Although there have been tons of speculation recently on the merger between satellite radio companies XM Radio Radio Holdings (NASDAQ:XMSR) and Sirius Satellite Radio Radio Inc., (NASDAQ:SIRI), I'll agree that a merger seems like it should have been born on the day both companies announced they existed. It seems like cutting-edge companies and technologies always end in mergers to achieve customer numbers and the faster payoff for early investors who grow impatient -- or no longer want the risk.

But, if the two companies were to announce a merger, would the FCC block such an action? This article over at BusinessWeek seems to think so, and there is a good part of me that agrees. I think. The customer has so many choices these days in terms of in-car entertainment: terrestrial radio (which is dull and boring from my perspective), iPods and digital music players, DVD systems and of course, satellite radio.

Should there be a premium to shares of both XMSR and SIRI at this point? Not really. Will more OEM installs for both XM Radio and Sirius offset retail softness for both satellite radio companies? If so, the car deals with GM, Honda, Toyota, Ford had better ramp up soon.

Shares of satellite radio are having a great day. XM Satellite Radio Holdings Inc. (NASDAQ:XMSR) are up over 9.4% and shares of Sirius Satellite Radio Inc. (NASDAQ:SIRI) are up over 5.4% on remarks from a Citigroup analyst who raised her target price for XM radio and commented on the possible merger of the two companies.

Citigroup analyst Eileen Furukawa who has a Buy on XM, raised the 12-month price target on XMSR from $16 to $21. The reason -- due to the deals XM has with car companies to pre-install the devices on their cars and trucks, she expects an increasing numbers of car buyers to sign up for the service.

Furukawa also discussed the possible merger between Sirius and XM. First, she said, XM is now more open to such a possibility, and second, this possibility could provide support for XM stock. As for the FCC, XM still believes that approval of the merger isn't certain.

It is generally believed that a merger could only benefit the two highly leveraged companies as they can share costs, cut redundancies and improve operations and earnings. What may have sparked life in the two companies' stocks is that the analyst also said she believes the merger could be signed before the fall of 2007.

Update:
XMSR closed the day at $16.65, up 10.12% or $1.52 on heavy volume.
SIRI closed the day at $3.98, up 7.28% or $0.27 and was the Nasdaq's volume leader.
I just can't help but wonder if we will wake up to an announcement...

XM Satellite Radio Holdings Inc. (NASDAQ:XMSR) announced this morning it has topped the subscriber mark of 7.6 million paying customers, as it added more than 1.7 million new subscribers in 2006.

XM's paying customer total now stands at over 7.6 million subscribers. During the holiday shopping quarter that just ended, the company added more than 442,000 new subscribers. While this information is all relevant, are these good numbers or not?

Rival Sirius Satellite Radio Inc. (NASDAQ:SIRI), which lagged XM severely in subscriber numbers, finished 2006 with more than 6 million subscribers, after spending the last 18 months in rapid-fire catchup mode after. Not any more, although XM still has a lead of about 1.6 million customers. XM CEO, Hugh Panero, said, "XM completed another year of significant subscriber growth, despite retail softness, and did so with continued cost controls, achieving positive cash flow from operations during the fourth quarter."

With over 13.5 million paying satellite radio subscribers now in the U.S., is the terrestrial radio business doomed? Not yet, but if the growth rate of both XMSR and SIRI continue, and we see 25 million paying subscribers by 2010, watch how things start to change in the radio business. For now, though, I'll stick with my Archos Gmini 402 for my portable and car tunes use since it has my entire music collection.

Advertising dollars are swiftly moving off age-old (emphasis on *old*) platforms like the television and print and onto the Internet. The contemporary radio moguls, like the record and movie industry execs before them, are in denial and are starting to protect their precious turf instead of innovating to keep customers. Innovation is just too hard, you know, so they'll fight all the battles before acknowledging that the war has been lost. A broken record from earlier struggles, really (no pun intended).

Advertising dollars will continue to shift to more relevant mediums or they'll be forced to become more relevant to consumers on the current medium. This is why Google bought dMarc broadcasting -- to inject its success into a dinosaur medium like terrestrial radio and make consumers actually care about listening to ads again. But there are more fires in the kitchen here. Let me give you an example here of a personal nature.

