XM, Sirius to merge

[ghost of miles]

Satellite radio's XM, Sirius to merge

NEW YORK - XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc. have agreed to merge, the two companies said Monday.

The deal would consolidate the only two companies in the emerging business of subscription-only satellite radio, and is sure to face tough scrutiny from federal regulators. Investors and analysts have been speculating about a deal for months.

The two companies said in a statement that Mel Karmazin, the CEO of Sirius, would become chief executive of the new company while Gary Parsons, the chairman of XM, would remain in that role.

[alocispepraluger102]

Satellite radio's XM, Sirius to merge

NEW YORK - XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc. have agreed to merge, the two companies said Monday.

The deal would consolidate the only two companies in the emerging business of subscription-only satellite radio, and is sure to face tough scrutiny from federal regulators. Investors and analysts have been speculating about a deal for months.

The two companies said in a statement that Mel Karmazin, the CEO of Sirius, would become chief executive of the new company while Gary Parsons, the chairman of XM, would remain in that role.

how long before time warner swallows them(2), too? ahhh, TIMEXM

Edited February 19, 2007 by alocispepraluger102

[ghost of miles]

Another article out today on this, posted shortly before announcement of the merger:

The ongoing rumors of a merger between satellite radio giants Sirius and XM continue to heat up, and now ABC News is reporting it has confirmed the rumor and that Sirius CEO Mel Karmazin will oversee the merged company.

The prospects of a merger being announced today started with a source telling the New York Post that the long-rumored marriage could happen as soon as today. The paper's source says that the satcasters spent the weekend in negotiations, aiming to make the announcement today in Washington, D.C.

The Post notes that the talks were still ongoing and "the deal could fall apart at any time." The source said that the satcasters' lawyers are working very carefully on the language of the deal to avoid any antitrust issues. The merger is expected to be structured as a 50/50 split.

Both companies will report their quarter and year-end financial numbers early next week. Last Friday, financial analyst firm Bear Sterns released a note suggesting that now was the best time for a merger to take place, before the fiscal reports come out, and giving plenty of time for regulators to work out the kinks. If announced now, Bear Sterns projects that the deal could close and become official by the middle of 2008.

If a satcaster merger is in the cards, it would face intense scrutiny from the FCC. Just last month, FCC Chairman Kevin Martin suggested that a merger would be blocked by rules the Commission put in place when satellite radio was starting to become a reality. He noted the rules specifically state that there cannot be "one entity owning both of those licenses" and there must be at least two satcasters in operation.

So how do they word/structure it to avoid an antitrust kibosh? Although this administration has been more than friendly to the idea of media monopolies, that last quote from the FCC chairman doesn't seem to leave much room for maneuvering.

Edited February 19, 2007 by ghost of miles

[Tom 1960]

A lengthy article from PC World brings up some valid points:

It's Official: XM and Sirius Are Merging

So the New York Post's report is true: The Coke and Pepsi of satellite radio, XM and Sirius, have announced that they're merging. As you'd expect, the official press release says that this is fantastic news for customers--with benefits ranging from better programming to cheaper and better devices. (It also reports that the $13 billon deal is a "merger of equals," with XM's Gary Parsons serving as chairman of the combined company and Sirius's Mel Karmazin serving as CEO.)

My impulse, however--thinking here as the reasonably happy XM subscriber that I am--is to be bummed out at this news. Change is always tough. And until I'm convinced that the change is for the better for those of us who are already satellite radio fans--and who chose XM over Sirius, or vice versa--I'm going to be a tad paranoid.

The release says that the combined company will offer broader programming. And I'm guessing that the big marquee names of both services would survive. XMSirius (or whatever it ends up being called--I'm guessing that the XM name would eventually prevail, but I could be wrong) would presumably keep both XM's Major League Baseball (a huge plus for me) and Sirius's Howard Stern (which I'm living happily without, but your mileage may vary).

