NFL Draft Gets Sirius

April 23, 2007

Sirius Satellite Radio to Provide Comprehensive Live Coverage of the 2007 NFL Draft

Labels: nfl, nfl draft, sirius

4/23/2007 10:28:00 AM

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BOA's Jacoby Weighs In

April 23, 2007

Jonathan Jacoby published a 1Q Preview note lowering price targets, highlights below:

Satellite Radio 1Q07 Preview

Key Inputs Point to Lower Fair Value for Both XMSR and SIRI

􀁘 Despite the recent sharp decline in share prices, we maintain our neutral ratings on XMSR and SIRI – standalone values and merger synergy values likely are lower than previously estimated. Given the proposed merger, the fair value of XMSR and SIRI consists of fair value as a standalone entity plus the expected value of merger synergies. In our view, BOTH components are worth less than we had previously estimated.

1) Lowering our stand-alone estimates due to lower longer-term conversion rate assumptions. New standalone value estimates are $2.25 (from $2.50) for SIRI and $10.50 (from $13.50) for XMSR. We have scrubbed our valuation models for both companies. The principal adjustment was to reduce our longer-term OEM conversion rate estimates for XM to make them more consistent with our longer- term assumptions for Sirius (i.e., 40-45%). Our previous model assumed that conversion rates bottomed at 50% in 2H07. The adjustment to OEM churn shaves ~500K subscribers off of our 2010 year-end estimate.

2) Lowering our merger synergy assumption to $3.6B from $5B – sports rights fees could increase initially under the base scenario. Our prior analysis assumed that combined programming and content expenses would be reduced by 15% in ’08 and by 25% in ’10 and thereafter. However, in order to be able to offer baseball or football to subscribers of both satellite networks, the merged entity might need to increase the current payments and/or extend the agreements. Our model now assumes that there are no net programming cost savings as lower costs for certain programming (e.g., music and talk channels) could be offset by higher sports rights fees.

􀁘 The current stock prices seem to suggest that the probability of regulatory approval of the merger is roughly 35-40% - but our FCC contacts believe that the percentage is trending lower. Assuming that our new fair value estimates for XMSR and SIRI with or without a merger are roughly correct, we estimate that the market implied probability of obtaining regulatory approval for the merger from the DOJ and FCC is between 25% and 40%.

􀁘 On a positive note, we see little downside risk to our 1Q07 (and 2007) subscriber estimates. In fact, we believe that XM should beat our net add estimate of 242K (consensus is 334K – we believed that 290K is reasonable). We expect Sirius to meet or beat our net add estimate of 461K (consensus is for net additions of 497K). XM and Sirius will report 1Q07 results on April 26th and May 1st, respectively.

􀁘 Our new price targets are $2.75 for SIRI and $12.50 for XMSR. Given a smaller synergy value estimate and lower standalone value estimate for each company, we estimate that SIRI would be worth ~$3.50 and that XMSR would be worth ~$15.50 if the merger is approved. Our new price targets are $2.75 for SIRI (from $3.50) and $12.50 for XMSR (from $17) – our new targets assume a 40% probability of the proposed merger receiving the necessary regulatory approvals.

􀁘 Sector View: Audience erosion will continue to cap top-line growth over the next decade, whether radio "goes Google" or not

Labels: bank of america, jacoby, merger, q1 2007, sirius, xm

4/23/2007 10:04:00 AM

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Berstein's Craig Moffett On XM and Sirius

April 23, 2007

Craig Moffett of Sanford Bernstein Published a note this morning, highlights below:

XMSR and SIRI: Heads I Win, Tails You Lose. XMSR/SIRI Pair Trade Should Work With or Without a Merger

Highlights

If a stock falls in the forest, and no one is there to hear it, does it still make a sound?

• That’s the salient question for satellite radio investors…those who are left, that is. Ever since XMSR and SIRI announced their merger on February 19th, the stocks have been in a free-fall. At the same time, trading volume has dropped sharply (down 44% at XM and 14% at Sirius), as investors have traded apathy for pessimism. Since the announcement of the merger, both XMSR and SIRI shares are down some 20%.

• At the center of both declines is the view that the companies’ proposed merger faces dim hopes in Washington, and that – without it – the companies face dim futures in the marketplace. Based on where the stocks are currently trading, we believe the market is assigning only a 11.2% chance that the merger will ultimately be approved

• Even if the merger doesn’t happen, the relative value gap between XM and Sirius remains our preferred way to participate in the sector. XM trades at an 11.7% discount to Sirius, despite being a better positioned company, in our view.

• XM’s strategic position in the OEM channel is better, and is only getting more so. The aggregate share of XM’s OEM partners has grown from 56.0% of the U.S. auto market at the beginning of 2004 to a 59.3% share by the end of 2006, a gain of 340 bps in two years. Last year was a particularly difficult one for Sirius’ OEM partners. Overall U.S. auto sales were down 2.4%, yet they were down 4.6% at Sirius’s partners and only 0.9% at XM’s partners

• On the other hand, if the merger does get approved, the spread between the two equities should expand by 19% versus current levels – based on the fixed 4.6x exchange ratio that Sirius will pay for XMSR shares. Since the merger announcement, the shares have rarely traded above a 4.0x ratio; the spread has remained virtually constant

• Earnings previews and updated models for both XMSR and SIRI appear at the end of this report. XM will report first quarter earnings on Thursday, April 26th at 10:00 AM ET. The dial-in number is (877) 265-5808, pass code 5409333. Sirius will report earnings on Tuesday, May 1st at 8:00 AM ET.

We believe that the relative value gap between XM and Sirius remains the single best way to participate in the sector. We view the 11.7% enterprise value gap between the two companies as unwarranted, and untenable. We are lowering our XMSR (Outperform) target price to $16 from $19 and we are lowering our SIRI (Market-perform) target price to $3.50 from $4.00

Labels: bernstein, sirius, xm

4/23/2007 09:57:00 AM

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NAB Testimony - More of The Same

April 19, 2007

The testimony provided by the NAB representative at the hearings this week was basically more of the same. Whether the NAB stance holds water is up to the DOJ and FCC.

TESTIMONY OF RUSS WITHERS
BEFORE SENATE COMMERCE COMMITTEE

WASHINGTON, DC -- NAB Radio Board Vice Chairman Russ Withers, owner of Withers Broadcasting Companies testified today before the Senate Committee on Commerce, Science and Transportation regarding the proposed monopoly merger of XM and Sirius. The following is a transcript of his oral testimony.

* * *

Good morning Chairman Inouye, Vice Chairman Stevens and Members of the Committee. My name is Russ Withers. I am the owner of Withers Broadcasting Companies, which operates 30 local radio stations and six television stations in seven states, including Missouri and West Virginia. I am testifying today on behalf of the National Association of Broadcasters, where I serve as vice chairman of the NAB Radio Board and a member of the Executive Committee.

I am here to voice opposition to the proposed merger of this country's only two nationwide satellite radio companies, XM and Sirius.

Satellite radio is a national radio service that provides hundreds of audio programming channels to listeners across the country. There are only two such services, and they compete against each other in the national marketplace. The undeniable fact is that XM and Sirius want government permission to take two competitive companies and turn them into a monopoly.

