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Sat-Radio Firms to Wed; Who's Next?

After a year or so of suspense, the Justice Department gave its blessing yesterday to the proposed merger of satellite-radio broadcasters Sirius and XM.

The move did not surprise too many people; many pundits whose opinions I respect applauded it.

So why do I still have a bad feeling about this, over a year after I first noted my objections here and in print?

It's true that the two companies have not had the most vigorous, constructive sort of competition as separate entities. After they had aligned their initially divergent subscription rates, they put most of their efforts into locking up exclusive deals with sources of content--the NFL, Major League Baseball, Howard Stern, Playboy, etc.--and car manufacturers. Many XM and Sirius subscribers probably saw their choice of service made for them by these factors.

A merged company--once it got past the usual post-merger turmoil--would at least eliminate the whose-side-are-you-on indecision forced by these exclusives.

(Note that I am not one of these indecisive souls. As somebody who takes a subway to work and doesn't drive all that much, I am one of the least likely sat-radio customers in America.)

No, what concerns me is the DoJ's rationale--that it was OK for these two rivals to merge, even after promising not to when they first got their licenses, because their real competition was the wider universe of FM, AM, HD Radio and Web radio. (Set aside, for a moment, the threats that Web radio faces from the recording industry's greed and that HD Radio faces from its own lackluster marketing.)

Redefining the market to "prove" that real competition will be left after a merger is one of the oldest tricks in the monopolist's book. Accepting this logic invites any number of other corporate combinations. For example, why not let rival satellite-TV broadcasters DirecTV and Dish Network merge, since the real competition for each consists of cable TV and Web video? That's already been tried once--and who knows, it just might work on the second try.

So I worry about what companies will be next to try to cash the blank check the DoJ appears to have written.

How do you feel about this? If you're an XM or Sirius subscriber, are you optimistic or hesitant?

By Rob Pegoraro  |  March 25, 2008; 11:16 AM ET
Categories:  Music  
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Comments

I am a Sirius subscriber and am fairly happy with my choice. It would be nice to get MLB as well as NFL, however. I have listened to XM on airplanes and rental cars, and prefer Sirius' DJs and music choices. I will be interested to see how they mix services and pricing schemes. I bought a "lifetime" subscription and would be very upset if they started to cut down on my choices or put a surcharge on new services.

Posted by: WA2CHI | March 25, 2008 12:07 PM | Report abuse

I'm a Sirius subscriber and am very excited about the merger. I'm looking at buying a new GM car this summer, and was disappointed that I could only get XM installed. Why should I have to buy services from two different companies to get a full complement of content? I don't have to subscribe to Cox to get NBC and Comcast to get CBS... As for the DiretTV/Echostar comparison it's not really relevant. There are large parts of the country where if I want TV and movies those two are the only game in town. I don't know of anywhere in the US where XM and Sirius are the only sources for music and talk radio.

Posted by: eric | March 25, 2008 12:13 PM | Report abuse

I think the answer to why the Justice Deparment is leaning this way is because of the question nearly everyone I know is inclined to ask.

Who cares what happens to satellite radio? The entire concept of someone else picking my music and force feeding it to me is a dinosaur. It's like every local station I never liked wrapped into one, and I have to pay for the privilage.

Between the Web and portable mp3s, I get exactly what I want to hear, when I want to hear it, the way I want to hear it. Among most of my friends and colleagues, the entire radio universe could implode tomorrow and it wouldn't make much of a dent in our lives.

Posted by: aarons | March 25, 2008 12:20 PM | Report abuse

I'm still struggling to understand why the process of vetting this merger was so protracted when multi-billion dollar oil company mergers were rubber-stamped with barely an eyebrow lifted. Oil company mergers directly affect consumers through reduced competition. Don't believe me? Pull up to a station. Satellite's merger is small beer in comparison.

Posted by: Srpinpgh | March 25, 2008 12:25 PM | Report abuse

I think this is a great move by the DoJ to approve the merger. Its about time! Now all we need is the FCC to approve.
Terrestrial radio has been getting worse and worse every year. You would hear 15 minutes of music within one hour and 45 minutes of commercials, plus the music played is very repetetive, which is why I have been listening only to Sirius for the past 2 years.
By having this option it makes any music fan happy, including myself.

