X-Mirius? Siri-X?

The long-rumored merger between Sirius and XM is supposedly on. Moreover, at least one analyst thinks the move will win federal approval.

Don't know how anyone can make that leap, not with an activist Democratic congress yet to be heard from on the issue. For now, just the still unknown nut-and-bolts of how the two services would merge and which shows would migrate -- does Stern go to Oprah, Oprah go to Stern? -- are quite enough to ponder.

Comments

[Lost_In_Translation]

Most of the time, mergers confound me. I understand buying a certain businesses for their technologies, market expansion or diversification, but XM and Siruis merging does none of the above, except mean that competition decreases and XM and Siruis can cut overhead for more profit. This wouldn't be growing a business, this would be eliminating the strain of heavyweight competition. Am I wrong?

[Miles]

I can't see how such a merger would even work.

Assuming that the primary reason behind a merger is to eliminate one of two very expensive satellite networks, and that each service uses different frequencies, data-encoding mechanisms, etc., one set of customers is going to get screwed. Particularly for those subscribers with factory-installed satellite receivers in their cars...

[Jesse Walker]

This wouldn't be growing a business, this would be eliminating the strain of heavyweight competition. Am I wrong?

You may be right. The FCC has licensed only two companies to provide the service, so if those two become one it's an instant government-enforced monopoly.

[ed]

Particularly for those subscribers with factory-installed satellite receivers in their cars...

Can you say "eight-track", Miles?

[Dave W.]

I think the idea is that satellite radio competes with terrestrial radio and internet radio. That means it doesn't matter much whether there is one satellite company or two.

Generally speaking it does not matter that much whether there is one or two suppliers in a given market spread over millions of customers. The difference between oligopoly and monopoly is generally one of form and not substance. Most of the competitive juice is lost by having one or two suppliers rather than, say, one thousand. Each of those 998 companies not in the picture and not competing can be seen as a chunk of the invisible hand that has been cut off. When you get down to two suppliers, there just ain't a lotta hand left.

Fortunately, there still is competition on the Internet -- thousand of stations -- the real challenge is to keep Clear Channel, XM, Serious, Microsoft, the dying CD cartel and any other 300 pound gorilla out of that sandbox.

[ChicagoTom]

I think it's a fine idea...the best idea ever!

I don't see a downside!

(Full disclosure : I own shares in both companies in their infancy and did so believing the market would not support both companies and they would eventually merge)

[ChicagoTom]

Damnit!! "I own shares" should be "I bought shares"

Preview is my friend
Preview is my friend
Preview is my friend

[Karen]

I really don't see the benefit here. I'm an XM subscriber -- I got it in my new car -- but from what I've seen of Sirius, I wouldn't want anything the sell. (I do absolutely love XM though. Matt the Cat totally rules.) XM has many more music channels, including many channels devoted to music popular with people who can buy their own liquor. Sirius has, well, Howard Stern. Not the same customers at all. Finally, they do use different frequencies and equipment, so I don't see how there's any room for cost reduction. One group of subscribers is going to get completely screwed in this.

[Danny]

I am an XM subscriber, and if I can get NFL broadcasts and my wife can get Howard Stern (the two Sirius properties that appeal to us) for no extra price, that sounds good to me.

Two tricks will be equipment and prepaid service. As Miles said, I have the equipment hard-wired into my car, and I have a separate receiver/boombox at home. Will I need to replace these? Also, I prepaid for 3 years of service last year. How will XMrius deal with that? I'm assuming it will not change, but theoretically they could try to dishonor any prepaids on the basis that it was for XM service and the merged service is of greater variety/quality and therefore is more valuable.

[Matt L]

I have both services. They both have their strong points but lately Sirius seems (to me at least) to have better content. Either one is far better than terrestrial radio.

XM has Opie&Anthony and MLB in it's favor.
Sirius has NASCAR and the NFL.

XM does have a wider variety of music but the rock stations on Sirius (IMHO) are better.

I don't see much benefit here either since they will have to maintain, for the near term, two networks in order to avoid completely alienating half of there subscribers. Longer term there is the issue of trying to integrate the two networks. That also may be difficult to do without alienating subscribers. While there is a lot of overlap in the two services, they have differentiated themselves enough to create separate brands.

[JKP]

Lost,

I think that the problem is (as someone else observered,) the market is barely supporting one company, let alone two. Market forces are driving the merger, if my (admittedly limited) knowledge of ths situation is correct.

(FULL DISCLOSURE: I am an XM subscriber who would also enjoy getting a few of the SIRIUS-only channels without having to buy new equipment.)