When the FCC allocated spectrum to Sirius and XM in 1997, it specifically ruled against a single monopoly provider. The Commission foresaw the dangers of a monopoly. It explicitly licensed more than one provider to ensure "intra-market" competition and to prohibit one satellite radio provider from ever acquiring control of the other. There is no reason to change that position now.

Currently, Sirius and XM occupy 25 megahertz of spectrum allocated by the FCC for nationwide satellite radio service. With a new monopoly and a merged entity, they will continue to control this entire block of spectrum, preventing any new entrant from offering national, satellite radio service and competing against their new monopoly.

These companies have claimed that no one should worry about this monopoly, because local radio competes against XM and Sirius. Let's be very clear on this point: radio broadcasters do not compete in the national market of the satellite radio companies, but XM and Sirius do compete in the local radio markets – markets that I operate in everyday – markets like Cape Girardeau and Sikeston, Missouri.

Local radio stations can only broadcast within their FCC-defined coverage area. Local broadcasters' signals are not nationwide, and are not subscription. The national availability of satellite radio sets it apart from local broadcasters.

Withers Broadcasting operates in small and medium markets like Bridgeport, West Virginia. We are the voice of the community in times of emergency and have a unique connection to our listeners that no other medium provides.

XM and Sirius, by contrast, offer a pre-packaged bundle of national, mobile digital audio channels. KGMO in Missouri delivers outstanding local news, sports and entertainment.

Consumers, however, would never consider my station's local programming a comparable product to Sirius' 133 channels or XM's 170. A local radio station's programming is clearly not a substitute for the array of services offered by XM and Sirius. Services like XM and Sirius compete with each other - and no one else - in the national satellite radio market.

In fact, a recent FCC report and analysis on satellite market conditions shows a very healthy and competitive national, satellite radio market. Following U.S. Department of Justice merger guidelines the FCC defines the market participants as two providers, XM and Sirius. The report also finds the geographic aspect of this market to be national, subscription, and offering nationwide-licensed choices. These are inherently different characteristics and services than that of local radio broadcasters.

I can understand why XM and Sirius would want a monopoly, but that does not mean it is in the public interest. XM and Sirius, by their own admission, are not failing companies. Their current highly leveraged position is due to extraordinary fees paid for marketing and on-air talent, including the $500 million contract that Sirius awarded to Howard Stern and the $83 million dollar bonus paid to him just last year. But even with these costs, XM and Sirius have made clear they can succeed without a merger.

For these reasons and others, local broadcasters strongly oppose a government-sanctioned monopoly for satellite radio.

Thank you.

About NAB
The National Association of Broadcasters is a trade association that advocates on behalf of more than 8,300 free, local radio and television stations and also broadcast networks before Congress, the Federal Communications Commission and the Courts. Information about NAB can be found at www.nab.org.

Labels: merger, nab, sirius, xm

4/19/2007 11:05:00 AM

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Cowen Issues Q1 Preview Note

April 18, 2007

Cowen's Tom Watts issued a 1Q preview note today:

Sirius Satellite Radio

Reporting Date May 1, 2007

Key Issues

- M&A Tenor Growing Negative. Since announcing a merger with XMSR on Feb 19, sentiment has grown noticeably negative for approval, unnecessarily pressuring both stocks.

- High Operating Leverage Should Drive FCF Even w/o a Merger: Incremental margins for Pre-SAC Cash Flow were 42% for SIRI in 2006. We project increasing margins of 47% in 2008, and approaching mid-60s through 2012.

We expect significant cash flow potential once SIRI turns cash positive in Q4:07, ahead of XMSR.

- 2007 Guidance Low. We believe both XMSR and SIRI set sub guidance low for FY07, setting the stage for outperformance in H2 as subs ramp from new OEM programs and seasonality.

- Gaining Market Share. We expect 526K Q1 net adds, down from 761K in Q1:06. This (31%) Y/Y reduction compares to (38%) for XMSR and represents cont.d market share gains vs. XMSR.s 355K. For FY07, we expect 2.1MM net adds vs. 1.5MM for XMSR. We expect market share to reverse in 2008 as XM.s larger OEM base ramps up installs.

Valuation SIRI trades at $657 per 2007E sub and $527 per 2008E sub..

These values compare to XMSR.s $535 per 2007E sub, and $437 per 2008E sub . a 23% and 20% difference. Our DCF analysis implies 79% outperformance relative to the market over the next 12 months.

Recommendation

We maintain our Outperform rating on SIRI even without M&A potential with XMSR. We believe SIRI can outperform based on its FCF potential alone. Compared to XMSR, we prefer XMSR based on its stronger OEM relationships (60+% market share) and better relative value . 48% of industry enterprise value, vs. 52% for SIRI

Labels: cowen, merger, q1 2007, sirius, xm

4/18/2007 09:54:00 AM

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WedBush Comments on CBS Rumor

April 18, 2007

William Kidd published the following comment in reference to the recent CBS rumor:

Satellite Radio (SIRI - BUY, XMSR - HOLD): CBS Acquisition Rumor Shakes Up Depressed Prices

Report that CBS could be interested in either XM or Sirius sparks downtrodden equities; though we lack a definitive basis to support this unsubstantiated rumor, we think it's plausible that a radio player could look at satellite radio defensively.

If true, this would not be the first time that radio pondered teaming with the enemy.

We're skeptical that CBS, or any other media player for that matter, would attempt to combine both Sirius and XM given all that has already transpired.

The Senate also met on the merger yesterday: debate continues but the quality of the debate itself does not seem to be progressing.

The recent sell-off is overdone: Sirius is worth a strong look for investors with longer-term horizons.

Labels: cbs, merger, sirius, xm

4/18/2007 09:50:00 AM

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Sirius Files SEC Form 4's

April 17, 2006

Today Sirius filed Form 4's for Scott Greenstein and James Meyer. There are many who will look at this transaction and think that insiders are selling out. This is not the case if you look deeper into the transaction .

SCOTT GREENSTEIN

Sold 153,023 shares on 4-13 for a price of $3.08

This sale was made to cover the taxes and brokerage fees associated with the gain he had on restricted stock that had vested. Once the shares vest, the capital gains taxes are due. Mr. Greenstein sold enough of his shares to satisfy tax obligations and brokerage fees. Sales such as this are not tied to a sentiment about the company, but are rather tied to Uncle Sam demanding his cut.

JAMES MEYER

Sold 132,699 shares on 4-13 for a price of $3.08

The sales for Mr. Meyer is identical is reasoning to that of Mr. Greenstein.

Uncle Sam always gets his cut.....plain and simple.

Labels: sirius, stock sale

4/17/2007 11:27:00 PM

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A Deeper Look At The CBS Rumor

April 17, 2007

One thing that today illustrated was how fast things can change for Sirius and XM. Clearly there is a lot of money exiting these equities early in the day, but just as clear is that there is a lot of money on the sidelines waiting to hop into Sirius or XM.

The CBS rumor now adds yet another series of thoughts surrounding the proposed Sirius and XM merger.