But there'd have to be some downsizing of programming, given the massive overlap between the two services. A combined company isn't going to preserve two 1960s pop stations. It's probably not going to keep both XM Public Radio (a homegrown channel with NPR castoff Bob Edwards) and Sirius's NPR channels. Worthy niche channels--like XM's old-time radio station--might or might not make the cut.

In other words, I fear major cutbacks--maybe in part because I'm still ticked off that XM stopped carrying an audio feed for MSNBC a few months back.

With both companies pouring millions into ambitious programming, the competition between 'em has been swell for anyone who's a customer of either service. I fret that XMSirius, which would have a monopoly on satellite radio, would get fat and lazy--in part because even a less ambitious unified satellite service would be so much better than most terrestrial radio.

One interesting tidbit in the release: It speaks of the merged outfit "offering consumers the ability to pick and choose the channels and content they want on a more a la carte basis." What that means isn't entirely clear. But if it involves being able to opt out of paying for the several dozen stations I'm never going to listen to, it could be intriguing. (Wild guess, though: A customer who only listens to 20% of the new company's stations isn't going to save 80% of his or her current monthly subscription fee.)

Then there's the hardware question. Will all existing XM and Sirius devices--including all those receivers built into cars--work forever? If there's some period during which the services aren't completely merged, will new devices have to support both flavors of satellite radio? Is the combined company going to keep all of XM and Sirius's pricey satellites? I don't know enough about the technicalities of satellite communications to even hazard guesses here.

(XM, by the way, has usually been ahead of Sirius when it comes to the coolest hardware--so much so that I'm not worrying that a merger will be bad for the quality of satellite radio gadgets. I'm just assuming that future devices will draw more from the XM side of things than the Sirius one.)

It's possible to be an optimist here. Not having to choose between two sets of programming could have its upsides. (If you're a baseball fan who also likes Howard Stern, you've had to make a tough choice until now.) And both companies have had somewhat shaky business models until now; one financially healthy provider might be a better scenario for consumers than two that are bleeding cash. (The story is that a merger would save the combined company $7 billion a year.)

Here's the biggest reason I'm not completely panicky, though: In the long run, both XM and Sirius's biggest competition isn't each other. It's iPods and YouTube and TiVo and HD radio and MySpace and HDTV and Wii and PSP, basically, anything you might do to entertain yourself rather than listening to satellite radio. Which means that even a unified service would have plenty of incentive to offer folks lots and lots of reasons to sign up and keep paying that monthly service fee.

Assuming that the merger doesn't face any insurmountable legislative hurdles, we'll see how this all sorts out. One of my coworkers, upon hearing the rumors of a merger of satellite giants, cleverly said that it could turn out to be "a marriage made in heaven." Let's hope so....

[Dan Gould]

Not being a customer of satellite radio, I haven't paid a lot of attention to these two companies.

But I will say I am stupefied that the FCC has authority to regulate a merger. Terrestrial airwaves are a public good, so the FCC has the power to regulate them, just as they regulate broadcast TV. But they don't regulate cable television (I'm talking about mergers and programming, not local governments that regulate cable providers which have been granted monopolies). So what right should the FCC have to regulate satellite radio? Is there a limitation to how many stations can be 'broadcast'? It certainly doesn't seem that way.

I can understand a concern over what stations may be dropped from a merged company, but it is completely beyond me why there should be a question about anti-trust issues. Yeah, I know it creates a monopoly, but no one needs satellite radio to live. If the market supports one company, fine.

[GA Russell]

I expect that it will not be long before the monthly subscription price is increased!

[vajerzy]

I have XM. I chose it for MLB and Air America and ACC sports. I couldn't care less about Howard Stern or the NBA and I couldn't care less about Sirius. I will like the merger solely for NFL football.

Anti-trust?? There's only 2 companies and they mutually agree to merge- what's the problem? Now I believe my fees will eventually go up...

It's a bummer because XM was kicking Sirius' butt with subscribers and stock price.

[Randy Twizzle]

The fact that the odious Mel Karmazin will become the chief executive of the merged companies is not a good sign.

