Wednesday, April 04, 2007

An Interesting Read Regaring The Merger

April 4, 2007

Interesting read

via http://musicradio.computer.net/wwwboard/messages/310285.html

David Hinckley provides a quick synopsis of the report issued by the Carmel Group (commissioned by the NAB) that argues the XM/Sirius Merger should be blocked by the FCC (see the link to Hinckley's story below). The usual reasons are given about how there won't be enough competition given that there would only be one satellite service rather than two.

Here's the problem with that reasoning. Two weak and possibly unprofitable companies helps no one. If both Sirius and XM were in hot competition to sign up millions of subscribers and their bases were rapidly growing, I would agree with Carmel's argument. But that's not the case. Neither service is close to signing up subscribers at the levels they had hoped for. What good is it having two companies that may not make it at all?

As everyone knows, this comes down to whether or not you accept the argument that satellite radio competes with other forms of radio. Those who oppose this merger seem to think it doesn't. They're wrong and so is the Carmel Group.

Consider the comments made on this board week in and week out about how terrestrial radio faces challenges from all of these new technologies. Assuming that we, a group that follows radio closely are correct, then how can it be that satellite radio isn't in the same situation? Is it reasonable to argue that satellite radio is an island that faces competition only from itself? We all know better.

That isn't to say that satellite radio hasn't made its share of mistakes. As the Carmel Group report points out, paying out huge sums for air talent is probably a mistake (although if I were in Sirius' position in 2004 I would have paid Stern). It's also a bad strategy to not have some loss leader type giveaway so that people could get a piece of the service for free as a way to get them into the technology. In short, the business plan for satellite radio needs to be changed.

But... one stronger company has a far better chance to succeed than two weaker ones. There is plenty of competition... so much that even one company may not make it. I'm no fan of satellite radio as people on this Board know (because I hate the idea of paying for radio). But, in this case, I have to side with them.

Labels: merger, sirius, xm