What if a company such as CBS wanted to get into this business?

Would there be a premium paid?

What becomes of the $175,000,000 break-up fee that is in the terms of the agreement?

Could a buyer swoop in and grab one of these companies while the proposed merger is happening?

Are these companies attractive to outsiders?

Why would a company see Sirius and XM attractive?

Which company is more attractive to an outsider?

Does the thought of a proposed bid by a terrestrial radio firm, or any firm for that matter, give a pause to the thought process of the DOJ? The FCC?

These are all questions that investors in this sector need to ask themselves. None of these questions have an exact answer, so investors typically find themselves trying to guess.

Sometimes taking a step back from the excitement provides enough answers for someone to make a better decision.

First, we should take a look at whether it is possible to even happen. The short answer is that yes, it could happen. There is however a break-up fee of $175,000,000 involved that the acquiring company would likely have to absorb. Does that make an outside deal cost prohibitive? Likely it doesn’t in my opinion. While the sum involved is substantial, the market cap of these companies has gone down by more than that amount since the merger was announced, and it represents about 20% of the proposed subscriber revenue for one of these companies in 2007. More simply stated think of it as the subscriber revenue for 1 quarter. That begins to put the value of the break-up fee into perspective.

If CBS were to express interest in acquiring satellite radio company “A”, they would approach that company’s board to negotiate. The board of Company “A” would then consider the CBS offer in comparison to the benefits of a merged satellite radio company, while also considering the likelihood for merger approval. There are many moving parts, but in the end, if CBS had a strong enough desire, a deal could happen.

Now, we need to consider what about these companies would be attractive to a company such as CBS? There are many things that could be attractive, but the biggest factor is “TOP LINE” growth. Sirius and XM have TOP LINE growth. Typically TOP LINE growth is required to see healthy BOTTOM LINE growth happen. A healthy blend of growth is most desirable.

Both TOP LINE and BOTTOM LINE growth are useful in determining the financial strength of a company, but they demonstrate differing aspects of a company. These types of growth are not interchangeable. BOTTOM LINE is more of a measure of how efficient a company is with its spending and operating costs and how effectively it has been controlling total costs. TOP LINE growth is an indicator of how effective a company is at generating sales and does not take into consideration operating efficiencies which could have a dramatic impact on the bottom line.

Terrestrial radio has started to become more stagnant at the TOP LINE. By contrast, satellite radio is a growing sector with the deals and structure in place to continue to grow on the TOP LINE. Terrestrial radio powerhouses have become very good cost cutters, and are effective at the BOTTOM LINE. This was necessitated by the influx of competition from satellite, internet, cell phones, and MP3 players. The existence of these competitors has made terrestrial radio powerhouses become more efficient.

Thus, in theory, you would be acquiring a medium for TOP LINE GROWTH while being able to maintain your BOTTOM LINE efficiencies. Such a deal could make great economic sense.

Now the tricky part comes into play. Which company is more attractive, or is getting both better? Likely, there would be the same issues that are being bandied about now if a company such as CBS were to try to acquire both. The path of least resistance is likely to go after one. Which is more attractive? Well, XM has a lower market cap, but the enterprise value is what comes into play. According to Yahoo, the EV of Sirius is 5.09 Billion, and XM is 4.79 Billion. Thus, XM is less expensive by $300,000,000. Now you need to consider brand awareness, content contracts, OEM contracts, current market share, future market share, debt load, cash on hand, cash flow, and many other items. In the end, a company such as CBS would have to weigh out all of these items to find the better value, and then tack on $175,000,000 and see if it is still a better value. Arguments of “attractiveness”’ can be made for each company. This piece is not about which is better, merely what the exercise would be to arrive at a potential decision. These are questions that investors who are considering a move in this sector should ask themselves to determine the proper play, or whether or not a play even exists.

One logical question is if you have terrestrial stations, why buy a satellite radio company. The answer is simple yet complex. Think about the ability to deploy sample satellite content on HD radio. Think about the ability to advertise a premium subscription based product on free radio. Think about the ability to broaden the footprint of terrestrial shows via satellite. Think of the ability to advertise on both platforms. Think of the ability to appeal to any consumer, rather than specific niches and price points. There are many reasons a terrestrial radio company would want to get into the satellite business.

Simply stated, an already perplexing situation has had a new element added. That element could come into play at any time, and investors need to be cognoscente of this. The popular belief prior to today was that there would be little action aside from the arbitrage spread with Sirius and XM until the DOJ and FCC are close to a decision (something most people feel is months away). With this new information, investors now have new items to consider.

The point of this piece is not to propagate the rumor of today, but rather to get you the investor to think more deeply into the issues at hand as you consider your investment decisions. Sometimes that requires us to step back and observe an issue from another angle. Looking at the possibilities is free. Not knowing about them can cost you. Stay informed, and think about things like this from all sides.

Labels: buyout, cbs radio, sirius, xm

4/17/2007 10:58:00 PM

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WCS Challenges Sirius Backseat TV

April 17, 2007

If you have followed this sector for any length of time, it will come as no surprise that WCS is challenging Sirius new Backseat TV initiative. WCS, like the NAB has constantly challenged pretty much anything to do with satellite radio over the years with the exception of the period where XM was going to buy the WCS spectrum.

The WCS filing with the FCC can be viewed HERE

In a nutshell, WCS questions whether or not such services are permitted under the license issued to Sirius.

Labels: sirius, sirius backseat tv, wcs

4/17/2007 09:45:00 PM

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Sinatra Show To Debut April 19th On Sirius

April 17, 2007

Labels: content, sinatra, sirius

4/17/2007 01:28:00 PM

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Press Split on Merger Opinion

April 17, 2007

Labels: merger, senate hearing, sirius, xm

4/17/2007 01:10:00 PM

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Rehr Delivers Keynote Speech At NAB2007 - And Yes, He Mentions The Merger

April 17, 2007

REHR DELIVERS OPENING KEYNOTE ADDRESS AT NAB2007

WASHINGTON, DC -- NAB President and CEO David K. Rehr delivered the opening keynote address at NAB2007 in Las Vegas today. Below is a transcript of his prepared remarks.

Thank you and good morning.

Radio and TV broadcasters and our network partners implicitly understand the power of images.

Radio reporter Herb Morrison covered the explosion of the luxury airship, the Hindenburg when it burst into flames on May 6, 1937, in Lakehurst, New Jersey. His broadcast created a powerful image in the minds of the radio audience. You can hear the compassion and horror in More-is-son's voice. Let's listen.

Television, of course, also gives us powerful and indelible images, like these unforgettable events in history. These are moments we'll never forget.

Today, I want to look beyond the power of images to the power of words — exemplified by these great statesmen.

As we have just heard, words have consequences.

The words that we use in our business also have consequences. These words are critical to how we redefine our issues and our identity as we proceed into our digital future.

And that's what I want to discuss today.

But before I look forward to what we must do in the future, let me give a quick summary of what the NAB has accomplished over the past year.

You can call last year Phase 1.

It was a transition and it was successful.

For one thing, it was a year of listening — for the organization and for me personally. I spent much of the year listening to what you said our strengths are what our challenges are. I listened to your hopes for this business and, frankly, your fears.