In his quirky memoir, All in Good Time, radio host Jonathan Schwartz recalls working at iconic New York radio station WNEW in the 1970s when Karmazin, "a speedy little guy who conducted crucial talks while practically trotting down streets or hallways," was the general manager. Schwartz, the son of lyricist Arthur Schwartz, couldn't abide Karmazin's relentless focus on the practical. "To him, language was only utilitarian; it slipped from his lips as he hurried through his days, while clumps of financial declarations dribbled down onto his lapels during flurries of cost-cutting meetings and memos and phone calls and one-paragraph letters." Schwartz concluded: "All of it served the dismal fact that Mel had no interest in music, news, sports, books, theater. It mattered not what a station proffered, only how it profited."

Schwartz now programs XM's channel 73 "High Standards" He's got to be feeling pretty depressed today.

[Adam]

Not being a customer of satellite radio, I haven't paid a lot of attention to these two companies.

But I will say I am stupefied that the FCC has authority to regulate a merger. Terrestrial airwaves are a public good, so the FCC has the power to regulate them, just as they regulate broadcast TV. But they don't regulate cable television (I'm talking about mergers and programming, not local governments that regulate cable providers which have been granted monopolies). So what right should the FCC have to regulate satellite radio? Is there a limitation to how many stations can be 'broadcast'? It certainly doesn't seem that way.

I can understand a concern over what stations may be dropped from a merged company, but it is completely beyond me why there should be a question about anti-trust issues. Yeah, I know it creates a monopoly, but no one needs satellite radio to live. If the market supports one company, fine.

Buried in one article is that in the original legislation for satellite radio is a proviso that forbids only one satellite station. This element would have to be overruled by Congress for the merger to be allowed. I would say that the merger is not a sure thing.

As for your other question - you answer your question in your answer, so I'm unclear why you are confused. Satellite radio involves terrestrial airwaves. That's why it's called satellite radio. Cable television runs through cables underground. Satellitle radio uses waves to beam down the sound from the sky. Thus, it completely falls within the purview of the "public airwaves." Our government allows that trust to be administered by the FCC. A more legitimate question is why the FCC doesn't really work for the public good, but for corporate interests. Broadcasting also uses airwaves, and is controlled in similar fashion.

[Ed S]

I'm a Sirius subscriber and will admit to decided to get Sirius when Stern moved from terrestrial. I also have XM service through my Direct TV service. Musically, I don't find much difference.. I have to say that I do a lot of listening to Sirius Blues, some of the older rock stations like Classic Vinyl, Vinyl Rewind, Jam On, the Vault, alternative 90s. The jazz stuff is okay, as it is on XM.

I like having sat rad as an option in the car- especially on long trips. But I find I still listen to local talk, news and sports talk to and from work plus my share of CDs. It's nice to have another option though.

Both XM and Sirius have been having a tough go of it financially recently. Both stocks have dropped dramatically over the past 2 years and though the stock price of XM is higher, it has actually dropped about 60% in the past 24 months as opposed to Sirius which has lost 40% of its value. In either case, the stock performance has not been good at all.

From a subscriber standpoint, Sirius has been gaining steadily on XM, but the growth rate has declined for each company. The merged company should have continued subscriber growth with lower overal costs.

From what I've read, it appears that Sirius is buying XM, though it is being sold as a merger of equals. I'm hopeful that they'll take the best of both services and offer an expanded lineup.

I'd like to to more than one Blues station and more jazz offerings. In jazz, it seems they have a smooth station, new age type station, a more contemporary offering and a mainstream jazz type station. Sirius just added a Sinatra station that had previously been on XM. There's definitely room for more, just don't know if the audience is there to support more offerings.

Whatever happens, I won't be losing any sleep over it.

[Chuck Nessa]

Don't give a shit. Don't pay for radio.

[alocispepraluger102]

The fact that the odious Mel Karmazin will become the chief executive of the merged companies is not a good sign.

