One year after XM and Sirius proposed a merger, the Department of Justice has finally given its blessing. The companies are heading down the aisle. Last year, I argued that a merger was in everybody’s best interest. After reading my column carefully, it's clear that the DoJ agreed. Its analysis showed that a merger would not violate anti-trust laws because there is already significant competition in the market from other options such as portable music players and increasingly prevalent mobile Internet radio. Even good old-fashioned (and free) AM/FM radio is a competitor, and we all know who holds the cards in that market.
As with anything newsworthy, the proposed merger has stirred controversy. Some folks feel that it would violate antitrust laws, and conflict with the FCC’s original licenses issued to the companies with the stipulation that they would never merge. “Never” apparently meant “not for a little while.” We’ll see what happens with the FCC in the coming weeks, but analysts predict that it will follow along with the DoJ's ruling. Like it or not, the lobbyists can go home. It’s probably a done deal. With the FCC ruling just days away, click Continue to read about what a merger mean for us.
Nuts and Bolts
Assuming the FCC approves Sirius' buy out of XM, what happens to current subscribers? I’ve got XM in my car, XM at home, a portable device and a boombox — to say nothing of all the T-shirts and tote bags. Will XM as we know it continue to exist? Well, yes and no. The names of the services will most likely change into one cohesive name. Anyone care to suggest a few? That’s cool. I can deal with owning some obsolete, um, ebay collector’s item XM mouse pads. But what about my XM radios, not to mention that factory-installed XM in your new Ferrari Scaglietti? No problem — the satellites won’t be shot down from the sky, and your radio will continue to work. XM customers will continue to get XM through the same broadcast chain “pipeline” as they do now — same codecs, same satellites, same receivers, and the sound quality we love. What will change is the programming.
Oprah and Howard, NASCAR and MLB
While programming options are still up in the air, it’s obvious that both XM and Sirius fans will get greater choice. Sports fans, in particular. Let’s face it— Howard Stern (on Sirius) has a mostly male demographic. Those same male listeners probably also want to listen to baseball and the NHL (on XM). Prior to the merger, fans had to choose Howard or hockey. Now, you can have both. No one knows what the merged conglomerate’s pricing plans will be, but a la carte programming might yield basic subscriptions for just $6.99/month up to $16.99. That’s compared to the basic $12.95 fee each company charges now. Additional fees apply for “premium” programming. Plans and bundles could be customized, letting you create just the programming you want, so you can pay for only what you want. Currently, you could also get all satellite radio programming by subscribing to both services, but this would set you back over $25 a month.
The new pricing plans could significantly benefit listeners. Or at least it won’t be any worse. According to an online press release from XM, "Subscribers who want their current service after the merger will not have to pay any more than the $12.95 per month they pay today." In fact, it’s likely that the FCC will enforce price caps to limit price gouging by the new monopoly. The concern that the new company would raise rates seems far-fetched. There are just too many good alternatives for car, home and mobile radio.
Avoiding a bloody format war
If the companies had continued down separate paths, desperately trying to beat each other to death with lucrative exclusive deals, expensive advertising, and dual-licensing, odds are pretty good that one or the other (or both) would have gone belly up. Even with a combined total of over 17 million subscribers, neither company has yet turned a profit. In the situation of one of them folding, at least half of satellite radio customers would have been screwed with obsolete hardware. Perhaps hardest hit would be car owners with integrated, and useless, receivers.
Consider — would you rather have one semi-successful company spending money on better programming and technology, or two struggling companies spending money trying to out-do each other? Look at what just happened in the home theater market when HD DVD lost its battle with Blu-ray. In that situation, consumers were left with useless hardware and no new material to support it. With the merger, XM and Sirius hardware will both continue to work, with more programming options, not less. The merger's a win-win for everyone.
What do you think?
How do you feel about this? If you’ve put off buying satellite radio, will this change your mind? Will you pay more for expanded programming options? Will you be tempted by a lower price for basic channels? Would you listen to Opie & Anthony making fudge with Martha Stewart? Personally, I would pay good money to hear Howard Stern guesting on Oprah, especially if he jumps up and down on the couch with her. Now that's
what I call good radio.