I tried to be visible.

I tried to be everywhere, as you can see from this map. And where I couldn't get, other NAB executives went. And no matter where I traveled, I tried to spread the energy and excitement I feel for this business that is reinventing itself.

Last year also marked a transition in our attitude and approach toward advocacy, which is a much more active word than "lobbying." As you may know, the word lobbying comes from those who stood in the lobby of the Willard Hotel in Washington, D.C. in the 19th century, waiting for members of Congress to come see them.

Ladies and gentlemen, today we can't wait. If we simply wait and react, it's often too late. Instead, we have to anticipate.

In the past year we have implemented many changes at NAB to signal to Capitol Hill, the Federal Communications Commission, and others that this organization is going to be more aggressive.

It will be forward-looking. We will lead, not follow.

I asked the NAB staff, "How can we do this better?" I asked many of you the same question. I asked our friends on the Hill. We took a hard-eyed look at our standing in Congress.

As a result, one of the things we did is beef up our government advocacy team with strong, bi-partisan hiring. We are set to do battle. But we can not do it alone.

Over the last year, one of the goals of NAB has been to work more closely with our partners on issues of concern to all broadcasters.

We are working closely with groups like the Television Advertising Bureau, the Radio Advertising Bureau, the HD Alliance and the Radio and Television News Directors Association, among many others.

But most especially, we must have a close working relationship with our network partners. ION Media Networks, Univision Communications, and The Walt Disney Company representatives serve on our Board of Directors. And Preston Padden of the Walt Disney Company serves on our executive committee.

And now the big news:

Today, I am very pleased to announce that NBC has joined our association.

I would like to thank NBC President & CEO Jeff Zucker, Executive Vice President and General Counsel Rick Cotton, and President of NBC's Television Stations and Network Operations, Jay Ireland. Jay is with us today, and Jay, I want to thank you for this commitment. We appreciate your support and confidence, and we look forward to working together on behalf of all broadcasters. Jay, please stand and be recognized.

Yes, last year marked a transition, a first step, a rethinking not only of our brand but of our business. We began working to insure that our branding and our messaging was consistent.

In order to advance our agenda, we want to make sure that everything we do, everything we say – we say and do with an eye toward the Congress. And to help us speak more consistently, more compellingly, more positively, we created a new marketing communications group and a new media relations team. I believe we have our internal house in order for the next phase.

Phase II.

Phase II takes us a step further.

Phase II involves how NAB frames issues, defines words, and defines ourselves. In our businesses we understand the power of images very well. We also understand how to use words that paint the right mental pictures for our audiences. But we must apply that method to ourselves, and how we describe our business.

Words have consequences.

And we need to be more astute choosing the words that describe us and our positions on the issues. We need to choose words that advance our cause — not words that are inherently self-defeating, confusing, defensive, or simply outdated. The words we use, ladies and gentlemen, matter.

Now why, am I making such a big deal of this? Well, do we call the new, high-tech Mercedes S-Class car a horseless carriage? Of course not.

Broadcasting is using the equivalent of horseless carriage language in many ways. We have been using 20th Century language to define ourselves and our positions in a 21st Century world. And frankly, that has to change.

As an industry we need to rebrand over-the-air radio and television broadcasting to reflect the new digital industry that we are creating. A new vocabulary will make our industry and our issues even more understandable to policymakers and the public and more in harmony with the future.

Let me start with an example of success thanks to iBiquity radio.

When iBiquity used the term IBOC-In-Band On-Channel Radio-no one, well, perhaps a few of us, had a clue what it meant. Then iBiquity did something very smart. They changed IBOC to HD Radio. And suddenly a light bulb went on. People got it. Because they already knew what HDTV meant. That changed vocabulary is one reason, I believe, HD Radio is taking off.

iBiquity's change in terminology is an example of how we should all be thinking differently.

But let me give you an example of a television issue where I believe our word choice has put us at a disadvantage.

Multi-casting. Must-carry. What does it all mean?

With the transition to digital, broadcasters will be able to offer multiple streams of programming within their current television broadcast signal. The terms surrounding the issue are terms like "multicasting" and "must carry." When people hear about "multicasting," they assume that the cable companies have to cut their channels to accept ours.

Now we all know that's not true.

This is not a case where the pie is only so big and we want to eat the cable companies' slices. Through the magic of compression technology, we are making the pie bigger by adding extra slices, extra programming. The cable companies intend to strip out our new programming because we're in competition.

This is in effect "stripping."

And even though NAB holds its annual convention in Las Vegas every year, and what happens in Vegas stays in Vegas, let me assure you we are "anti-stripping." That's what's happening. They are ripping out our data, taking our valuable programming away from consumers. We're not asking to take someone else's property or programming. We're simply asking that the cable companies not take ours. We're simply asking that they do not take the anti-competitive step of stripping out our signals.

We have already begun to take this message to Congress and it has been well received.

Another term that works to our disadvantage is "down conversion." Now that sounds like it has something to do with duck feathers. Perhaps converting them to some kind of renewable energy source. But we know that's not what it means.

In the last Congress, draft legislation would've permitted cable operators to down convert or degrade a television broadcaster's high definition signal to a standard one. This would allow cable companies to carry their own channels in full HD while degrading our signals.

Let me describe what is really happening.

Consumers spend thousands of dollars on HD sets. Meanwhile, local broadcasters have already spent billions of dollars on the transition to digital. But what we have here is broadcast discrimination by the cable companies.

It is digital discrimination.

It is HD discrimination

And doesn't calling it discrimination make more sense than "down conversion?" The NAB will work on Capitol Hill to protect the investment of TV viewers and TV broadcasters alike. We will work to prevent the discrimination of high definition broadcast signals.

Then, we have the issue of what unfortunately has been called "performance rights."

Yes, people should be ALLOWED to perform! What good American is against denying rights?

We have civil rights. We have human rights. We have property rights. We have a whole Bill of Rights in the Constitution. But performance rights?

This is not about a right.

It's about a wrong that the record companies are seeking to perpetuate.

Radio has long played the record companies' music at no charge to them, the artist, or the listener... and in return the record labels and the artists have received free promotion of their products.

Free music for free promotion.

This arrangement has been mutually beneficial to radio, the record labels and the artists. Radio airplay continues to be the driving force behind music sales in this country. But now... the record labels want the government to impose a tax on radio stations for playing their artists' music.

Imagine the brazen greed it takes for the record companies to expect us to pay them for the honor of marketing and promoting their artists' music. It would make much more sense for us to charge them for our promotional efforts.

We will advocate that Congress oppose this levy on the market. If successful, it would be a government imposed performance tax. And we will fight it with everything we have.

This next clip is Mel Karmazin, familiar to some of you as the CEO of Sirius satellite radio, testifying before Congress recently. As you will see, he is attempting to define moving from two companies to one company as a merger, not the duopoly to monopoly that it is.

And on this point, Mel and I agree.

This merger will not be approved.

No matter how much Mr. Karmazin and everyone else at Sirius and XM use the word, it is not a merger they seek. It is a monopoly. It is a government sanctioned monopoly.

