XM and Sirius: The Battle for Merger Approval
September 19, 2007 2:29 PM
comment(s) - last by
Both companies have a tough crowd to please before their merger can go through
Since the rumors of the XM and Sirius satellite
radio merger were confirmed in 2006
, the two entertainment providers have been met by resistance from the
National Association of Broadcasters (NAB)
. The two providers state that the merger, along with their
proposed a la carte plan
, would drive costs down for consumers, as well as offer more options for content.
However, in the face of the NAB's protests, XM and Sirius aren't the only entities in favor of the merger. The Parents Television Council, a group of lobbyists, feel that the merger would not only benefit consumers with more affordable subscription options, but contends that the proposed a la carte programming can be used to block adult programming, a very favorable option for parents.
The merger still has a few hurdles on the track. The Department of Justice has yet to rule that the merger
does not break anti-monopoly laws
, and this appears to be the backbone of the NAB's case against the providers. The NAB argues that a merger would, contrary to XM and Sirius's plans, eventually drive the cost of programming upward as well as provide fewer program options and less local programming to subscribers.
The second major obstacle lies in FCC approval of the merger. The companies recently convinced former FCC chairman Mark Fowler of their need and he stated in a New York Times article that if the companies “need to combine to be more effective competitors in an audio entertainment marketplace teeming with technological change and innovation, the government should not stand in the way.” What remains for the satcasters is convincing the current FCC chairman, Kevin Martin.
In recent interviews, both companies' leaders came across as optimistic of the merger. Mel Karmazin, CEO of Sirius Satellite Radio felt confident that the FCC and DOJ approvals would come, as well as shareholder approval. Gary Parsons, chairman of XM Satellite Radio conveyed that though he feels the merger will be approved, XM does not need the merger – it will be beneficial to the provider, but not necessary in the face of their climbing subscriber growth.
The satcasters' line of reasoning lies in that the merger will allow customers more choice at a better cost, while allowing the companies to be more profitable and move forward with technology and more strongly into other existing markets such as streaming mobile and internet radio. They will need this profit margin and technology to compete with other popular forms of audio entertainment, such as iPods and other portable media devices, as well as terrestrial radio.
The coming months could prove interesting for XM and Sirius as the providers lobby for DOJ and FCC approval with support from various organizations, while the heavyweight NAB collects the opposing view of others to further its case.
This article is over a month old, voting and posting comments is disabled
9/20/2007 12:53:12 PM
This is exactly true. Its not as if this is the only option for people. If they charge more than people are willing to pay, those people just won't pay and they will have to either lower prices or totally fail. the market tends to balance itself so that everything costs the maximum amount that customers will pay
9/20/2007 5:00:19 PM
But with the current duopoly, consumers who have decided to get satellite radio can at least compare between one of two large providers. Post-merger, consumer choices will be between pay whatever amount they are asking, or not at all. My intuition is that this will lead to higher prices.
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