In his quirky memoir, All in Good Time, radio host Jonathan Schwartz recalls working at iconic New York radio station WNEW in the 1970s when Karmazin, "a speedy little guy who conducted crucial talks while practically trotting down streets or hallways," was the general manager. Schwartz, the son of lyricist Arthur Schwartz, couldn't abide Karmazin's relentless focus on the practical. "To him, language was only utilitarian; it slipped from his lips as he hurried through his days, while clumps of financial declarations dribbled down onto his lapels during flurries of cost-cutting meetings and memos and phone calls and one-paragraph letters." Schwartz concluded: "All of it served the dismal fact that Mel had no interest in music, news, sports, books, theater. It mattered not what a station proffered, only how it profited."

Schwartz now programs XM's channel 73 "High Standards" He's got to be feeling pretty depressed today.

i love quirky schwartz and his work and his music. he certainly knows the territory. i carch him on the wnyc stream saturday and sunday afternoons.

[alocispepraluger102]

i kinda like Schwartz but that he's a pompous windbag as in love w/himself as the music he plays goes w/o saying (tho' ya'll SHOULD note it anyway). Karmazin by all accounts is an interesting character, esp. in that era... anyone care to venture the different economic strata Mel & Jonathan come from? doesn't make one "right" (string baby but the wrong yo-yo)or wrong but.. fuck "Schwartz." i don't exactly need him to tell me Harold Arlen, oooh he speak so well either...

edc

con todo: competition = good, consolidation = bad

yeah, but he sticks an unforgettable(to me) gem or two into every show.

[GA Russell]

Received this email today:

February 19, 2007

To: SIRIUS Subscribers

Today is a very exciting day for SIRIUS customers. As you may have heard, SIRIUS Satellite Radio and XM Satellite Radio are merging to form the nation's premier audio entertainment provider.

This combination of our two offerings will benefit you - our loyal listeners. As a single company, we'll provide superior programming to you every day with the best of both SIRIUS and XM. Currently, XM and SIRIUS broadcast a wide range of commercial-free music channels, exclusive sports coverage, news, talk, and entertainment programming. Howard Stern. Oprah and Friends. The NFL. MLB. NBA. ESPN. CNBC. Fox News. Additionally, the combined company will be able to improve existing services such as real-time traffic information and rear-seat video as well as introduce new ones.

After shareholder and regulatory approvals, we anticipate that the combination will be finalized by the end of 2007. Until then, both companies will continue to operate independently. We will continue to provide you with the uninterrupted service - as well as the outstanding customer support - that you have come to expect and enjoy from SIRIUS. We do not anticipate any changes in your service during the merger process, however, please call our customer care team on 1- 888-539-7474 should you have any questions.

We look forward to the many benefits this combination will offer and continuing to make your listening experience an enjoyable one - offering more of the Very Best Radio on Radio.

Stay tuned,

Mel Karmazin, CEO

[Randy Twizzle]

Somebody named Philip Dampier posted the following observations at xmfan.com. I think it's worth reproducing here, though I can't say that I understand it all.

On the question of programming theory, as one poster noted, Sirius definitely is interested in appealing to a younger demographic. Mel does not believe that older skewing listeners are attainable in large numbers because of resistance to new technology and the concept of paying for radio, and more importantly, because older skewing channels do not attract advertisers. The oldest skewing channels on Sirius are conservative talk radio (followed by talk radio and news channels in general) and there are only so many Oreck-like advertisers out there.

Mel has made it patently clear - he feels advertising is a major and significant revenue stream. The only thing that holds Sirius back from increasing it is the marketing efforts of XM which makes their non-commercial music channels a fundamental benefit of being an XM subscriber (to the point where they launched duplicate channels when Clear Channel took their bandwidth in another direction). That pressure will be gone in a combined XM-Sirius venture run by Mel.

People need to look at what the companies are saying in the trade and financial press and learn to read between the lines, because there is a fundamental mistake in assumption that "cost savings" and "increased value" are directed at end consumers. They are very much not. These are signals directed exclusively at shareholders, and are designed to enhance the value of the stock.