Posted by: DoubleA | March 25, 2008 12:29 PM | Report abuse

While I agree with your assertion that we should be wary of this merger, I, for one, am now likely to purchase a satellite radio. As a transplanted Houstonian, I suffer from a lack of access to my home town sports teams. Now, with SiriX (or XMrius)I can get my Astros, Rockets and Texans all in one place.

I still think, however, that the DOJ should go after the NFL for its exclusive deal with DirecTV on the NFL Sunday Ticket. It's patently unfair (and I think a violation of antitrust laws, at the least) that just about everything they use for their product is public-funded (stadiums, airwaves, etc.) but they limit the public that can view their product. But I'm probably oversimplifying.

Posted by: BobT | March 25, 2008 12:31 PM | Report abuse

As an XM subscriber, I am generally happy with the non-stop classic and opera channels 110&112. The receiver is at home through my whole-house stereo system, and sounds very good, almost like playing your own CDs. A good friend has Sirius and enjoys Met opera and show tunes. What will happen to programming should the two services merge is anyones guess, but it should end up being the best of both. What comes with your new car would cease to be an issue.

Posted by: Bill | March 25, 2008 12:32 PM | Report abuse

Rob - The reason why Direct and Echostar could not merge and XM/Siruis can is actually in writing from the DOJ. the merger of two sattelliete TV companies represents a de facto monopoly to people who live remotely enough to not have 1) access to cable and 2) access to local broadcasts through old fashioned rabbit ears. Alternatively, for radio, there is at least one station on FM/AM anywhere you go. We think about this in terms of being DC-centric where all the options are plentiful, but these types of decisions don't affect us much as they do people with very limited options. The DOJ saw the Echostar/Direct deal as limiting super-remote people to one option where radio is not.

Posted by: E2DAV | March 25, 2008 12:41 PM | Report abuse

The FCC is correct that the relevant market for Satellite radio includes broadcast radio and webcasts. After all, if Satellite didn't compete against terrestrial radio, why would broadcasters fight so hard against the merger?

Posted by: Ookpik | March 25, 2008 12:46 PM | Report abuse

I have been a Sirius subscriber for 3 years. I have also listened to, and enjoyed, XM's content. I am excited, yet hesitant about the merger. If the combined company puts out the same quality content (programming and sound quality) with the combined quantity of content, this will be a great merger. I am concerned that less popular channels I really like (Underground Garage and Sirius Disorder) will be eliminated, or they will not wisely use their combined bandwidth (remember, the receivers out there now can only get one signal or the other), resulting in poor audio quality.

Posted by: Brad | March 25, 2008 12:54 PM | Report abuse

"DOJ Approves Sirius/XM Merger"

"The statement also dismisses claims by HD Radio that a merged Sirius and XM would exclude competing technology from car stereos and other equipment."

http://tinyurl.com/32og6s

"Lack of interoperable radio key to XM+Sirius merger approval"

"In an unusually sideways argument from the US Justice Dept. this afternoon, the fact that both XM and Sirius satellite radio services have been unable to create an interoperable radio device for the foreseeable future, has been put forth as evidence that a merger between the two entities -- which the DoJ approved this afternoon -- would not reduce competition between them."

http://tinyurl.com/2ajgq6

iBiquity is trying to weasel its way into Satrad interoperable receivers, but it looks like iBiquity is out-of-luck.

Posted by: PocketRadio | March 25, 2008 1:11 PM | Report abuse

I'm a little scared they will go with the XM Blues station, rather than the Sirius Blues station; sirius's is much better.

Overall though, I'm good with it.

Did you know that Clear Channel is demanding a precondition that the merged entity give HALF of their bandwidth to commercial radio? I hope they realize that they are the ones that created a market for sat radio with their lousy programming.

I bring that up because even if the merger costs me a little more a year, it is a small price to pay to avoid Clear Channel, and the rest of the pathetic commercial radio world.