Now some of you might not be aware I am an economist by training. I ask you, when has a monopoly ever served the interests of the consumer?

In 1997, when the FCC authorized two nationwide satellite radio operators, it specifically prohibited them from merging. The bad business decisions of XM and Sirius -- should not be rewarded with a government bailout in the form of a monopoly.

This certainly would not be in the consumer's benefit.

It will be a huge consumer headache because the companies use two different technologies which are not compatible with each other. Like beta and VHS. No, this is not about the consumer. It is not about advancing technology. It is about lining the pockets of financiers and corporate executives.

A monopoly is a monopoly is a monopoly, and we at NAB will continue to adamantly oppose it.

Ladies and gentlemen, here's the big picture: we need to reframe and rebrand not only those issues but perceptions about the broadcasting business itself.

To be honest, we, at the NAB, don't yet have all the answers.

But I do know that terminology like "free-over-the-air broadcasting" has become a bit clunky and perhaps outdated. I do know that terms like "terrestrial radio" are meaningless at best.

I was up on Capitol Hill recently and one of the hearing witnesses used that very term.

A congressman said, "Terrestrial radio? As opposed to extraterrestrial?" Terrestrial radio sounds like it either involves aliens or is something from a bygone time - which we are not.

Internet radio sounds like the future. Wireless sounds like the future. Digital television sounds like the future. High def sounds like the future. YouTube, Google, iBiquity sound like the future.

What does "free over-the-air broadcasting" sound like? I think you know.

We were wireless before it was hot, but we are captives of the language of decades gone by. The language of our past is confusing and perhaps obsolete. We need to update and clarify. We need to reframe and rebrand.

That is with one exception.

One word that is admittedly old-fashioned, yet continues to have power.

The word is local.

It's a word that policymakers immediately understand and definitely appreciate. In this day when society is homogenized and globalized with international corporations, local broadcasters are the only means to keep people and communities together and informed.

The NAB right now has a team working on finding the best words to define us and take us into the future. This will be a long and continuing effort. But, we need your help. We need your ideas. We need your self-discipline, so that we all speak the same language.

We need you to change the way you think and communicate about your business-in your marketing and in your public affairs efforts.

With the emergence of digital radio and digital TV we have an ideal opportunity to do just that.

As the broadcast business reinvents itself technologically, we must also reinvent our identity. We should draw on the best of the past, and redefine it for the future.

And my pledge to you today is this: the NAB is committed to redefining this business, so that perceptions will match our progress.

Broadcasting is being reborn – and is becoming a new business for a new age with a great future.

Thank you very much.

Labels: hd radio, merger, nab, sirius, xm

4/17/2007 09:07:00 AM

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Some Companies Have Already Married Sirius and XM

April 16, 2007

New SelectRadio(R) Software First to Bring Sirius and XM Radio Channels Together on Mobile Phones


LAS VEGAS, Apr 16, 2007 (BUSINESS WIRE) -- Today, a new version of SelectRadio software was introduced that lets users enjoy more than 160 channels of Sirius and XM Radio virtually anywhere, anytime with their Windows Mobile wireless handheld phone or PDA. SelectRadio software users can also see "what's playing" on any of the available satellite radio channels and set up the patent-pending HyperScan(TM) feature to automatically seek or skip artists to match their personal tastes.

"Consumer interest in content for their mobile devices is accelerating and SelectRadio's advancement of making satellite radio available for cell phones is a solid step forward for both the consumer and the satellite radio companies. In fact, the variety of content being offered by SelectRadio will likely contribute to the expansion of appeal for this mobile audio content," said David Van Dyke, president, Bridge Ratings.

The new SelectRadio software version also expands free content offerings across the spectrum of more than 5,000 music, news, talk and weather channels available through the software's easy-to-navigate interface. For example, SelectRadio has added a dedicated screen of presets for over 80 of the top financial news podcasts as selected by StreetIQ.com (FCON, Trade ).

"We are thrilled to help bring consumers one-click mobile access to the best financial podcasts from the thousands that we review each month. With SelectRadio software's new StreetIQ.com presets, users get hassle-free access to the freshest episodes of our top-rated programs - it doesn't get any easier to stay up to date," said Stephen Malaster, founder of StreetIQ.com.

SelectRadio software has also expanded the number of BBC content choices by more than 25 percent with the addition of on-demand programs from the BBC World Service. Users can quickly access the new content additions via dedicated touchscreens of presets for AccuRadio, BBC, radioio, Shoutcast, Sirius (SIRI, Trade ), StreetIQ.com and XM Radio (XMSR, Trade ), or create personalized groups of channels and podcasts from any of the many music, news, sports, and talk content choices displayed in the local directory. Users also can enter or import a list of favorite podcasts (from programs such as iTunes, Juice/iPodder or sites such as Digg.com) to take advantage of the one-click access to the freshest episodes without the hassles of downloading.

Access to either Sirius Internet Radio or XM Radio Online channels requires an account, which may be available free to existing radio subscribers or is available separately from XM for $7.99/mo. ( http://xmro.xmradio.com/xstream/index.jsp ) and from Sirius for $12.95/mo (https://home.sirius.com/webCUWI/NewSir1.aspx). SelectRadio also supports subscribers of the Soundpass commercial-free versions of the radioio channels. All of the other channels and podcast programs available from the latest SelectRadio software version are free and do not require a subscription.

The new version 3.5 of SelectRadio software is compatible with a wider variety of handheld phone models and PDAs such as the Treo 700 series, the UTStarcom 6700, HP hw65/69xx, HTC Universal, Hermes and others with Microsoft Windows* Mobile WM 2003SE/WM5.0 PPC or Phone Edition operating systems.

For live listening, SelectRadio software requires a network connection via either the handheld wireless GPRS/EDGE, EVDO, or WiFi connection or through the USB ActiveSync connection to the desktop. SelectRadio software is priced at $25 for a device-specific license. Customers using licensed copies of earlier SelectRadio versions can upgrade the same device to v3.5 for free. A free 10-day fully functional trial version is available for download directly to compatible mobile devices prior to purchase at www.selectradio.com .

All brands and trademarks are the property of their respective owners.

SOURCE: SelectRadio


PR Works Inc.
Anne Price, 602-840-6495
anne@prworksonline.com

Labels: cell phones, select radio, sirius, xm

4/16/2007 10:33:00 PM

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NAB Lobbys Congress Via New Reports

April 13, 2007

The NAB is on the pace of creating a new report every two weeks it seems. After previous reports and lobbying efforts, this one almost went under the radar, and was not accompanied by as much fanfare as the first reports. Whether this is a change in strategy or not is unknown, but the reports are now available to view.

The first report is the Napoli Report authored by Philip M. Napoli.

Napoli takes stances that by now will be familiar to SSG readers.

