Is a combined XM-Sirius good for consumers?

Posted Mar 2nd 2007 3:22PM by Brian White
Filed under: Deals, Rumors, XM Satellite Radio (XMSR), Sirius Satellite Radio (SIRI)

The initial fanfare of Sirius Satellite Radio's (NASDAQ:SIRI) purchase of larger rival XM Satellite Radio Holdings(NASDAQ:XMSR) has died down for now. But I am sure it will heat back up in a huge way once Sirius CEO Mel Karmazin brandishes his tongue at federal regulators, who will want to know how combining the two companies into the nation's sole satellite radio provider will benefit consumers.

For one, consumers do have a range of choices for audio entertainment in the car these days. Standard analog terrestrial radio, the newer HD Radio, and portable music players like the iPod can all be seen as competition to satellite radio. This is a very valid argument, and it's hard to refute when the majority of new passenger vehicles and SUVs include an "auxiliary input" on their factory radios to make it easy to listen to that entire music collection on the road from your iPod or other MP3 digital music player.

If we remember history, though, federal regulators blocked a similar proposal from satellite TV operators DirecTV Group (NYSE:DTV) and EchoStar Communications (NASDAQ:DISH) back in 2002. At that time -- and still today -- there was ample competition. Analog (and free) TV, pay TV in for the form of cable television and DVD players were all thought to be the competitors to satellite TV. Federal regulators didn't buy it, and the proposed merger did not happen. What is different here?

Technically, not a whole lot -- except this argument talks about entertainment while mobile, not stationary. Would a combined Sirius/XM be considered a "monopoly" when so many other consumer choices for in-vehicle entertainment exist? In one sense, no. But, if we are talking about a monopoly just in the arena of satellite radio, then yes -- a monopoly would exist in that market after a merger, almost by definition. If programming doesn't fit the needs of consumers and prices go up, a satellite radio consumer would not be able to turn to another satellite radio competitor -- as there wouldn't be one.

Tags: SIRI, Sirius Radio, Sirius XM merger, SiriusRadio, SiriusXmMerger, XM Radio, XmRadio, XMSR

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Reader Comments (Page 1 of 1)

3-02-2007 @ 4:28PM

Dan said...

You could be right about the merger creating a monopoly. But if one of them ends up bankrupt & off the air won't that create a monopoly too. The way they are burning through cash,I don't think they can both survive alone.

3-02-2007 @ 6:22PM

EMIL J KOVACH JR said...

No Company With the Rights To SATRADs Rules, And 8 Million Checks A Month @ 13.00, Goes Off The Air, Believe Me.
Thier Are 8-10 Million XM Receivers Out Thier, Logic Tells Everyone, Worse Case, Reciver Runs Operation, Till New Buyer Step In.
ALSO, GM Is XMs Largest Partner,
So No Radios Go Silent, Or Satelites Get Turned Off.
REMEMBER, Parrsons Has Already Stated " We Don't Have To Do This Deal"
They Have Made It Clear To The FCC, Poverty Is Not Part Of The Arguement For Merger.
It's About One Thing, The Combined Value Of Two Stocks, Has A Higher Value Then The Two Alone.
My Fear, The Combined Company Stock, Reaches It's Peak, And nstitutions, Who Own Lion's Share--DUMP.
And The Market Is Stuck With This Merger, And Government Regulations (Price Caps On Subscription)
Which Mel Will Give The Government To Allow This Merger.--Unbelievable--A CEO That Wants Government Regulation Of Price.
EMIL J KOVACH JR

EMIL J KOVACH JR

3-04-2007 @ 9:33PM

MaRIO said...

Well the thing that I find completely different of the XM-Sirius deal vs the other echostar- dish deal is in the exclusive content deals.

With either TV proviser, I could watch pretty much the same channels on TV and get the same programs. Really, a merger would just mean that there was 1 company, with the exact same programming.

With the XM-Sirius merger, each company has exclusive deals. As it stands, I can hear Oprah on XM, but if I want to hear Howard Stern, I have to subscribe to Sirius. How is this good for me? I want to listen to both programs on 1 radio with 1 subscription!

In the end, with the TV deals, the Satelite companies did not own and operate the TV networks, but with SatRad, XM and Sirius actually
own and operate a lot of their content stations. The comaprission may be similar but it really is not exactly the same at all.

5-22-2007 @ 1:30PM

Pat Fezza said...

I would love a merger if the price could be controled. I recently purchased a new car and I had no choice but to take sirius. I wanted major league baseball but that is on XM. The merger would give the concumer the best of two worlds