program also features plenty of talk of bodily functions and sex, lots of sex.

STERN: That's what 18 looks like?

Burping and farting still turn me on. I still think it's funny. In fact I have a porno movie waiting for me at the hotel that I'm going to watch tonight and I'm going to be by myself and I'm going to have sex by myself tonight. I am still a child and am still excited by those things and that's probably why I'm so successful.

PROF. ROBERT THOMPSON, CTR. FOR THE STUDY OF POPULAR TELEVISION, SYRACUSE UNIVERSITY: Let's face it. Morning radio people are hired to do things that will come this close to getting them fired. It's the job description. They're supposed to do things so outrageous that every day they're dancing the line between keeping their jobs.

MOCKLER: However, the FCC has fined stations that carried Stern's show multiple times for millions of dollars, saying he stepped over the line of outrageousness into indecency.

STERN: Screw everybody.

THOMPSON: If there were no traditions and rules on radio, there would be no show. Howard Stern would cease to exist as a program in some ways, because it's dependent upon the fact that he's breaking the rules.

HARRISON: He's the kind of person that means millions of dollars for the companies that have him. Whenever he gets in trouble, when they have to pay fines, it's worth it, because he brings in so much more money than it costs to have him.

MOCKLER: Stern has said he doesn't let his three daughters listen to his program but he also says what he does is not indecent and he believes he has been persecuted by the FCC.

STERN: I now turn on network news and I see people talking about fondling the president's penis.

UNIDENTIFIED FEMALE: The president has broken more barriers than we have at this point.

STERN: And what is so odd about it is, if I said fondled the president's penis on the radio, I will be fined.

MOCKLER: Stern found an audience beyond radio.

STERN: I am the king of all media.

UNIDENTIFIED FEMALE: That's a fact.

STERN: That is true. That's a fact.

MOCKLER: He's written two best-selling books, "Private Parts" and "Miss America."

STERN: You're a moron. Shut up and sit still.

MOCKLER: Stern also went Hollywood with a well-received film adaptation of "Private Parts."

ROEPER: I think what took people by surprise is that it was a love story. At the time, it was a very honest about Howard Stern and his wife. It was funny and it was actually, I think, surprisingly sweet.

STERN: Ooh, look at that bra. Where did you get that?

UNIDENTIFIED FEMALE: Do you like this?

STERN: OK. That's it. That's it. I am making a baby. It's baby time.

The biggest question is, what kind of woman would marry Howard Stern? There are issues involved with being Howard Stern. Some see it as betrayal when I talk about her miscarriage or I'm running around on the floor with a bunch of strippers or something. I wanted to show that in the movie.

ALLISON STERN: He's a wonderful husband. He's a great father to our children and I have a great life with him. So, I can handle it.

MOCKLER: However, in 1999, after 21 years of marriage, Stern shocked listeners when he announced he and his wife were divorcing. Forever speaking what's on his mind, Stern discussed it on the radio.

STERN: It's the saddest time in our lives. It's awful, just the most awful thing. I don't want to be going through this. I don't want my kids going through this. I don't want Allison going through it.

ROEPER: When I first read the news that Howard was getting divorced, I thought how is he going to pull this off because he always had that great kind of built-in excuse. He could flirt and he could talk to these movie stars and actresses and say, boy, what I would do with you if only I weren't married. Yet, he somehow managed to pull it off, partially because he's been honest about it. It just became part of the show like the rest of his life.

MOCKLER: But when PEOPLE IN THE NEWS continues, Stern makes a surprise announcement, sending shock waves through the radio industry.

STERN: This marks the death of AM and FM radio. I guarantee it.

(COMMERCIAL BREAK)

ANNOUNCER: Welcome back to PEOPLE IN THE NEWS.

MOCKLER: Sunday, February 1, 2004. Janet Jackson's wardrobe malfunction sets off a firestorm of controversy. By the end of this song

UNIDENTIFIED MALE: This was wrong.

UNIDENTIFIED MALE: I thought it was outrageous.

CALLER: (INTELLIGIBLE) they should have slapped cuffs on both of them.

MOCKLER: Congress leapt into action, holding hearings on broadcast indecency, but what began with Janet Jackson quickly turned to focus on Howard Stern. Clear Channel, the largest radio company in America, announced it was suspending Stern from six of its stations.

CASTRO: Howard Stern was like a pit bull on rabies. He was uncontrollable.

MOCKLER: Stern accused Clear Channel of having a political agenda, saying it took him off the air because he had been critical of the Bush administration. Clear Channel denied the accusations. Stern remained furious.

