The radio business has been struggling lately, to say the least. Traditional, terrestrial radio hasn't found a way to successfully box out competition from Sirius XM Satellite Radio (NASDAQ: SIRI), internet streaming radio, iPods, and other sources.

Plus fewer people are in their cars driving to work lately, so the ratings numbers are down. Not to mention the monotonous nature of much of today's music (or maybe I'm just old . . . get off my lawn, you Jonas Brothers, you!)

It's no surprise, then, that the radio advertising business recently saw its worst quarter in history. The Radio Advertising Bureau said yesterday that combined national and local ad spending dropped 26% to $2.8 billion during the last quarter. Network radio dropped 13% to $238 million while off-air revenue receded 12% to $264 million.

That's what seems to be happening. And I would not want to hold either stock.

I thought that the proposed merger between Sirius Satellite Radio Inc (NASDAQ: SIRI) and XM Satellite Radio Holdings Inc.(NASDAQ: XMSR) made little sense for investors back when it was announced on February 19. This combination of two money losing companies seemed to me like it would lose even more money together and not pass antitrust regulations.

Now BusinessWeek is reporting that Wall Street gives the merger a 25% chance of closing. XMSR is down 22% and SIRI has lost 24% of its value since February 19th. And XM's Q1 2007 results were lousy -- on April 26th it announced that it had added half as many subscribers in the first quarter as a year earlier.

Kit Spring, an analyst with Stifel Financial, gives the deal a one in four chance of closing. FCC Michael Copps said the companies seeking approval face "a pretty steep climb."

If you own XM or Sirius your best hope now may be that a white knight -- maybe CBS Corp. (NYSE: CBS) -- buys one or both companies. If their proposed deal vanishes, so may your investment.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the stocks mentioned in this post.

In-car entertainment is becoming as sophisticated as multi-channel surround sound in the media room these days. Well, to a point. Consumers now have standard old FM and AM radio, hundred-channel satellite radio, iPod and other 10,000-song portable libraries and now even HD Radio. HD Radio is basically the same old content (I think) that is on the standard analog FM band, but with digital clarity and enhanced features.

Do customers care about all this or are they interested in content over "crystal-clear quality"? Both XM Satellite Radio Holdings (NASDAQ: XMSR) and Sirius Satellite Radio (NASDAQ: SIRI) would argue that content is king, and 10+ million American satellite radio customers would back that statement up pretty nicely. What about terrestrial radio's comeback, as in HD Radio?

There are some industry watchers who say the death of terrestrial radio is imminent. Too much annoying advertising, deejays who have little to no function, boring and repetitive play lists and boring content in general are the standard gripes. But when HD Radio receiver units come to Wal-Mart Stores, Inc. (NYSE: WMT), will consumers pay for those radios to hear their "boring content" in perfect digital clarity? HD Radio, unlike satellite radio, is free to receive (no monthly costs), which is a boon to many listeners. Add to that the advertising spending the HD Radio partners are planning this year along with national station support (in a fight for survival, no doubt), and Wal-Mart becomes a powerful ally for the aging radio industry. Will consumers even notice though?