I have been involved in lobbying in the consumer protection field for nearly 20 years now. People must look beyond the marketing propaganda being given to consumers by these companies in an effort to forestall their involvement in the inevitable backlash campaign to prevent these companies from merging.

One thing I have learned in 20 years of doing this is this fundamental fact:

Mergers that reduce the number of competitors in an industry have never benefitted consumers, although they may benefit stockholders and management -and- mergers which create de facto monopolies have always hurt consumers with reduced choice at a higher price.

The cable television industry model is a perfect illustration of this fact in the real world. Early efforts to create a competitive marketplace in wired cable television provided consumers with the benefits of a competitive marketplace - increased innovation, reduced costs, better service, and more choice. In those few cities where multiple wired providers exist, it's an entirely different world compared to the rest of us. More channels, better packages, lower costs, and better customer service.

But existing in a competitive marketplace suppresses potential profitability, and shareholders continually pressure companies to maximize shareholder value.

In many industries where buyouts and mergers have occured, they have always been sold to consumers as somehow benefitting them by "reducing costs" and giving consumers the benefits of having one lineup so they need not "miss" anything. A propaganda marketing effort always takes places designed to eliminate consumer resistance to merger deals. Even if everyone doesn't believe it, having a few dozen people protesting a merger before a government entity is far easier to dismiss than having thousands turn out.

The truth comes later, especially in any marketplace where you grant a de facto monopoly to one player. And make no mistake, a combined XM/Sirius entity in a marketplace that investors have become dubious about because of lack of profitability will result in absolutely no satellite competition coming to fruition down the road. Nobody is going to fund a competitive venture in a marketplace that wasn't awash in profits when there was competition.

In the satellite television marketplace, just ask Cablevision or Primestar, two late entrants into the field who could not sustain themselves because investors felt the marketplace was already too entrenched with DirecTV and DISH (who themselves occasionally flirt with the idea of merging).

The creation of a de facto satellite radio monopoly will result in:

- Less innovation - where are people going to go if they don't like your programming? When there is no other player to respond to and compete with, why bother? Give them the basics.

- Higher costs - Mel says marketing costs are a major factor holding down profitability. Today, equipment costs are subsidized in part by end consumer rebates. Marketing offers discounted packages to entice new subscribers, and strong retention offers to keep those wavering. Those all go away in a combined company.

- Equipment cost hurdle - By setting the costs higher on equipment, you automatically build in subscriber loyalty by reminding the customer contemplating leaving because of a rate hike or programming change of the "waste of money" they will incur by owning a piece of equipment that becomes potentially worthless. The higher the initial outlay, the less chance the consumer will want to throw that money away.

- Philosophical differences - Anyone who listens to Sirius and XM realize their core programming philosophies are very different. Sirius' concept will eventually replace XM's.

The a-la carte concept that occasionally comes up as a perceived "benefit" is really not, unless you honestly confine yourself to around a half dozen channels. The reason is that a-la carte is expensive to market and manage and it throws the entire business model for a loop. Currently, subscribers subsidize the most expensive component of satellite radio - sports with their subscription fee. Breaking sports out into a-la carte, which is an absolute certainty, will result in far higher costs for that a-la carte package, but the savings realized by those who don't want it will not come close to being equal to the amount they will charge for those who do.

In a de facto monopoly, there is no marketplace resistance to price. You can set it as high as the end consumer will tolerate, realizing that they have no alternative choice.

The cable industry proposed a suggested rate card for an a-la carte model at Congress' insistence. The result for end consumers watching more than just a few channels was a massive rate hike. They charged 10x the wholesale rate or more for a-la carte than they did for the current "all for one, one for all" model, blaming "increased marketing and administrative costs." And because they exist as a de facto monopoly in most areas, they have no incentive to keep those costs down.

The more you read about this deal, the less you should like it.

[ghost of miles]

I'm not a subscriber, but what Randy posted makes me even less inclined to pursue that path. Sounds like satellite will go the way of cable-TV--conditioning folks to the idea of paying for what was once free (partly through expanded offerings that may well be contracted at some point; partly on the premise of no ads or fewer ads, then eventually escalating the # of ads that are running). My primary interest in satellite right now is how it affects us landlubber-industry-types down the road.