He first tries to define the competitive landscape

He then addresses three components of the marketplace....specifically the "Upstream Content Market", The "Downstream Content Market", and the "Audience Market"

In his position, he defines the "Upsteream Content Market" as the buyers of national content such as Sirius and XM. He states that if a merger were allowed that Sirius and XM would have a monopoly and thus the content providers and talent would have less negotiating power. the framework of his statements sound plausible, but they rely on the reader to ignore several key items:

1. National Talent is not exclusive to XM. For the Napoli stance to hold water, readers would have to believe that simulcasting on terrestrial radio does not exist, and talent such as Rush Limbaugh, Michael savage, Sean Hannity, etc. are not broadcast on terrestrial radio.

2. Readers would also have to set aside the fact that many radio groups exist in several markets, and in fact, many act as a "cooperative" by allowing other networks to broadcast a feed of a particular show.

3. The reader also has to virtually ignore what radio is mostly made up of.......music channels. I can assure you that "Let It Be" by the Beatles is the same on terrestrial, I-Pods, internet or satellite.

Napoli then discusses the "Downstream Content Market" where the sellers are providers such ass Sirius and XM, and consumers are the buyers. Napoli wants this segment to carry a narrow definition to support his stance. Her feels that the competitive landscape should be limited to services that are mobile. He also feels that satellite radio differs from other mobile service in many ways, and that these other mobile services are not substitutable, but rather complimentary from satellite radio.

Well, this is interesting. How much is new here. It is obvious by even a casual observer that the method of delivery differs between the various services. It also stands to reason that consumers will utilize more than one type of service or more than one delivery method. This also seems to be the first time that complimentary has been added into the stance by the NAB. It seems that perhaps they are getting a bit closer to the word competition.

Napoli then gets to the "Audience Market" where he calls the audience the advertisers that buy ads on radio. Napoli insinuates that there is very little competition between terrestrial radio and satellite radio on this front. How he arrives at this conclusion is interesting. He states that satellite gets most of it's revenue from subscriptions, and terrestrial gets most of its revenue from advertising dollars. HMMMM.....That is part of the point of satellite radio. Consumers can choose a free service and get advertising, or a subscription service and have less advertising. further, there was a substantial dent in ad revenue for terrestrial radio when Howard Stern left for Sirius. Mel Karmazin has stated that he is working towards ad revenue being 10% of overall revenue. At $1,000,000,000 of revenue, that would mean $100,000,000 from advertising. That is a substantial amount of money, and believe me when I say that both terrestrial and satellite compete every day for ad dollars.

All told, the Napoli report is well written, but once again, it is a document written to support a specific side of the issue. This is obvious as you read through the report. The reader has to ignore many aspects of the sector that we already know exist. The reader has to ignore the $200,000,000 in revenue terrestrial radio collected for the internet side of their business in 2006. The reader has to ignore that there are radio companies that own stations across the country. The reader has to ignore the fact that terrestrial radio carries many shows with a national presence.

The second piece from the NAB this week came in the form of a letter from James C. Miller III. In which he categorizes the proposed merger as a "Two-Down-To-One" situation. Again, this is something that has been floated by the NAB since the beginning, and again, it requires the reader to suspend the belief that terrestrial radio, cell phones, internet radio, and I-Pods are not competing for the ears of the consumer. All one has to do is boil this down to the roots of the issue, and you arrive that all of these types of companies carry a common goal.......Have consumers listen to content provided by their company.

This merger has many facets to consider, and many debates and arguments to hear. In the end, it is the mission of the DOJ and FCC to consider all sides and render a decision. If you are a reader of SSG I highly suggest that you let your opinions be known as well. readers can click on the banner ad to the right and voice their opinion.

Labels: merger, miller, nab, napoli, sirius, xm

4/13/2007 10:14:00 PM

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Bear Stearns Note

April 13, 2007

Peck noted the following after the DOJ second request and the Imus situation:

Report excerpts:

DOJ Second Request as Expected; Imus in Play?

Bear Stearns - 13 April 2007

· Second Request, as Expected.

XM and Sirius disclosed that they had received the "Second Request" from the Department of Justice. While this request for additional information was expected, the DOJ/FTC exercise significant restraint in issuing second requests. Between 1998 and 2005, according to the "Announcement of Federal Trade Commission Chairman Deborah Platt Majoras On Reforms to the Merger Review Process" dated February 16, 2006, the agencies issued second requests at an annual rate of between 2% and 4.1% of the total number of reportable transactions. From 1998 to 2005, the annual percentage of second request investigations by the FTC that resulted in some type of enforcement action (that includes transactions that resulted in consent decree or restructuring as well as a very small percentage that were challenged) ranged from 44% to 78%.
· Imus on Satellite Radio?

Business Week reported that CBS fired Don Imus after some of his recent comments raised a furor. Time Magazine once named Imus, who was aired on 61 radio stations, as one of the 25 Most Influential People in America, and he was a member of the National Broadcaster Hall of Fame. We think satellite radio is one of the options that would be available to Imus.

· Compensation May be Limited.

We think that the compensation levels for Imus may be significantly smaller than Stern's. The Business Week report stated that Imus contributed about $15 million in annual revenues to CBS. Howard Stern, on the other hand, accounted for an estimated $95 million in annual revenues and about $50 million in EBITDA. While Stern was paid the equivalent of 5x Revenue contribution for the 5-year contract, we believe he got a premium because (i) he could "make or break" the business model, and (ii) the economic/competitive environment was different then.

Labels: bear stearns, doj, imus, merger, sirius, xm

4/13/2007 10:10:00 AM

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Goldman Issues Report On Satellite Radio

April 13, 2007

Mark Wienkes of Goldman Sachs issued a report regarding the satellite radio sector.

Report Excerpts:

Slowing gross adds...growing churn.

We are lowering our 2007 subscriber estimates below company targets for Sirius owing to continued slower subscriber growth as retail demand weakens. Industry net additions first fell n a year-over-year basis in second-quarter 2006 and accelerated through the balance of 2006. We expect the full year 2007 net additions to decline again versus 2006 for both operators. Our estimates contemplate greater gross OEM net additions year over year versus fewer retail net adds set against a backdrop of increasing churn.

Valuations likely to remain under pressure.

Satellite radio fundamentals remain challenged and, in our view, will face speed bumps near term before entering a two- to three-year OEM-driven window of opportunity to solidify a position in consumer-supported media. With consensus forecasts still too high and merger uncertainty, we think XM’s and Sirius’ stock price will remain under pressure with increased risk to the downside - especially as many large investors sit out the binary merger situation.

Uncertainty of merger benefits and approval.

As we have stated, merging platforms could deliver significant operational, financial, and strategic benefits, but remains unlikely to pass muster with the FCC, DOJ, and investors under current conditions. Further, we question how much of the cited pro consumer benefits cannot be attained by simply playing nice.

Investment recomendations.

We still prefer XM as the better investment in the satellite radio space given its OEM alignment and lower cost structure set against a discount valuation relative to Sirius. That said, with a fixed exchange ratio tied to SIRI, we are not optimistic that the shares will appreciate, given our belief Sirius' fundamentals will deteriorate and disappoint in 2007 as XM’s did in 2006, with net add growth set to fall and churn rise.

Lowering price targets for XMSR and SIRI. Our 12-month price targets are now $12.75 for XMSR (Neutral), from $14, and $2.50 for SIRI (Sell), from $2.75.

