(FORTUNE Magazine) – ANYBODY COULD SEE THAT MEL KARMAZIN WAS miserable in his final days as Viacom's chief operating officer. The former Wall Street darling had struggled unsuccessfully to keep the company's stock aloft. He had lost his much-publicized power struggle with Viacom CEO Sumner Redstone. He looked beaten up and ashen.

Karmazin finally departed Viacom in June 2004. But don't feel too bad for him. He has returned from the depths, and he's never been happier. "It's the drugs," Karmazin jokes.

Karmazin isn't really taking mood-altering pharmaceuticals. In November he celebrates his first anniversary as CEO of Sirius Satellite Radio. Karmazin says he is relieved to be out from under Redstone's thumb. "I'm just not very good at being a No. 2 person in the company," he admits. "It's my weakness. It's my failure." He adds that he found Redstone a particularly disagreeable CEO to work for.

The two men are still at it. Redstone told a reporter in late October that he doubts Karmazin can build Sirius into a "major challenger" to terrestrial radio companies like Viacom's Infinity Broadcasting division. Never mind that Sirius has poached premier raunch-jock Howard Stern away from Infinity with a five-year contract worth $500 million. For his part, Karmazin notes with satisfaction that investors aren't giving much credence to Redstone's plan to break up Viacom. (Since the plan was announced, Viacom's stock has fallen 10%.) "I don't think the stock market today is saying it thinks the split-up of the company is the right thing to do."

But Karmazin isn't just happy to have escaped his old boss. He has transformed himself at Sirius in a way that makes him the envy of his generation of media executives. In one way or another, most of Mel's peers are trying to change themselves from old-media guys to new-media guys. They are in a panic because, as Merrill Lynch analyst Jessica Reif Cohen points out, new-media stocks have outperformed those of traditional media companies by 370% since mid-2001.

So now we hear Disney CEO Bob Iger evangelizing about selling episodes of Lost to iPod users. Rupert Murdoch spends $580 million to purchase the parent company of MySpace.com, a teen website, and poses with a PowerBook in FORTUNE. (Message to investors: Rupert gets it.) Time Warner CEO Richard Parsons is bullish on AOL--after removing those three letters from his company's name. (Time Warner is the parent of Time Inc., FORTUNE's publisher.)

Karmazin, though, has outdone them all. He has pulled a Terry Semel. Like the former Warner Brothers chairman who recreated himself as CEO of Yahoo, Karmazin has crossed completely over to the promised land of new media. He says he tried to be content with yearly revenue growth of 5% at Viacom, a $27 billion company with properties like MTV, CBS, and Infinity. But the business simply wasn't going anywhere fast, and it was drudgery. "That wasn't that much fun," he concedes.

Compared with Viacom, Sirius is tiny--it had revenues of only $67 million in 2004. But satellite radio is enjoying the kind of sales growth that traditional media colleagues can only dream about. XM Satellite Radio, which has rights to Major League Baseball, says its subscribers will almost double this year, to six million. Smaller but faster-growing Sirius predicts that its subscribers will nearly triple, from 1.1 million to three million, by the end of this year. Wall Street expects Sirius's revenues to rocket skyward by 256% for 2005. Both Sirius and XM Satellite say they will be cash-flow positive sometime next year.

In terms of Wall Street momentum, Sirius has the edge on XM. Since Karmazin's arrival, the company's stock is up 33%. Shares of XM, by contrast, have declined 10%. Part of the reason is Stern's pending arrival. The self-proclaimed "king of all media" is building a studio in Sirius's Midtown Manhattan office--complete with a stripper pole and waterproof walls--from which he will begin broadcasting his Sirius show and his pay-per-view television shows in January, free of FCC regulations.

XM CEO Hugh Panero calls the Stern deal "a half-billion-dollar gamble on the part of my competitor," and it is certainly that. But Karmazin says the agreement is already paying off. "They have more subscribers than us, but we have more unaided [consumer] awareness," he says. "Howard has definitely contributed to that. He's already brought a significant number of subscribers to us, and he will significantly jump-start our ad sales operation."

Of course, Karmazin himself is the other reason for the performance of Sirius's stock. He has extended the company's exclusive relationships with Ford and BMW to include the company's radios in new cars. He has lured Martha Stewart to Sirius, where she will create channels for women. He has acquired the programming rights to NASCAR, and helped launch Sirius's first portable music player. He's also raised $500,000 in debt financing on what Sirius boasts are "extremely attractive terms." Says Merrill Lynch's Cohen: "I just think he's given huge credibility to the company and the [satellite radio] sector."

Karmazin started selling radio ads when he was 17 and ran Infinity Broadcasting for 15 years before selling the company to Westinghouse, then CBS's parent. The joke about him was that he was so pushy that advertisers used to buy airtime from Mel just to get him out of their office. "Mel's a guy who, if he was selling shingles, he'd have the best shingles, and everybody else's shingles would suck," says the head of a Hollywood studio. "Now he's selling satellite radio, so he's saying Sirius is the best satellite radio, and XM sucks."

Maybe this isn't such a transformation after all. Karmazin may have gone over to new media, but he's still selling radio ads (only on Sirius nonmusic channels), kicking competitors in the shins, and getting rewarded for it by investors. Who would need pills? This is what's always made him happy.

DEVIN LEONARD, a senior writer at FORTUNE, can be reached at dleonard@fortunemail.com.