Posted by: Matt | March 25, 2008 1:57 PM | Report abuse

As an XM subscriber, I'm definitely concerned about what the merger will bring. Supposedly XM has generally broader playlists, while Sirius playlists are "tighter" (i.e. more popular tunes & repetition). Reasonable people might prefer either option, but the merger will eliminate that choice.

On the other hand, it could be great if they can eventually eliminate the duplicative stations & use the combined bandwidth to expand into more genres and improve the degraded audio on many stations that are overly-compressed. It's too bad the hardware can't accomodate that right now.

Also, will the HQ be in New York? It looks like Sirius will be the "top dog" in this merger. I've always liked the XM brand better, so it would be a shame to see them reduced to just a DC outpost of Mel Karmazin's empire.

Posted by: BPM | March 25, 2008 4:52 PM | Report abuse

I am a subscriber to XM for one vehicle and Sirius in my other vehicle. I initially thought the merger to be a good idea, but now am rather skeptical about it.
Which channels will survive? XM has a very good DJ lineup (even if it's not live) on their decades channels while Sirius is more of a jukebox. If I want that, I'll turn on my MP3 player. I want radio that is fun and interesting to listen to. Not just for the music, but for the presentation of that music. That's what made radio great in the 1960's and 1970's. Many of the DJ's and the commercials were worth listening to because of the creativity that was invested in the presentation.

Which formats will we lose? XM has a very mellow Christian AC format channel while Sirius offers a more upbeat Christian CHR format channel. Both feature Gospel channels but neither one gives the subscriber the opportunity to listen to Christian Rock on the satellite. Which one will survive? One, the other or both?

XM and Sirius satellites have different coverage in hilly areas. In the northeast, Sirius has a better signal in areas where the valleys are narrow and the mountains are high. One of the routes I regularly drive has excellent coverage with Sirius, but XM is spotty at best and gives the listener the urge to turn it off and tune in the local FM station.

As for the DoJ decision, it appears that they are out to lunch. The coverage area of the most powerful FM or AM station in the world cannot compete with a satellite's continent-wide coverage. The only thing that even comes close is shortwave, but it's not very consistent coverage year-round.
All of these terrestrial broadcasters are bound to fewer frequencies and thus fewer programming choices in any given geographical area.
The DoJ has lost touch with reality if it thinks that Am and FM are competition to satellite radio.

Posted by: A radio programmer | March 25, 2008 5:14 PM | Report abuse

I have been a sirius subscriber for 3years & also listen to Xm on a regularbasis at work. They both have there pro's & con's so I'm not sure how I feel about the merger I guess it all depends on what happens with the stations is the real concern because I enjoy the selection but I also like the stations that xm has to offer. It sounds good but I learned a long time ago If it sounds too good to be true it probably is. Kepping my fingers crossed for the best outcome.

Posted by: thousandproof | March 25, 2008 8:32 PM | Report abuse

I have been a sirius subscriber for 3years & also listen to Xm on a regularbasis at work. They both have there pro's & con's so I'm not sure how I feel about the merger I guess it all depends on what happens with the stations is the real concern. It sounds good but I learned a long time ago If it sounds too good to be true it probably is. Kepping my fingers crossed for the best outcome.

Posted by: sam | March 25, 2008 8:32 PM | Report abuse

I'm a Sirius subscriber for 3-4 years now and I'm happy with the merger because I can now listen to MLB. The NFL package was what drove my initial purchase. I've heard XM on airplanes and during my trial period in a new Honda and found that I found the music selection and DJs on Sirius to be superior. It seemed as though there were no DJs on XM. That would be my primary concern in the merger, the loss of a voice in the studio.

Posted by: cj | March 26, 2008 8:45 AM | Report abuse

I have XM, and I don't quite understand the people who say "oh, but I have my iPod". Do you seriously have EVERY SINGLE SONG that you would EVER want to hear?

One of the channels I listen to regularly is (regrettably) called Fred, it plays "new wave / alternative" music, primarily from the 80s. I hear lots of songs that I don't have in MP3 format (some of them I own on vinyl), so it's nice to hear them in the car. I also listen to a couple of the comedy channels - who needs to actually own a record from a stand-up comedian anyway? And unlike some of the other commenters, I don't mind the lack of DJs on the channels I listen to. Unless they actually have an in-depth knowledge of the music they're playing, they're just so much added noise.

