The two giants who provide satellite radio services, XM and Sirius, would like to merge in order to provide greater programming choices to consumers as a single entity, according to XM Chairman Gary Parsons in the Wall Street Journal. The Journal points out that the two money-losing enterprises will have to get by the hurdle of the FCC, which has a specific rule against the satellite radio companies merging. I thought the time was right for satellite radio to see a psychiatrist. The following is a partial transcript of its recent visit.
Dr. Feelgood: So tell me, how are you feeling today, S.R.?
Satellite Radio: A little mixed up. I should be elated that my two halves — XM and Sirius — will be united into one amazing whole, a service that will please, entertain and excite radio listeners everywhere…. But, there’s also this weird empty feeling in the pit of my stomach…
Dr. Feelgood: Are you worried that the marriage won’t be all that it could be?
Satellite Radio: There are people who don’t want to see us together. The FCC, the broadcasting industry…
Dr. Feelgood: …People who don’t want to pay more for their service? Let’s go back in time, S.R. Back to a time when you were just two little kids fighting for the attention of the American public… Look at my watch as I swing it back and forth… You are getting sleepy, sleepy, sleepy… Now. When you were much younger, what was your business plan?
Satellite Radio: Well, we spent billions of dollars to launch satellites into space to give people commercial-free radio with more variety. The idea was that they would pay us a monthly subscription fee and we would get millions upon millions of people to drop free radio for pay radio.
Dr. Feelgood: Yes, that is good. What happened after that?
Satellite Radio: We spent our billions and vowed to compete fairly as XM and Sirius, in the hopes that fair competition would help keep prices low and keep those subscribers coming. But…
Dr. Feelgood: I feel a dark aura hovering over your head.
Satellite Radio: Yes, well, many people liked our service but didn’t want to pay for a new radio, or pay a monthly fee for commercial-free radio. They also have free Internet radio and free podcasts so we were starting to lose momentum. That’s when the Las Vegas Effect kicked in.
Dr. Feelgood: The Las Vegas Effect?
Dr. Feelgood: Did the bet pay off?
Satellite Radio: In the short term, yes, we started getting millions of people to subscribe, but not enough to make the whole thing profitable.
Dr. Feelgood: [snaps fingers] You can wake up to the present now, S.R. So you’ve proven you have a pretty good technology here, and you have something that millions of people want — but not enough millions to make it profitable. So why will this merger help?
Satellite Radio: We will save money by combining forces, just as in any other merger. We cannot raise the price of the service or people will leave us. We compete with many other services such as podcasts, online radio, free broadcast radio. All we are asking is for the FCC to lift their rule, to approve the merger and let us get on with the business of creating the most amazing merged service ever!
Dr. Feelgood: Ah yes, but then what will you be? One huge service with more channels, more content, a bit less overhead, but the same big money contracts as a result of the Las Vegas Effect? And you think you can charge the same amount for this mega-service?
Satellite Radio: I know, it all sounds a bit crazy. (And you should know crazy.) But remember, we have to listen to our shareholders, and they listen to market analysts, who have been trying to get us together for a long time.
Dr. Feelgood: Now we are getting somewhere. So you are listening to analysts? Do they really care about what the people — your customers — will get from this deal? Do they really care about you, or do they just want a higher stock so they can sell out?
Satellite Radio: That is the source of the trouble here. We do want to please our customers, we do want to make Wall Street happy, and we do want to stop bleeding money. But we don’t want to disappear forever. We don’t want to have “Transitional Technology” on our tombstone just yet, like our old friends 8-Track Tape and VCR.
Dr. Feelgood: So the FCC, by allowing this marriage, would help you to help yourself, basically save you from yourself and your high spending and poor business plan?
Satellite Radio: Yes, that’s all that we want for inner peace. Let us live our lives together in harmony and may all the people be served with commercial-free audio forever (as long as they can spare the $12.95 per month).
What do you think? Is this merger a good idea, and will it bring a better satellite service at the same price? Or should the FCC block the deal as bad for consumers and competition? If you use either service, please tell us why you like it and what your fears are with a merger.