Recently I've tried both XM Radio and Sirius in my vehicle with some of the newer "plug-n-play" radios. While I liked the content on Sirius more (like all the college football games being broadcast!), in the end I chose -- like millions of others, most likely -- to listen to just a handful of stations. When I couldn't find anything on I liked, I switched to a CD. There's the pinch -- trying to be relevant to all listeners all the time is impossible. My solution? Jettisoning both radios for auction on eBay, closing both accounts, buying a new (and dirt cheap) flash-drive MP3 player that plugs into the auxiliary jack on my car stereo and listening to all my music for free, how I want and when I want. I'll even record Internet broadcasts directly into MP3 files to use in the car now. Like I said -- the content I want when I want it (with, gasp, no cost attached!).

Things like audio books and podcasts aren't on satellite radio yet. Now, if I could have purchased some satellite radio stations "a la carte", I would have stayed. But paying $13 per month and not needing 95% of the content was a total waste, I figured. I am sure the satellite radio (and television) execs will cry that a la carte pricing would destroy their companies. This may be true, but using the oldest pricing and business model in the book for content availability is *not* innovative. Hence, my dilemma.

Moral of the story? Relevance to each customer is of utmost importance -- in content, advertising and everything else. Will this force innovation? It better, because with all the talk of content protection and the shifting of ad dollars here and there, the consumer now has more choices than ever.

XM Satellite Radio Holdings Inc.(NASDAQ:XMSR) and Sirius Satellite Radio Inc. (NASDAQ:SIRI) are
booming, even amid constant predictions of future doom for the industry. Will HD radio be able to pull those subscribers back to earth? Circuit City Stores, Inc. (NYSE:CC) hopes so, as the retailer will begin selling HD radios soon along with online retailer Crutchfield.com and RadioShack Corporation (NYSE:RSH).

Roughly 1,000 terrestrial radio stations are broadcasting in HD Radio already, but relatively few listeners can hear the signals. HD radio gives FM radio CD-like audio quality while giving AM radio FM-like quality.

I don't see how HD radio can lure back former listeners. Sure, there are fidelity enhancements. But all they'll hear is the same tired content, all plugged playlists and tons of ads.

But, the HD Digital Radio Alliance is hoping to change all that now that the country's second-largest consumer electronics retailer has become the first 'big box' retailer to put HD radio products on its shelves -- and just in time for the holiday season.

Will you continue to listen to terrestrial radio stations with the same content, even though it'll sound better than it ever has? Or, are you planning a move to satellite radio soon? I'd be interested to hear from XMSR and SIRI investors as well as consumers on this one.

Both Sirius Satellite Radio Inc. (NASDAQ:SIRI) and XM Satellite Radio Holdings Inc. (NASDAQ:XMSR) have been under close scrutiny as of late due to allegations that both satellite radio companies are setting land-based repeaters to higher-than-allowed power levels. With the FCC still looking at how to handle permanent radio spectrum agreements that allow both satellite radio companies to operate a land-based network in addition to their birds, both Sirius and XM Radio may have some tough times ahead.

Basically, both companies operate a land-based network to supplement holes in satellite coverage, which is common in dense areas with taller buildings and foliage that block the satellite signal from the sky overhead.

What's happened here: both satellite companies, which are using temporary means of land transmissions to repeat their actual satellite signals in areas where needed, are tuning these repeaters to power levels outside of the specification allowed by the FCC. In other words, they've hopped up the wattage in a way that is irking many traditional radio folk. Sirius has disclosed that it has 11 repeaters outside the spec, while XM Radio has unveiled that it has 221 repeaters operating outside the spec.

With the prospects for both satellite radio companies looking a little shaky right now, let's hope that subscribers don't start losing signals in those downtown skyscraper-plexes.

With XM Radio swimming in the wake of competitor Sirius' success with bringing Howard Stern into the satellite radio biz, XM is going after a little of its own star power. The satellite radio network signed TV and publishing personality Oprah Winfrey to the network back in February, and just announced the Oprah talk network to debut today -- September 26.

This is a rather shrewd move by XM that will cost a pretty penny, but there are surely legions of women nationwide who, like their male counterparts and Stern, will have XM radio always handy just to hear their favorite celebrity. It's a formula for success that has worked for Sirius so far, and Oprah has a following just as impressive, if not more. XM hopes it is more.

In a perfect naming convention, the talk channel "Oprah and Friends" will make its debut at 11:00am EST today after being announced as available just yesterday (the official announcement was in February). Nothing like waiting until the last minute and launching right after the announcement to capitalize on the buzz and the incessant need most Americans have for instant gratification.

While Stern notched a reported $500 million deal with Sirius, Oprah's deal is reportedly worth $55 million. In Stern's defense these days, it's hard to not count the amazing 3 million+ customers who have tuned into Sirius since the raw radio personality took to the airwaves last January.