Labels: goldman sachs, merger, sirius, xm

4/13/2007 10:04:00 AM

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E! Gets Sirius

April 10, 2007

E! Entertainment Television and SIRIUS Satellite Radio Launch New Entertainment Call-In Show: 'YO On E!'

Live daily show focused on celebrities, pop culture and gossip on E! Entertainment Radio launches only on SIRIUS

NEW YORK, April 10 /PRNewswire-FirstCall/ -- SIRIUS Satellite Radio (Nasdaq: SIRI - News) and E! Entertainment Television today announced that YO on E!, a new live entertainment radio call-in show hosted by star Miami DJ Michael Yo, launched Monday, April 9th on SIRIUS' E! Entertainment Radio. Fast-paced, interactive and slightly irreverent, YO on E! broadcasts live from E!'s Los Angeles studios Monday - Friday from 4:00 - 7:00 pm ET on E! Entertainment Radio, SIRIUS channel 107, and rebroadcasts Saturday and Sunday at 11:00 am ET.

Source: SIRIUS Satellite Radio; E! Entertainment Television

Labels: e, entertainment, sirius

4/10/2007 01:10:00 PM

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Sirius Q1 2007 Conference Call Scheduled

April 10, 2007

SIRIUS Satellite Radio to Announce 1Q 2007 Financial and Operating Results on May 1

Company to Webcast Earnings Call for Investors and Media

NEW YORK, April 10 /PRNewswire-FirstCall/ -- SIRIUS Satellite Radio (Nasdaq: SIRI - News) today announced that it plans to release 1Q 2007 financial and operating results on May 1, 2007.

SIRIUS also plans to hold a conference call at 8:00 am ET to discuss these results. Investors and the press can listen to the conference call via the company's website, http://www.sirius.com, and on its satellite radio service by tuning to SIRIUS Channel 122.

Source: SIRIUS Satellite Radio

A replay of the call will be available on the company's website.

Labels: conference call, q1 2007, sirius

4/10/2007 01:07:00 PM

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Cramer On Satellite

April 9, 2007

Love him or hate him, Cramer always has an opinion. He spent months being down on satellite and speaking of a merger. He got his wish, but now feels the hurdles are too high.

What Cramer said:

XM Satellie Radio (XMSR - Cramer's Take - Stockpickr): "Very problematic. ... I wanted the two to merge, but the FCC [Federal Communications Commission] is making it very difficult. The hope for Sirius (SIRI - Cramer's Take - Stockpickr) is that XM goes bankrupt. ... The FCC and Congress have made this deal too difficult. I want to SellSellSell XM Satellite."

Labels: cramer, merger, sirius, xm

4/09/2007 09:56:00 PM

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SSG Report - Competition

April 6, 2007

SSG Report – Competition

In opening I want to make a few statements. This is a simple report with simple theories and concepts that can be verified with relative ease and common sense. I purposely developed the report in this manner because all to often people get hung up in debate over minute details and the bigger picture gets lost in the shuffle. The purpose of this report is to outline what I feel are the competitive natures of companies, industries, and sectors that all have a common goal. It may well be that my opinions are not shared with some contributors to SSG, and as always, they have the latitude to formulate and publish their opinion as well.

Much is made about the proposed merger between Sirius and XM. What is known is that the competitive landscape needs to be defined. There are claims of vast competition, and claims of no competition. So what is the answer? Which group is correct?

To answer this question we need to first decide on a ROOT LEVEL what the industries, sectors and companies in the field are in business for. That is the most basic level of understanding whether competition exists.

TO MAKE MONEY

This is the very core of all of these companies. They all exist to make money. They all compete aggressively to make money. No one can deny that on this most basic level that these companies are all competitors.

Now that we have this established, we must narrow the field down a bit and determine what the product being offered is.

AUDIO INFORMATION AND ENTERTAINMENT

Once again, this is very basic. Audio programming at a consumable level. People want to hear informative and entertaining programming. All of the companies compete aggressively to fill the consumer demand. Again, no one can deny that all of the companies discussed compete in this aspect.

It is now that we see some separation in how the companies compete. In simple terms, different companies have chosen different paths to be able to offer consumers audio entertainment and information. The differing paths each have their positives and negatives, but in the end, the path involved ties directly to the desire to deliver a similar product.

TERRESTRIAL RADIO PATH

This is a long standing and well established path. The costs to take this path involve buying radio stations, and broadcasting the content. There are no subsidies that have to be paid and the proliferation of equipment that is capable of receiving the broadcast signal is massive. Every car and home have equipment to receive the content, and there is no charge to the consumer to receive the content. Additionally, federal law affords this path access to music for free, meaning that no royalties are paid for songs played.

Terrestrial radio has a limited range. In many cases, owners buy several stations in multiple markets to expand their business. Additionally, these groups of owners get together to act as a single body on a national level via the National Association of Broadcasters. Talent is often syndicated to play in multiple markets, and station names and formats also cross over into many markets.

The terrestrial radio stations make money via advertising and syndication. In an effort to widen their footprint even further, terrestrial radio has entered into a global scale via the internet. This enables the broadcasts to be available anywhere in the world. Many stations also offer download services where listeners can download songs for a fee, or even download radio shows to listen to later.

Terrestrial radio is able to garner a national presence and compete on a national level via their membership in the NAB, via syndication of talent, and via the internet. Even on this level, there is competition with satellite radio for advertising dollars.

Terrestrial radio also makes efforts to compete with the I-Pods and MP3’s via a format known as JACK FM. This format is advertised as “An I-Pod on Shuffle”.

There is indeed a unique aspect to terrestrial radio in that the path they are on differs, but that does not mean that they are not competing with the other mediums. Remember, on the most basic level, they are competing for dollars via the delivery of a common product.

Within this sector there are many companies. These companies all compete with each other for market share and dollars.

There are those that argue that terrestrial radio does not get subscription dollars, and is therefore not competing with satellite. While it is true that there are no subscription dollars, terrestrial radio has a distinct set of advantages:

- They deliver local content.
- They do not pay for the music they play
- The penetration of equipment capable of receiving their content is everywhere.
- They do not have to manufacture, subsidize, or distribute the hardware capable of receiving their content.
- They are well established
- They are currently expanding their reach though HD programming, which promises CD quality.

While many do not see HD radio as mature yet, they should consider these statements offered by David Rehr of the NAB:

“And HD Radio brings expanded program offerings – and less interference. More than 1,000 HD radio stations are already on the air, available to 75 percent of the population. Thousands more will be going digital soon. Like their digital television counterparts, HD radio broadcasters can also offer multiple program streams. More than 350 stations are doing just that – rolling out additional channels with new music formats, local information and local creative content.”

“We at the NAB are working to accelerate the number of HD receivers in the marketplace, to increase the diffusion of this technology throughout the nation. In fact, it is a top priority of the NAB Radio Board of Directors to make this amazing technology commonplace.”

They are doing just that. BMW is now installing HD radios, and other manufacturers are already following suit. Even Wal Mart, the worlds largest retailer is now on board with HD radio, announcing in the past month that they will retail hardware.