Edited February 20, 2007 by ghost of miles

[vajerzy]

Excellent essay.

Since I listen to XM mostly for sports- I'll get socked I believe.

It's like our phone service here- we have Verizon and we didn't carry their long distance since we use a cell phone for that....well Verizon, the compassionate company they are, now have an all inclusive paockage with unlimited long distance for 39.99.....they could have done that before, but didn't. Since cell phones are cutting into their business- they now offer it.

[Lazaro Vega]

Insightful essay on the downside of monopoly. Would just add that older listeners are drawn to classical music not just conservative talk radio and that the older demographic has more income to invest in high end purchases, such as homes. The Orek crack is horseshit.

[chris olivarez]

Since I work at a commercial radio station all this interests me but doesn't really concern me at this time. This merger is pending FCC approval which is not a given and since the commission pretty much rolls over for the Clear Channels etc might make it a bit dicey. On the other hand since the FCC pretty much rolls over for all the biggies I would be less than shocked if they gave it their blessing-same applies for congress.

[Dr. Rat]

One part of the story behind this is that satellite is in a race to get adopted before the advent of high-bandwidth Internet access in your car. If there is not already a whole lot of satellite infrastructure out there (receivers in cars, essentially) when a practically infinite number of free Internet music services become avaialble, satellite is dead.

I think part of the gambit here is that if there are two compteting companies, it's going to be tougher to get the car companies to buy in to the extent the satellite companies really need. If they succeed in simplifying the question for car companies (and consumers) to satellite or no satellite rather than XM, Sirius, or sit on my hands and see what happens next, they might get a lot more radios and subscribers out there, in which case they'll have a lot longer to milk the cash cow when Internet in the car comes along.

From what I've heard, the money people are not particularly happy with the business outlook for either of these companies

--eric

[montg]

Hopefully this merger isn't a move of desparation, signaling that sattelite radio may not be viable. Right now it's a radio lovers dream--Giant Steps, 70s kitsch ("cracklin's Rose you're a store bought woman, you make me feel like a guitar strummin' " ), Bob Edwards, Junior Walker, Indians baseball, and on and on. There's no way ipods or even internet streaming radio matches the breadth and eclecticism of what's currently available on sattelite.

[Lazaro Vega]

From The New Yorker

Satellite Sisters

by James Surowiecki

March 19, 2007

When the satellite-radio companies XM and Sirius announced, last month, that they were planning to merge, it looked like a futile attempt to flout antitrust regulations. The merger would benefit Sirius and XM—which, despite signing high-profile figures like Howard Stern and Bob Dylan, have cumulatively lost close to seven billion dollars—but it would confront radio listeners with a satellite-radio monopoly. Not surprisingly, then, when Sirius’s C.E.O., Mel Karmazin, appeared before Congress to defend his plans, he was grilled by legislators convinced that regulators would block the merger. The deal, though, is far from dead. Thanks to an intellectual revolution that, over the past three decades, has transformed the way the government assesses mergers and monopolies, we may yet end up with only one satellite-radio provider in America. And, surprisingly, we may be all the better for it.

Antitrust law in the U.S. rests on two documents—the 1890 Sherman Antitrust Act and the 1914 Clayton Act. Their underlying principles are clear (competition and lower prices are good, collusion and price-fixing bad), but the laws themselves are remarkably vague, and regulators have had much leeway in enforcing them. In the era after the Second World War, for instance, the government took an aggressive stand against mergers. In 1962, it blocked a deal between the third-largest shoe company in the country and the eighth-largest, even though the new company would have owned just five per cent of the shoe market. A few years later, it barred two California supermarkets from merging, despite the fact that together they controlled less than ten per cent of the market and had many competitors. Bigness, regulators seemed to assume, was always bad.