XM Radio introduced portable satellite radio units over a year ago, and they have gotten better since. Newer models are much smaller, like an MP3 player, and have high-resolution color screens and antennas that don't weigh a customer down. Since XM doesn't say which categories of its satellite radios sell the best, you can bet that as time goes on more and more consumers will want small, portable units that can be used anywhere; home, car, or on the go.

Competitor Sirius, on the other hand, has not had a truly portable satellite radio even though the aging S50 model can record Sirius content for later listening (portable TiVo for radio, maybe?). That is, until now. Sirius has announced the Stiletto truly portable satellite radio model that one-ups XM portables. The unit can be ordered with built-in Wireless Internet (WiFi), meaning it can stream Internet radio when a WiFi hotspot is nearby.

With online Sirius radio streaming available, it seems that Sirius is trying to bridge the gap between when a customer does not have satellite reception and when that same customer can still get their satellite radio fix when neat a Wireless Internet area. The Stilleto can also record and play back 100 hours of Sirius content (compared to 50 hours in many of the XM portable units), which is a nice touch and almost required these days. The WiFi-less version, from what we can find, only stores 10 hours of recorded Sirius content.

With 2GB of memory for MP3 files and recorded Sirius content, the new Stilleto just raised the bar higher in the satellite radio wars between XM and Sirius, which are battling ferociously to gain every single customer in the race to profitability. At a price point of $349, the new Sirius unit is priced just about right for the capabilities it has, although a WiFi-less version will reportedly sell for $249. Just in time for the holiday shopping season, this may help Sirius boost its 2006 fortunes I think. SIRI stock needs all the help it can get these days, as it stands at the $4.00 mark today.

With the holiday shopping season being here sooner every year (or so it seems), a huge potential issue has been solved. XM Radio was set to continue pulling many of its products from shelves in terms of advertising and selling its portable satellite radios. Now this issue appears to have been fixed just in the nick of time.

Portable XM radios, XM's largest category of products that generally feature "plug-n-play" units that can be used with almost any car radio or home stereo with an FM radio, are now back on the selling block at retail. XM Satellite Radio has received new grants of authority from the FCC for three XM radios with FM transmitters after determining that the radios are in compliance with FCC regulations.

This was the overall problem: many of XM's radios feature FM transmitters so that the radios can be used with almost any FM radio made. This included factory car radios and stereo systems.

These XM "plug-n-play" radios, the Audiovox Xpress, Delphi RoadyXT, and XM Sportscaster, are three of XM's best retail sellers. Having these products not available at retail during this time of the year would have been semi-disastrous for the company. A company which is already under fire for losing gobs of cash and for not signing up customers fast enough to make it to profitability soon.

So, in a little over eight months what has Howard Stern -- the King of all Media -- done for Sirius Satellite Radio? The famous shock jock moved from the public airwaves of CBS to the privately-owned and subscription-only Sirius Radio network in January of 2006, taking a $500 million multi-year contract with him for himself and the crew he operates with (Hi Robin!).

But let's pull out the measuring stick and see if Stern has been worth it, although a direct measurement can't really be made. After all, would newer Sirius subscribers have signed up for Sirius if Stern had not moved over? That is the question we can all speculate on, but nobody can definitively answer, although some marketing statisticians have tried.

Sirius has gained customers this year, no doubt about it. Even Mad Money's Jim Cramer calls SIRI stock a "buy" at $4. But there are rumors all over that the overall disappointing performance of Sirius and larger competitor XM Radio might force the two companies to make a deal and merge their networks. Cramer says this would spike SIRI shares to $10 or more. It very well could. Both companies are unprofitable so far (as expected, launching satellites is not cheap), and a merger could eliminate tons of financial redundancies and other factors.

Even as Stern has more than likely brought legions of his fans to the Sirius network in the last eight months, it will take more than the arguable most-popular show host on radio these days to rescue Sirius from mounds of debt and impatient institutional shareholders, who are ready to try and recoup some investment. It's true that it takes time to make a profit after launching satellites (at a cost of hundreds of millions) and facing huge costs up front.

Then you have to spend hundreds of millions of dollars on customer rebates to hit price points and marketing costs (like Stern) to drudge up a loyal fan base that will pony up $13 a month to help you pay all that debt off. That's apparently not happening fast enough, even with Stern's recruits onboard.

XM Radio continues to see technical issues with some of its most popular satellite radios, which has helped propagate a share tumble to near XMSR's 52-week low. The Roady XT and MyFi products have failed to pass tests from the FCC regarding the amount of noise these units pass out into the air when the FM transmitter feature is used. There are millions of these units in use today, and they are among XM's best-selling units because they can be used with any car radio or stereo system that has just an FM radio built-in. There is no need to hard wire them to any car stereo system at all, although the fidelity is lowered quite a bit.