[Karen]

Now, if we can get an Austin-San Antonio traffic and weather channel with the deal, I'll support it enthusiastically. Love is never having to listen to Clear Channel during drive-time again.

[matt]

Which one has the Bob Dylan theme time radio hour?

[mathwiz]

XM has Dylan

[Jesse Walker]

I think the idea is that satellite radio competes with terrestrial radio and internet radio.

Not many people listen to the Internet while they drive, though. And while obviously terrestrial radio (not to mention CDs and books-on-tape) compete with satellite radio, those are substantially different products in a way that XM and Sirius are not. (I also suspect, though I haven't looked at any market research on the matter, that once someone has decided to invest in one satellite radio system they aren't likely to switch to the other one.)

I'm not saying that the only reason for the deal is to eliminate competition, just that it's surely one of the motives.

[R C Dean]

Don't know how anyone can make that leap, not with an activist Democratic congress yet to be heard from on the issue.

I think we can predict with a high degree of confidence what will happen on the anti-trust front as follows:

If Sirius and XM have made generous campaign contributions to Our Masters in Congress, then this will sail through.

If they have neglected to do so, well, Microsoft stands as an illustration of how the anti-trust laws can be used to, umm, encourage more, errh, civic responsibility by corporate citizens.

[Warren]

...those are substantially different products...

I can think of may differences between satellite and terrestrial radio. None of them strike me as "substantial".

They are different but they compete for the same ears with similar products.

[Matt L]

Both Sirius and XM have been gaining subscribers since they began. I wouldn't say either is losing ground to terrestrial radio. They are competing against each other for each subscriber though. At this point I don't think either can up their subscription prices for fear of losing subscriptions to the other. A merger would eliminate that problem while still allowing them to increase subscribers.

[Doctor Duck]

those are substantially different products in a way that XM and Sirius are not

I'm not sure how to parse that. If you're saying that XM and Sirius are not different from each other in the manner (or degree) that they're different from CDs, iPods and terrestrial radio, then I agree. But all those things are more similar than they are different, in how they;re consumed.

My in-dash thingie accepts an MP3 CD with 8 hours of music, has an input from an iPod or satellite receiver (with integrated displays), and offers terrestrial AM and FM radio. It's all interchangeable, and I often don't remember or care which I'm listening to.

Add WiMax to the mix and now the internet is in play too.

When choosing a sat radio provider I took into account the (then) rumors that Stern would be going to Sirius, and went with XM just so he would never get a nickel of my money. For that reason alone I'd resist any merger.

[Timon19]

If I (XM subscriber) can get the EPL and UEFA CL out of this, merge away!

It still disappoints me to no end that XM has yet to cash in on the rather large popularity of their English-language broadcasting of the World Cup this summer with more programming like Sirius' EPL and Champions League package and some of their talk.

The English- and Spanish-language World Cup channels were extremely heavily listened-to during the summer on XM.

[ktc2]

I used to have XM but their only channel devoted to "classic rock" was "Top Tracks" and they seemed to consider, Steely Dan, Janis Joplin and solo beatle tunes the pinnacle of "classic rock". Didn't bother to renew. I swore if I EVER heard "Hey 19" again it'd be too soon.

[Bee]

.....they could do what MLB and DirecTV just did to Cable and Dish Network subscribers who like to watch baseball.....screw them over. I believe the NFL did a similar exclusivity thing with DirecTV a while back with their Sunday Ticket package. And perhaps the most surprising move of this sort was NFL Monday Night Football moving from ABC (that everyone with electrity and a tv can get) to ESPN.

The precedent for screwing over people who *already want your product* is well-established.

[Bud]

Golly! After the merger, maybe I'll finally be able to pick them up on my homemade crystal radio. That would be swell! Radio is really keen!

[M&A Attorney]

"theoretically they could try to dishonor any prepaids on the basis that it was for XM service and the merged service is of greater variety/quality and therefore is more valuable."

No, they can't.

[Guy Montag]

This wouldn't be growing a business, this would be eliminating the strain of heavyweight competition. Am I wrong?

JKP took my answer. My wording: the FCC licensed two companies in an area that seems to only have enough customers to keep one in business.

As for that comment in the post about the activist Democrat congress, their idea of competition is everybody going out of business. So, yes they might examine ways to block this.

[Bhh]

No thank you. I like my choices without this satellite stuff: Limbaugh, Hannity, Limbaugh, G. Gordon Liddy, Limbaugh, Savage, Limbaugh, Glenn Beck, Limbaugh, Hannity, Limbaugh, and Limbaugh. Plus a couple preachers and the NPR station that plays 12 hours of bluegrass a day, followed by 12 hours of celtic music.

