XM-Sirius Merger Made Simple: One Is Always Less Than Two
Sunday, November 11, 2007
Sometime soon, when federal regulators decide whether to allow a merger of the nation's two satellite radio services, XM and Sirius, the government will have to take a stand: Would combining the two companies unfairly diminish consumer choice or, as the companies argue, turn losing operations into a profitable service with lower prices?
But while lawyers at the Justice Department and the Federal Communications Commission fight through a thicket of filings, the questions for listeners are different: Would a single satellite radio company produce more or less interesting and entertaining content? Would the menu of music, news, sports, comedy and talk programming get longer or shorter -- and at what price? Wouldn't reducing the satellite field to one company lead inevitably to service cuts and price increases?
Think about it: Can you name one example of a new consumer technology that was guaranteed to a single provider and still served customers well? (Don't everyone say "cable TV" at once.)
In 1997, when the feds gave the two companies the green light to launch satellites that would each transmit more than a hundred channels of programming across the country, the idea was to provide a far higher quality of music, news and other programming in categories AM and FM radio simply ignored. Satellite would serve up the blues, bluegrass, jazz, classical, dance music, comedy and dozens of other genres that barely exist on commercial radio.
But by the time XM fired up its $13-a-month service in 2001, a year before Sirius's start, the soundscape of the nation had begun to change. Today, the competition is no longer just old-fashioned, over-the-air radio stations, which cling to music formats that have barely changed in decades, but a whole raft of new media that let listeners create their own stations: iPods, Internet radio, podcasts, music blogs, music delivered to cellphones, and the broadcast industry's response to all of that, HD radio, which digitally inserts additional stations on the same frequency as existing ones.
The merger decision turns on this question of competition: When the feds approved satellite radio, they banned XM and Sirius from ever merging, because competition would protect the public from high prices and assure that the companies seek top-quality programming. But the two companies now argue that they no longer exist alone in a satellite silo; rather, they say they are content providers just like Yahoo, ABC, Clear Channel or The Washington Post, creating material that can then be consumed through all manner of technologies.
That's a fascinating question both legally and socially. Will Americans in a decade or two recognize any useful distinction among different media, or will broadcast, Web, print and phone all merge into one stream of information and entertainment?
XM and Sirius, which now reach about 13 percent of U.S. households, want to branch out beyond sending programming from a satellite into a radio. They want to deliver movies and other video to in-car DVD players. They own a transmission system that can serve cars, businesses and homes, but more important, they are already among the biggest producers of audio entertainment, and they want to sell that content wherever they can.
Sirius Chief Executive Mel Karmazin and XM Chairman Gary Parsons argue that since they have morphed into content providers competing against many different media companies, there is no longer any rationale for preventing a merger. The companies no longer compete mainly against each other and need size and financial prowess to take on Apple, Hollywood, TV networks and the infinite number of music sources on the Web.
But that same argument works against a merger, too, perhaps more persuasively.
The past decade has provided convincing evidence that corporate consolidation in radio and other media leads to dramatic cost-cutting, which results in less local programming and lower quality.
Why wouldn't the same happen in satellite radio?