The problem lies in the potential interference other FM users may experience when an XM customer with an XM radio using the FM transmitter feature gets close by. While this may seem like a low-end problem (it is in my view), there are no bones about it -- XM must correct this "defect" in these XM models before they can be sold again. With the holiday shopping season getting closer, this is a serious deal for XM, which needs to continue bolstering its subscriber numbers so that the company can become profitable sometime this decade (at the earliest).

An added issue is that XM may start taking existing XM radios with built-in FM transmitters off store shelves, denting sales even now. The speed at which XM responds to this crisis -- which it is for sales alone -- will be a good indication of the strength of its management team.

Brian White has worked in various executive positions in technology and telecommunications and now focuses on editing and writing.

Manufacturers of Sirius Radio (SIRI) receivers that previously had to stop production of several models because of signal emissions the violated FCC standards have resumed production of two models, the company said yesterday. The models were designed to allow users the capability to use receive FM radio as well as receiving the subscriber programming offered by Sirius. This brings over 90% of Sirius radio models back into production. XM has its own ongoing FCC concerns, noted below.

The news was met indifferently by investors and in late afternoon the stock is landing where it finished yesterday -- at $3.77 a share.
Michael Canfield is a private investor, a business and media writer, living in Seattle. He doesn't own stock in XM or Sirius.

Volvo announced plans to offer factory-installed Sirius Satellite (SIRI) radios on many of its models beginning with the 2007 model year, including all of the new S80 models. That'll run Volvo buyers around $295, including a 6-month subscription. Sirius' biggest challenge to growth is the massive head-start competitor XM (XMSR) has in pre-installed automaker offerings, including General Motors, Honda, Toyota, Hyundai, Nissan and Volkswagen/Audi.

Sirius has been adding new dealers as well, and soon consumers will have increased benefit of choice when seeking satellite music right off the dealer's lot.

In other satellite radio news: although XM Radio loses Nascar to Sirius in 2007, it maintains a valuable major-league baseball contract will broadcast the US Open.

Michael Canfield is a private investor, a business and media writer, living in Seattle. He doesn't own stock in XM or Sirius.

Google is upping its efforts to obtain partnerships across a broad spectrum of the world. This morning, XM Radio announced with Google that Google would be supplying automatically-inserted advertising spots into the non-music channels on XM Radio -- no doubt an extension of the dMarc technology Google acquired when it bought the company this past January. Google sure doesn't waste any time.

What this will do is give Google advertising partners -- which number in the millions -- exposure to the XM Radio universe. This is a rather revolutionary concept in traditional media advertising. Imagine this -- Google partners bid on keywords and phrases in their AdWords console and have not only potential customer exposure on Google's search engine, but now on strategic radio channels on the nation's largest satellite radio network. And, these ads are targeted and automatically inserted without the traditional red tape that goes along with ad insertions.

This is a win-win solution for both companies, as Google advertisers will surely love the fact that exposure to over 7 million new radio customers will be coming their way. XM Radio will lower ad processing costs and most likely see more effective advertising for their radio customers. Who said Google was only interested in serving text ads on Internet searches? This is a great idea for Google, and it makes sense as it needs to continue to find ways to monetize its business outside the text ads that produce almost all its revenue these days.

Brian White has worked in various executive positions in technology and telecommunications and now focuses on editing and writing.

With losses mounting and subscribers coming in at the lower end of expectations, XM Satellite Radio Holdings (NASDAQ: XMSR) reported quarterly results yesterday, with losses coming in at $231.7 million on sales of $227.9 million, which nearly doubled from the year-ago quarterly period sales figure of $125.4 million. So, XM almost doubled sales but lost its shirt in the same quarter. Surprised? I'm not and neither should you. XM is a ways off from gaining consistent profitability with the billions it has poured into its satellite network and marketing. This will take time.

What XM has to do is continue keeping customers listening and courting new customers to the network, like competitor Sirius did when it brought shock jock Howard Stern onto the private pay radio network and off the public airwaves. It's a bet that many Sirius watchers have speculated has paid off, as Sirius is bringing in new customers by the thousands.

Is XM really in deep trouble? I don't think so. It needs $12.95 per month from at least 10 million subscribers to be able and makes gains instead of losses every quarter, and that's going to take some time.

At least today, it seems, XM investors are ready to give that kind of time. The stock is up 4%, or 41 cents, to $11.30 as of 11:45 a.m.