STERN: These fascist right-wing A-holes are getting so much freaking power you got to take back the country. That's my last words to you, and I don't know how many more days I have on the air.

MOCKLER: Stern would soon have more to complain about. In two separate rulings, the FCC announced indecency fines totaling over half a million dollars for several stations that broadcast Stern's radio show.

STERN: I'm thrilled because I had a solid bowel movement.

BOZELL: What you've got is some people in the entertainment industry like Howard Stern, who have made a bloody fortune of money kicking America in the teeth and saying we will not abide by it. So, guess what. They're getting fined now.

MOCKLER: Stern released a written response to the fines, saying he was the victim of a McCarthy type witch hunt and adding, quote, it is pretty shocking that governmental interference into our rights and free speech takes place in the U.S. However, there are laws on what can and can't be said over broadcast airwaves.

PAULSON: What the Supreme Court has decided is that there can be limits in public interest.

MOCKLER: Ken Paulson, the editor of "USA Today" spent seven years as director of the First Amendment Center.

PAULSON: In effect, broadcasters have a contract with the American people and they agree that from 6 am to 10:00 pm, they won't put indecent content over the air.

MOCKLER: The FCC definition of indecency focuses on language deemed patently offensive by community broadcast standards. However, it leaves plenty of room for interpretation.

THOMPSON: What is patently offensive to contemporary community standards? Big city, no way are you going to get any consensus on what contemporary standards are, small town, probably not, under the same roof, probably not.

STERN: Oh, I see. She wants to give me a proctological exam.

BOZELL: You look at some of the raunch that's on Howard Stern's radio show and I challenge you to find me a single community anywhere in America, including the 90210 zip code that finds it acceptable to have that material.

MOCKLER: However, Stern has pointed to other shows, most notably Oprah Winfrey's, saying the same content he deals with can be found on there.

THOMPSON: Who gets to decide radio parody, which is what Howard Stern is doing, is somehow a illegitimate form, whereas sincere, confessional, self help, which is what Oprah is doing, is an OK form and that's when this whole thing gets a lot, lot more complicated.

MOCKLER: Right now, those decisions are made by the FCC.

ROEPER: My problem with that is whether you like Howard Stern or not, today they decide that Howard Stern has crossed that line. Tomorrow maybe it's Rush Limbaugh, then the day after that it' another form of programming and you've got all this power in this governing body.

PAULSON: Sometimes the first amendment debate is not really about the content. It's about holding government to the rules, making sure the government continues to maintain its promise of keeping hands off free expression. It's not about Howard Stern. It's about James Madison and Thomas Jefferson.

MOCKLER: Meanwhile, Congress has been debating giving the FCC even more power, by raising indecency fines to $500,000 per instance, up from $27,000. The legislation would also allow the FCC to begin fining individuals and not just the companies they work for.

BOZELL: You start fining $500,000, up to $500,000 per utterance of indecency per station uttering that indecency and soon you're talking real guacamole and that's got their attention.

HARRISON: The $500,000 fines is a draconian, bone crunchingly powerful display of restraint on the part of the Federal government that is going to chill creativity in radio. It's going to set radio back 30, 40 years.

MOCKLER: However, in 15 months, Stern won't have to worry about the FCC anymore.

STERN: I am so thrilled about this. I am.

MOCKLER: This week, he announced he'll move his show from broadcast to Sirius satellite radio when his current contract runs out.

STERN: I have one of the largest radio shows in the world. Whenever I go on my radio show, if I have to sell a book, sell a movie, do anything like that, I can instantly go on and reach millions of people. I'm walking away from it. The reason I'm walking away from that is I believe the future is with satellite radio.

MOCKLER: There's another reason for the switch. Satellite radio isn't regulated by the FCC for indecency, meaning Stern will have the opportunity to say whatever he wants without fear of government punishment.

THOMPSON: The one challenge shock jocks would have in satellite radio is having no rules to butt up against. They may suddenly find themselves in a situation where the very thing that animated them in the first place has been taken away.

MOCKLER: So, listen again to Howard Stern.

STERN: I changed radio when I got into this 20 something years ago and I'm going to change radio again.

MOCKLER: The man who has pushed the limits of indecency and what can and can't be said on radio is pushing boundaries once again.

(END VIDEOTAPE)

ZAHN: On news of Howard Stern's impending crossover to satellite radio, shares of Sirius radio went up 18 percent, while shares of Viacom's Infinity broadcasting went down. That's it for this edition of PEOPLE IN THE NEWS.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com


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