The idea that if mergers were bad for competition they were bad for the economy was intuitively appealing. But it wasn’t always accurate, as a group of law professors and economists, usually called the Chicago School, set out to show in the nineteen-seventies. Much antitrust regulation, they argued, did not benefit the economy but just protected small businesses; it could even make consumers worse off. (Most obviously, economies of scale allow bigger companies to produce more for less, which can lead to lower prices.) This meant that regulators should scrutinize deals through a different lens: if a merger reduced competition but enhanced “consumer welfare,” it should be approved. Later economists have complicated these arguments—there’s now a post-Chicago School—but the idea that mergers should be measured by their impact on “consumer welfare” remains central to antitrust law.

Even by these standards, though, the XM-Sirius deal looks sketchy, since monopolies created by merger are usually bad for consumers. So why does the deal have any chance at all? It comes down to the question of what market XM and Sirius are in. If it’s just satellite radio, then they are competing only with each other and the deal would be sure to send prices soaring. But it makes more sense to see XM and Sirius as part of the bigger radio and digital audio markets and thus in competition with AM/FM, HD, and Internet radio. In that case, even a merged company would have only a small percentage of radio listeners, and competition would limit its ability to raise prices.

Consumers, then, have little to fear from a merged satellite company in the radio market, and they may actually have a lot to gain. Dominated by chains like Clear Channel, AM/FM radio has become a catalogue of bland choices, pre-programmed playlists, and syndicated talk. A recent study by the Future of Music Coalition found that four companies received fifty per cent of all radio advertising revenue and had nearly fifty per cent of all listeners. Even among competitors, there is often tremendous overlap in music playlists; in this environment, XM and Sirius, which offer real diversity across three hundred channels, are a gain for consumer choice. And there’s no reason to think that this diversity would ebb after a merger; no one wants to pay thirteen dollars a month to hear the same songs he could have got free from his local KISS-FM.

The National Association of Broadcasters, which represents commercial radio stations, has lobbied hard against the deal, arguing that XM and Sirius compete only with each other. But the very fact that broadcasters are fighting the merger demonstrates that they view Sirius and XM as a threat. Similarly, for fifteen years AM/FM stations have done everything they could to cripple satellite radio, lobbying the F.C.C. to stop its roll-out in the nineteen-nineties and persistently trying to limit the types of programming XM and Sirius can carry. Just last month, a bill was introduced in Congress—for the third time in as many years—that would bar satellite stations from providing local traffic and weather.

Broadcasters understand that a merger between Sirius and XM would help extend satellite radio’s reach, making it a more formidable competitor. Many consumers have hesitated to subscribe to satellite because they didn’t know which company would survive. And desirable content is split between the companies: if you want major-league baseball and Bob Edwards, you need XM, but if you want N.F.L. games and Howard Stern, you need Sirius. Allowing Sirius and XM to merge would eliminate this problem in one stroke. And that would significantly increase the competitive pressure on traditional radio stations, perhaps forcing them to abandon their cookie-cutter model. Paradoxically, by reducing choice you could stimulate more diversity. Sometimes, it seems, you can have fewer competitors but more competition.

[Lazaro Vega]

"Much antitrust regulation, they argued, did not benefit the economy but just protected small businesses..."

Just?

[GA Russell]

Here's the latest:

http://www.reuters.com/article/entertainme...=22&sp=true

LOS ANGELES (Hollywood Reporter) - Sirius Satellite Radio CEO Mel Karmazin has more than just a stalled merger with XM Satellite on his mind. He's also wondering what it's going to cost to keep his star talker, Howard Stern, on board.

"Great content costs money," Karmazin reminded analysts Tuesday during a conference call to discuss quarterly earnings.

"If Howard is on the call and listening, if he would like to extend his deal at less money, we would be interested in that," Karmazin told the analysts. "But from my history with him, I don't think that is apt to happen."

Stern costs Sirius $500 million for five years, and he's in his third year already. Add to that the billions Sirius spent on rights to the NFL, NBA, NASCAR and other content, not to mention the building and launching of expensive satellites, and its easy to see why Sirius wants so desperately to merge with XM, though regulators have yet to approve that plan.