My dad owns a few shares of the Dogstar (aka SIRI), think he'll be unable to unload that turd with a modest profit or what?

[Russ 2000]

Not many people listen to the Internet while they drive, though.

They will, in time. And then there'll be no advantage to XM or Sirius having 100 channels of anything as you could listen to, say Pandora or Launchcast which is basically an infinite number of "formats" and you could listen to MLB games via MLB.com.

[Max]

The merger has two main benefits to shareholders in the short run: increased subscriber fees and lower subscriber acquisition costs (because the competition for customers is reduced), and reducing the cost of content (because the firms would not be bidding against each other for content rights).

There's no way this will be approved. It's exactly parallel to the DirecTV/Echostar merger, which was rejected.

[Max]

"My wording: the FCC licensed two companies in an area that seems to only have enough customers to keep one in business."

Interesting concept of the 'free market' you have. If somebody isn't making a profit, it's because the government permitted too much competition.

[Guy Montag]

Max,

You are under the illusion that I was talking about a free market? I was talking about two companies being strictly regulated by the government.

Not sure what *you* are taking about.

[Pepe]

I'm an XM subscriber but from what I know of Sirius, most of the content is redundant. The only big differences are which sporting events and talk shows are carried.

Most sports fans would probably find the merger a good thing as they wouldn't have to choose between NFL and MLB among other things.

Combining the talk shows on one system could be interesting. I doubt "Opie and Anthony" and Stern would be thrilled about the prospect of working for the same company again. And who gets morning drive? Both?

[Harpua]

XM subscriber since 2004

I have a theory that as things become more popular, they tend to suck harder. XM was kind of cool when it first came out. As time has gone on, they've gone more towards "Hits" style channels and cut out some of the more obscure channels. Just like FM in the 70's turned into the cesspool it is today, sat radio will do the same thing in a shorter period of time. If it weren't for the MLB and NHL games, I'd probably fire them like I did my cable company.

[Rhywun]

And who gets morning drive? Both?

I don't know about Opie & Anthony, but Howard Stern has his own channels so I would guess "both".

[kevrob]

I figure that since Google bought YouTube, their main competitor will try to steal a march and buy the combined satradio company.

They can then rechristen it Yahoo/Sirius.

Kevin

[Jesse Walker]

I can think of may differences between satellite and terrestrial radio. None of them strike me as "substantial".

Let me put it this way. "Satellite radio" as a class competes with "terrestrial radio" as a class. Once you've made the mental leap and decided to subscribe to a satellite radio service, competition between XM and Sirius enters the picture. Hardly anyone subscribes to both at the same time: You choose one or the other and then ignore the other option entirely, which isn't the case when you choose each morning between tuning in to XM or turning on your dashboard MP3 player. The two companies compete with each other in a way that they're not competing with the AM and FM dials.

Complicating that, of course, are the people who subscribe to XM or Sirius for a particular channel or program -- the Stern or Dylan fans who wouldn't subscribe to satellite radio at all if it weren't for their favorite show. In those cases, competition between XM and Sirius comes before competition between satellite and terrestrial radio.

Just to clarify: I'm not arguing that the government should stop the merger. I'm not even arguing that there's room for a second satellite service -- for all I know JKP and Guy are right and the market will only support one satellite radio service. All I'm arguing is that the FCC shouldn't block satellite-radio entrepreneurs from trying to compete with XM, Sirius, or the amalgamation now pending.

[pigwiggle]

A big potential benefit is increased bandwidth. The music channels sound like absolute shit. Because of the poor quality I don't listen to the music channels. Absent that, I guess there would be more in the news lineup. Come to think of it, they would have to increase bandwidth for some channels. I'm sure they would have some redundant programming that would be cut freeing up bandwidth.

[ChrisO]

Since we got a car with a built-in CD player, I don't think I've listened to more than five minutes' of radio in the last two years. I think satellite radio *is* the 8-track tape of the 21st Century. Regardless of the merger, I think it will be eclipsed by events.

[b-psycho]

I wonder...who sent up the satellites they use?

[leviramsey]

If GM is in favor of the merger (and the fact that it's even being proposed is a sign they do, given that they own a lot of XM stock), Congress will not be a problem, thanks to the Representative from General Motors, John Dingell.

As for who launched the satellites, both services' sats were at least partially privately launched: XM's by SeaLaunch and Sirius' by International Launch Services (one partner in which is Khrunichev State Research and Production Space Center.

Nice to see you again, Mr. Montag...