Clearly terrestrial radio stations want people to carry a certain belief with regards to the proposed Sirius and XM merger. They want you to act as if syndication does not exist, as if there are not station owners that span many markets, as if programming is not common, as if they are they are like your next door neighbor. However, realistically they are not only planning on expansion…..they are already doing it. More comments from Rehr:

“Another benefit of digital technology is our ability to move content from one platform to multi-platform distribution – to expand our reach. Multi-platform generally means broadcast programs delivered on something other than the TV set or the radio. Not at the expense of our core business – but in addition to all that we do.What makes multi-platform strategies attractive is having more convenient access to our audiences – such as radio on cell phones, and TV on laptops.”

“More than 8,000 radio stations have Web sites, and many of these are being used as portals to stream their stations' audio. Radio stations earned more than $200 million dollars in revenues last year from online offerings alone.”

“Who are the newer competitors? On the television side, in addition to cable and satellite and the Internet, we now have Video on Demand, interactive TV, time-shifting, place-shifting, and much more. On the radio side, we have satellite radio, Internet radio, iPODs, other MP3 players, cell phones and others. How will we compete?Our vision is a broadcast signal on all of these platforms, and on any gadgets yet to be invented. Broadcast signals will not only enhance the experience for the viewer or listener – they will also give the manufacturers that include us an advantage over competitors who do not.This is already happening in radio. Motorola's I-Radio is merging the cell phone, the car radio and the MP3 player. FM adaptors for iPods are in the marketplace. It is no accident that Microsoft has included an FM tuner in its just-launched portable media player “Zune.”Broadcast signals on all devices. That’s our future.”

These statements were delivered by David Rehr only 6 months ago.

Thus, it is reasonable to conclude that although there are unique factors to terrestrial radio, that it is indeed competitive with SDARS on both a local and a national level. Rehr himself states that internet radio represented $200,000,000 in revenues last year, and he clearly indicates that this is just the beginning.

I-POD and MP3 PATH

This path is mostly about delivering to the consumer a permanent copy of content that can be stored on a device and played on demand. The business model differs, but again, the basic and root goal is to make money by delivering entertaining and informational audio content to the consumer.

There is really no advertising on this platform to speak of. True, some pod-casts, etc have advertising, and the websites where songs are downloaded also have adverting. The money is made on the sale of hardware, and in some cases, the distribution of content.

Many download services charge by the song, and also have a subscription. At this point there is even a crossover into the cell phone arena with AT&T announcing a 1 year unlimited subscription to Napster with the purchase of one of their cell phones.

This facet of the competition has unique aspects like the others. A simple MP3 player is capable of storing and organizing thousands of songs. This allows a user to pick their favorites and own a copy of them. The disadvantage of this type of device is that most lack a method of discovery for new songs. Users of these devices need to discover new content via another means.

One advantage is that the auto manufacturers are recognizing very quickly that consumers want the ability to use a non-OEM device in their cars. Aux. Inputs are becoming a standard feature. At this point, it is the OEM driving this via consumer demand. Toshiba is not subsidizing the installation of Aux. Jacks. The Aux jack is a standard size that can be utilized across most platforms and brands.

Additionally, there are scads of aftermarket companies that develop, manufacture , and retail products to make automobile use of these device easy. Again, the vast majority of these devices are not subsidized by the manufacturers in this sector.

Satellite radio, as well as terrestrial radio have recognized that this method is viable. Both XM and Sirius have developed hardware that acts in a very similar fashion to an MP3 player. At this point, such devices either carry an RIAA bounty, or are being litigated by the RIAA.

Auto manufactures are getting in on this segment as well. Chrysler has introduced a stereo system with a hard drive capable of developing and organizing playlists. Clearly consumer demand in this segment is huge. Over 90,000,000 I-PODS have been sold, and the term Pod-cast has become a virtual part of our everyday language.

CELL PHONES

This technology is booming. Each carrier has full lines of devices that are capable of acting as a phone as well as an MP3 player. There are deals with internet radio, deals with terrestrial radio, deals with download services, and that is just the beginning.

Perhaps out of the entire group of competition, the cell phone companies can boast the most capability. A cell phone is a very common device these days. At this point even many children can be seen with a Nokia appendage growing from the side of their head.

A device capable of letting you jam the night away, and make or receive calls is a pretty compelling device. Cell companies have the advantage of an already well established network of customers, and massive revenues which give them extreme marketing power. A day does not go by without just about every person in this country being exposed to a cell phone in one manner or another. In fact, the most recent ad campaigns for cell carriers focus more on audio or video capability than they do the core business of being a cell phone company.

For anyone to insinuate that this medium is not competitive is really not paying attention to what is happening, and how fast it can happen. One only needs to look at the PDA. Devices such as PDA’s have now become part of the cell phone.

This category is perhaps the toughest to define in terms of competition. Many informational and entertainment audio delivery companies are seeking out partnerships in the cell sector, while at the same time, competing against other services. By example, both Sirius and XM have deals with cell carriers, but those same carriers als provide other content. Thus, you are competing against them in one area, and aligning yourself with them in another.

INTERNET RADIO

The participation in this sector is massive. Nearly all of the competitors listed by Sirius and XM participate in internet radio, and on top of that there are thousand more who broadcast over the internet as their primary means.

The internet is global. One only has to do a bit of exploring to find scores of stations in any genre you can imagine.

Internet radio has come a long way over the past few years, and new technology is being developed constantly. One new company, Slacker, enables users to mark favorites, and ban songs from their playlist. Slacker boasts that users can create their own virtual radio station. Even further, they plan are launching a device capable of getting into the car and receiving updates via satellite. Slacker states that they are “A New Kind Of satellite Radio”. Slacker has a free advertising based service, as well as a subscription based service that is advertising free. Additionally, they are also offering a download service for $1.00 per song.

SUMMARY

What we have here are companies, industries and sectors that all have the exact same goals in mind.

These companies, industries and sectors all have some distinct methods by which they want to obtain those goals. They also recognize that while they believe their method is good, and gives them some distinct advantages, that the other methods also have merit. Thus they also bleed into those delivery methods as well.

In the end, they are all trying to satisfy the consumer in the best manner possible, because a happy consumer is a repeat customer. The consumer has many choices. Do they want to own the song? Hear the song without advertising? Pay a fee? Listen for free? Stream it on the net? Stream it on their cell phone? Or use a combination of these methods?

A satellite radio merger does not mean that a monopoly is created. It does not mean that prices will rise. It does not mean that hardware will cease to be innovative. With the numerous competitors in the landscape, the competition is fierce. This level of competition and consumer choices demand that all companies, industries and sectors make efforts to be on the cutting edge. The key here is that a compelling product be offered, both in terms of content and hardware, and the existence of all of these forms of audio information and entertainment delivery dictate that none of these can exercise monopoly power.

This issue rests in the hands of the Department of Justice and the Federal Communications Commission. They have many factors to weigh in coming to a conclusion, but the unavoidable fact is that all of the companies, industries and sectors have COMMON ROOT GOALS. It is the method of obtaining that goal that differentiates them, but even that line is getting blurred each day.

Labels: competition, merger, sirius, xm

4/07/2007 10:49:00 PM

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