In fact, the termination date for the merger deal is Saturday, though Karmazin said Tuesday that he expects the boards of both companies to meet before then to extend the deadline. XM will no doubt update analysts Thursday when it reports financial results.

Karmazin was once optimistic that the merger would be complete at the end of 2007, even while referring to it on occasion as "an uphill battle."

Not only has Karmazin's timetable been thrashed, but the one-year anniversary of the deal struck on February 19, 2007, also has passed, a significant milestone given that more than 200 mergers have been completed since then, each taking an average 110 days to complete.

Still, the bureaucrats aren't in any hurry. In fact, 10 months into the process, Rep. John Conyers, D-Mich., the chairman of the House Judiciary Committee, asked the Justice Department not to "rush through" an approval, if there is to be one.

"We wait by our telephone," Karmazin said Tuesday. "But we really have not heard anything from them. It has been more radio silence than anything else."

Even if the DOJ approves, the Federal Communications Commission must also bless the merger.

Karmazin also said that confusion about the merger among consumers is having a negative impact on retail sales, though Sirius posted better-than-expected quarterly results Tuesday.

The company added 654,000 new subscribers to 8.3 million on its way to losing $166.2 million, compared with a loss of $245.6 million in the year-ago quarter. Revenue rose 29% to $249.8 million.

Sirius posted a full-year net loss of $565.3 million; the year earlier it lost $1.1 billion. Sirius and XM together have burned through billions in the past decade, and merging the companies, by some estimates, would save them an equal amount over the next several years.

Many observers seem to think there's not much of a reason to reject the planned merger, though that hasn't stopped Wall Street from hammering the stock prices as if deal approval were a long shot.

Since February 20, 2007, Sirius shares have fallen 22% to $3.05, while XM shares have sunk 15% to $13.13.

Regulators presumably have been considering for more than a year now the question of whether a merger of the only two satellite radio firms in the nation would constitute a monopoly that would harm consumers.

But most observers seem to have come to the conclusion long ago that the answer is no, considering that sat radio is used mostly in vehicles where competing devices like free radio, iPod docks and CD players are also options, as are DVD players. Soon, the Internet and satellite television will become mainstream attractions in cars, as well.

Anyone blocking the deal on the grounds that merging the two companies would stifle competition "may as well lay on the ground and become fossil fuel for that kind of dinosaur thinking," Motley Fool senior analyst Rick Munarriz said.

Munarriz, like others, worries that two competing satellite radio services can't survive. If they don't merge, Munarriz predicts, "one or the other will fail, and that will give the victor the monopoly it wanted."

Munarriz suggests that investors buy shares of XM and Sirius because the stocks will pop when the merger is approved. "Obviously it's a gamble to get in at this point, but the uncertainty is also discounting the shares," he said.

Steve Birenberg of Northlake Capital also advises buying the stocks, but he says to sell them once the deal is approved and buyers rush in.

"I don't think that satellite radio will ever be the pervasive technology for in-car entertainment based on the current subscription model," he said.

One particularly bearish analyst, Mark Wienkes, said recently that it is "increasingly unlikely" that regulators will block the deal, though he wouldn't buy either stock, merger or no merger.

"Our outlook for satellite radio is cautious given our view of unrealistic cash flow expectations," he said.

Karmazin touted several positive outcomes if the merger were approved, including a la carte programming and cheaper prices for consumers. Plus, the company and its shareholders will benefit from increased advertising revenue.

Sirius only sells about $35 million a year in ads, an anemic amount considering it features dozens of channels with advertising, including two with Howard Stern.

"We ought to be doing a better job in selling Howard," Karmazin said Tuesday.

Reuters/Hollywood Reporter

[Guest Bill Barton]

"'Great content costs money,' Karmazin reminded analysts Tuesday during a conference call to discuss quarterly earnings."

Great content? Howard Stern? Give me a break...

"'We ought to be doing a better job in selling Howard,' Karmazin said Tuesday."

Well, duh! You spend millions on crap and expect it to sell itself?