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?
Satellite Radio: We decided to bet the whole she-bang on expensive content deals such as Howard Stern for $500 million and Major League Baseball for $650 million.
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.
View Comments (12)
I would agree with Chip above. Although there might not be much competition in the satellite radio business itself, there is plenty of competition in the market-place - from digital terrestrial radio to internet-based radio. Indeed, more competition is probably on the way through radio streamed via 3G networks to mobile phones or on WiMax connections to any manner of devices.
XM/Sirius would be in direct competition with any of these radio forms, so that ought to keep them playing competitively.
I already get all of the satellite radio I can handle everytime I pass a big-rig on the highway and the cab's satellite service interrupts and supercedes my radio signal. One minute I'm listening happily to "Morning Edition" on NPR, the next I'm listening to Howard Stern complain about some sordid issue. Quite the unpleasant experience.
I'm glad it's about time that the satellite services owned up to the fact that there's just not a large enough market for a service that you can get for absolutely FREE from some many other media outlets it's ridiculous. Podcasts, internet radio, and traditional broadcast is plenty to keep me happy. Why should I spend a monthly fee for content I can't even hope to digest during my commute or at work when I have a hard time just keeping up with content from the previously mentioned sources?
What makes anyone believe that two mismanaged companies can forge a profitable entity by simply merging? Viewed by a successful businessman from the sideline, satellite radio has been an inevitable car wreck from the beginning. Did they really think they could spend their way to profitability? The bidding war for properties Like NASCAR coverage demonstrated that vendors of programming have been equally shortsighted. For example, Sirius outbid XM for NASCAR coverage by offering substantially more that either XM or Sirius could afford. What happens if XM & Sirius merge? What is Mike Helton going to lose when the NASCAR contract is re-negotiated with a monopoly?
Bottom line: The public deserves a credible plan to profitability (which must include new management) if the merger is to be approved. I say, "No plan, no FCC approval."
In the interest of disclosure I am a Sirius user and shareholder.
The shareholder part of me isn't buying all of the Wall Street b.s. about these two stocks. They want the merger because they want all of the money and they want it now. They don't want to wait to see where market forces drive this part of the industry and what long term profits might be had by remaining seperate and refining the business model. The shareholder doesn't like the merger.
As a user I fear that I am going to wind up with a product that I can't afford on the other side of a merger or that I am going to wind up with a choice of bad choices like having to live with XM music programing (too much like commerical radio), too many talk channels and fewer sports channels.
The kicker is that I've heard nothing about how they are going to clear all of the technical hurdles. Which satellites to use, which receivers. what to do with all of the terrestrial repeaters.
This is a Wall Street driven deal that makes zero cents in the real world. I can't wait for its failure.
I am just one of those truck drivers whose cab signal interupts the next guys "NPR" broadcast, so I will keep it short like the simple man that I am. Personally, I think that the main issue here is that too many people are too upset about a private service that has grown outside of Governmental controls. Let them merge. Let them spend their money without big brother holding onto thier wrists. The free market (ME) will be the deciding factor. Let me spend my money the way that I want to. If I don't like it, then I will find another solution. Of course, you do agree that I am able to spend my own money wisely dont you?
What happens to the prepaid fees I have made to xm radio if this meger is approved. Will it be applied to my sirus plan or will it be lost? I have ask this question of sirus people but have yet to receive a positive answer. All they want is for you to sign up for 2 years so that when they fold you will lose that also. I want to pay month by month but they discourage this approach as too costly.
Let us not allow the system of competition in the business world in this United States become controlled by the gov.!! We the customers for this radio service will turn out to be the losers in the long run. Rate increases, rate increases and more slow but steady rate increases will follow just as it has in the cable and satellite business.
You then have so much invested in receiving equipment you just cant say no and obsolete that investment. Let us allow competition to rule. If they BOTH fail so be it. If this satellite radio is a Good Idea, a Needed Service then the market will develop to support it. If not then it goes "Down The Tubes" just like any other business that had a good product that not enough people were willing to pay for!
No special treatment should be allow this business type and not all other start up businesses. That is NOT the American Way. Keep BIG BROTHER out of the business world!
ALL TAX PAYERS KNOW THE GOV. HAS NO BUSINESS SENSE AT ALL IN 100'S OF OTHER AREAS, WHY SHOULD THIS BE ANY DIFFERENT???
XM - Sirius already have way too much invested into this merger. To disallow them from merging risks destroying a valuable service completely.
SATRAD is a cheap, informative source of media. If my cellphone bill were only $12.95 a month, I would leap for joy!
It's efficient. It doesn't rely on the internet. It provides an alternative channel for mass communication! There is value in this for our country!
I can listen to BBC on my SATRAD. I do not have television. SATRAD is an alternative to high-priced cable and satellite television.
Not to mention, I love NASCAR and I love MLB, and I would absolutely love the opportunity to listen to them both via one radio service.
Furthermore, I can also listen to terrestrial radio, and I do. Give the consumer a choice! This merger does!!!
Sirius has so much more content for the same money that XM is about as good as gone with no merger. Sirius has 78% of market share in Canada. That shows that XM that now has even lost NASCAR to Sirius cannot survive with so little content when Sirius has so much more under exclusive contract for the same price.
As far as that truck wiping out NPR just give that truck a little room it is not safe to be that close to a truck.
I bet you could drive for a month looking for a truck to wipe out NPR and not find one.
Better yet get satellite radio and listen to NPR on it no matter were you go.
Let the consumer make their own choice. If you get in a car you do not have to choose between two different carriers for AM or FM. I have a choice to listen to many mp3 players, free radio of a service that I choose to pay for. I think it is wrong that since I am willing to pay for satellite radio that I am almost forced to buy a specific car because the government has not allowed these companies to merge. Bigger companies have merged that are closer to monopolies that Sirius & XM could ever be. The main reason the merger has been held up is because many high ranking official have a vested interest in radio stations or their pockets have been lined by the NAB. Now the merger is held up by the FCC most likely due to the feud with Howard Stern. I would be willing to pay more for the service because I like it. If they charge too much I can live without it. Let me make my own choice and let satellite radio thrive.