Wednesday, April 04, 2007

Carmel Report - The Questions We Have

April 4, 2007

The Carmel Report has now gotten quite a bit of attention. We here at SSG were critical of many points in the report. The reports author, Jimmy Schaeffler, did return our call, and spoke of a willingness to go over the report details. We have put together a list of deeper questions, and have forwarded those to the Carmel Group. When the answers come, we will publish them. The following are the questions that SSG will be asking regarding the report:

1. The Report is Titled, “Higher Prices, Less Content, and a Monopoly: Good For The Consumer?”

A) Do you recognize that Sirius and XM have already promised lower pricing as well as tiered pricing?

B) Do you recognize that subscribers will have access to more content than they previously had?

C) Can you state a monopoly will exist without seeking out and identifying all aspects of the competitive landscape currently and two years from now?

2. The Report’s front page states, “The Proposed Sirius-XM Merger. It’s Harmful Impact On The Consumer, Content Providers And Performing Artists.”

A) Did you look into the benefits to consumers?

B) Did you look into the benefits to content providers?

C) Did you look into benefits to performing artists?

3. You state that presently there is a duopoly in satellite radio and that they are attempting to merge into a monopoly.

A) The statement may be true, but like everything in life it is not that simple. By narrowly defined parameters may consider Sirius and XM a duopoly, and even a monopoly if the merger is approved, but in reality aren’t there many companies in the business of delivering audio content to consumers?

4. You state that if the merger were to be approved that every subscriber would be beholden to one satellite radio company.

A) Every subscriber has plenty of choice. They can obtain audio entertainment from various sources, and many of them do not require a fee. In fact, looking at the take rate in the OEM channel, roughly half of the consumers decide to NOT CONTINUE the service. Aren’t these consumers exercising their choice?

5. You state that if this merger were allowed that it would result in less service.

A) How do you come to this conclusion?

B) Do you recognize that a current subscriber to one service would now have access to programming from the other service?

6. You state that if the merger were approved that there would be less affordability.

A) Do you recognize that Sirius and XM have promised a lower priced package?

B) Do you recognize that they have spoken of a price freeze?

C) Do you recognize that the costs would be less than if a consumer had to subscribe to both services?

7. You state that if the merger were approved that there would be less diversity.

A) How do you arrive at this conclusion?

B) Does it not stand to reason that with the removal of duplicitous programming that there would be room to increase channel diversity?

8. You state that if the merger were approved that consumers would have less choice in content.

A) Again, with the removal of duplicitous programming, would it not stand to reason that there will be more variety?

9. You state that if the merger were approved that there would be less choice in hardware.

A) Is there anything to substantiate that opinion?

B) Do you recognize that there are many companies that deliver hardware that is capable of delivering audio entertainment?

C) I-Pods control a massive chunk of the MP3 market. Do they stop developing hardware?

10. You state that overall opposition to the merger is significant and growing.

A) Do you offer any data to support this statement?

B) What is your definition of significant?

11. You state that the idea that AM, FM, HD, I-Pods, Cell phones, and internet radio are competition for satellite radio is ludicrous and could not be further from the truth.

A) In previous reports issued by you, you stated that these were all indeed forms of competition for satellite radio. How do you defend being on both sides of this issue?

B) Does AM Radio compete for advertising dollars with satellite radio?

C) Does FM radio compete for advertising dollars with satellite radio? Does HD Radio compete for advertising dollars with satellite radio?

D) Does terrestrial radio carry ads from identical sponsors that are heard on satellite radio?

E) Does terrestrial radio compete for the ears of consumers?

F) Do cell phone companies compete for the ears of consumers?

G) Does Internet radio compete for the ears of consumers?

H) Do I-Pods and MP3 Players compete for the ears of consumers?

12. You state that AM and FM Broadcasters do not compete in a national market against national satellite radio broadcasters.

A) Were you aware that AM and FM radio broadcast their content on the internet, and that this content is not limited to a local area, but is in fact not only national, but global?

B) Do AM and FM radio compete for the same advertising dollars as satellite radio?

C) Do you recognize that AM and FM station owners syndicate programming for distribution on a wide scale that covers many markets?

D) Do you recognize that shows such as Michael savage, and Sean Hannity are national talent that terrestrial radio broadcasts in many markets?

13. You state that true measure of competition must look at services that can substitute for satellite radio as of March 2007.

A) If satellite radio were to not exist, do you think that subscribers would not listen to audio content?

B) Do you recognize that roughly half of the OEM consumers do not elect to keep satellite radio after they receive a free trial of the service? Is this not a clear and demonstrated fact that shows that consumers do feel they have an adequate substitute?