To the topic at hand - I'm a little worried about what channels might be considered redundant and eliminated. I'm waiting to hear about the supposed a la carte plans to see how they work and if one of them could save me money and still give me the channels I want.

Posted by: LarryMac | March 26, 2008 10:05 AM | Report abuse

Letting this merger happen is a bad idea and a worse precedent. Satellite radio does NOT compete with terrestrial radio except in very large cities. XM and Sirius subscribers WILL see decrease in listening options, increase in price, and decrease in commercial-free listening. Plus this raises the barrier to entry from would-be competition to astronomically high levels. They've got all the contracts, all the infrastructure and all the writeoffs they can take as part of the merger that will prevent anyone from entering the market ever.

A really, REALLY bad idea.

Posted by: JJ | March 26, 2008 11:18 AM | Report abuse

I have had XM for 5 years now and I love it. I have 3 receivers. One is with my receiver in the living room, one in the bed room on powered speakers and my son has the other. I only care about not being price gouged and not buying new equipment. I don't spend enough time in the car to bother with it, and I listen to my i-pod at work. I don't listen to on-line radio and have given up on commercial radio. In the car I listen to a local college station. So, yes there is other competition for satellite radio.

Posted by: gus | March 26, 2008 3:11 PM | Report abuse

I'm an XM subscriber and am concerned, particularly about how they will define redundancy. I tried to get XM to answer that question; they stonewalled.

I would feel a bit better if the FCC required new satellite tuners to pick up all HD offerings. That would increase competition.

Posted by: Oscar | March 26, 2008 5:36 PM | Report abuse

Who cares, indeed? I realize this is a "tech" news section, but there are a few more serious issues of suspected "monopoly" buzzing about than this. It's about time. I PAY for this service and only welcome broader programming. Now, if you'll excuse me, I'm very busy with important issues of my own... .

Posted by: peterjoe | March 27, 2008 11:19 AM | Report abuse

When the FCC originally auctioned off the two radio frequencies, they required both services to develop a common radio. Each vendor had a different modulation system, sort of like GSM and CDMA in the cell business. In the beginning a common radio was expensive. But we are long past the time when a common radio could have been designed at little or no extra cost. Both Sirius and XM ignored the directive and spent a bundle tying up auto manufacturers with exclusive agreements. We could have had a system where al a carte pricing would give anyone easy access to all sports and other services and in a competitive environment. Now the only way to get all sports on XM and Sirius is to duplicate the sports channels on each system. Some channels will have to go. Bloomberg already shares its channel with sports and C-Span got dumped by Sirius when they wouldn't agree to sharing their service. (XM still has C-Span). When Mel has to give up channels to make room for the services he has to duplicate, the new XM Sirius radio will be on the market in a New York minute. The FCC head is a lobbyist so he may miss all the fine points but the techies at the FCC see a merger where a monopoly will be granted and spectrum will be wasted because Mel ignored their common radio directive. Despite all the smoke about alternate technology, like IPods etc. there really is no way to compete with satellite radio in a car for sports and news. If Mel gets his monopoly you may get a few channels for "free" after a lower monthly charge, but the majority of the channels will begin to have commercials, and expect to pay a real premium for those sports channels. And what do you think Mel will pay the leagues when he's the only game in town?

Posted by: Sparks | March 28, 2008 1:18 AM | Report abuse

I have been an XM subscriber since they first launched. I joined for the music. I listen to MANY different channels (80s, bluegrass, xmcafe, fusion, straight ahead jazz, etc). I am concerned about the merged company trimming back on programming/channels.

I like listening to music I may not have in my own library, presented in a more or less random way - so I enjoy the radio format (as opposed to downloading all my music).

Posted by: JM | March 28, 2008 12:41 PM | Report abuse

I have a Sirius radio which I let service to expire.
My son has a car which has XM radio. Why should I SUBSCRIBE TO ANYTHING UNTIL THE fcc DECIDES WHAT IT WILL DO?

Posted by: david blauch | March 28, 2008 10:52 PM | Report abuse

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