14. You state that I-Pods and MP3 Players are not substitutes for satellite radio.

A) Consumers that use I-Pods and MP3 players seek out the content they want to hear, and organize it in such a way that they desire. Was not JACK FM a concept that advertised that it “was like your I-Pod on shuffle”? Does not Sirius have a channel called “Super Shuffle”?

B) Do you recognize that if someone is listening to an I-Pod that they are not at the same time listening to satellite radio or terrestrial radio, or internet radio?

C) Do you recognize that many AM and FM radio stations offer podcasts to their listeners via the internet, and that consumers can down-load this content to their device? Please pull up some terrestrial radio station websites and see for yourself.

D) Do you recognize that both Sirius and XM sell products that are capable of storing, organizing, and playing content in much the same way that an I-Pod or MP3 player functions?

E) Do you recognize that these devices from Sirius and XM allow you to mark a song that you hear for later download?

15. You state that ell phones and internet radio are rarely offered in vehicles and therefore are not a substitute.

A) This may sound foolish, but don’t you bring your cell phone with you in your car?

B) Most people spend more time in their home and office than they do in their car. Internet radio is a viable medium in those locations. In fact, terrestrial radio as well as satellite radio, offer internet feeds of their content. Do you recognize this?

16. You state that Sirius and XM have not acted in a competitive manner towards Cell phones, Internet Radio, or MP3 players.

A) Do you recognize that the portable devices offered by Sirius and XM do indeed compete with MP3 Players?

B) Do you recognize that Sirius and XM have tried to work with cell carriers to deliver content, and that many carriers develop other deals instead of satellite radio?

C) Do you recognize that Sirius and XM offer service on the internet in an effort to compete in that sector, as do terrestrial radio?

D) Would you argue that terrestrial radio owners do not use internet listener-ship as a factor when selling advertising? I called a few stations, and indeed they offer that their service is on internet radio as a selling point. Do you think that Sirius and XM are not doing the same?

17. You state that Sirius and XM have big installations in the OEM market.

A) If Sirius and XM have big installations, are the installations of AM and FM radios Gigantimungous? What about CD installations?

B) Do you recognize that OEM’s are increasingly installing Aux Inputs? Do you recognize that these inputs are often termed as I-Pod ready?

C) Do you recognize that satellite radio is paying for these installations whereas AM and FM do not?

18. Your report contained an Action-Reaction chart to illustrate competition. Did you consider expanding that Action-Reaction chart into the other markets?

NAB reaction to the introduction of the cell phone was to oppose it being used in cars.

NAB reaction to satellite radio was to oppose the service

NAB reaction to the use of repeaters was to oppose them

NAB reaction to satellite radio was to oppose them providing local content

NAB reaction to satellite offering traffic and weather was to oppose it

FM radios reaction to I-Pod was to create JACK FM

FM radios reaction to Stern leaving was to create FREE FM, and in fact, they spoke directly about the fact that it was free.

NAB is at this point arguing before the FCC to make ownership requirements less restrictive allowing consolidation within their ranks.

NAB is at this point lobbying against Low Power FM

The success of the Inno and Stiletto has led directly to Slacker developing a product that they term as satellite radio. It will launch this summer.

NAB reaction to commercial free music is to cut the number of ads

Google “NAB and Opposition” and you will be amazed at how many hits there are.

Terrestrial radios reaction to satellite HD Radio. They are now being installed in cars, and wal mart is now selling them.

Cell carriers now offer 1 year unlimited downloads with Napster.

The competition is fierce, and comes from many directions. These companies compete for listeners and advertising dollars. Some entities in this group (NAB membership) have the benefit of not having to pay for music royalties as well as a lock on “local” content.

The Carmel report was published, and it got a lot of press. These are compelling questions that arise when the issues are explored more deeply. Thank you for taking the time to return my call, and for agreeing to discuss the report. I look forward to seeing your reply.

SSG

Labels: carmel report, merger, nab, sirius, xm

4/04/2007 11:17:00 PM

SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here

3 Comments:

Your "questions" are all attempts at catching the guy on a technicality.

Substantively, he is absolutely correct -- XM and Sirius are competitors with each other, and not with these other forms of media.
By Anonymous, at April 04, 2007 11:28 PM

a technicality????? That is one hell of a list of technicalities!!!!

These companies all compete. Apple wants your ears, satellite wants your ears, cell phones want your ears, internet radio wants your ears. Do you disagree????

Do you hear ads from the same companies on terrestrial and satellite? You sure do. These companies all compete, and they compete strongly.

XM and Sirius do compete with each other on a micro level.....same is true for FM stations in a city....same is true for I-Pod, zune, and gigabeat. That is one aspect of the competition.....Don't be fooled, these companies also compete with each other
By SSG, at April 05, 2007 12:01 AM