The Fun Part Is Over, Now The Real Work On The XM-Sirius Merger Begins
from the questions-aplenty dept
Now that the dust is starting to settle a bit around the XM-Sirius merger announcement, a closer look is being taken at the merger’s chances of succeeding. As we’ve noted, the biggest hurdle to overcome will be government approval from the FCC and the Department of Justice. While some see a shifting antitrust environment giving the satellite radio companies some hope with the DOJ, the FCC’s rejection of a DirecTV-Echostar merger four years ago, as well as comments by chairman Kevin Martin, make it clear the companies have quite a fight ahead of them. The key is convincing the FCC that the companies compete in a market that’s bigger than just themselves — that is, they don’t just compete with each other, but with other types of audio content. It’s a valid point, but one the FCC rejected in the satellite TV merger. However, they could receive some unintended support from an unlikely source: terrestrial radio broadcasters. Quickly after XM and Sirius announced their merger plans, the National Association of Broadcasters (predictably) issued a statement saying what a bad idea it was, just the latest in its long and storied history of trying to protect its turf from a relatively new competitive threat. If the NAB is so concerned about the effect of satellite radio on its terrestrial member stations and broadcasters, doesn’t that illustrate that it sees XM and Sirius as competition?
If the satellite companies can overcome that hurdle (and that’s a big if, particularly given the way Martin and the FCC generally seem confused about competition), other questions remain. Martin has also said that they must be able to show that “consumers would clearly be better off with both more choice and affordable prices” if the merger was approved. This plays into the issue of competition: the key task for a combined XM-Sirius would be to grow its subscriber base and convince people to spend their money on its services, rather than other types of audio content. It can’t do that by raising its prices and offering consumers a less valuable product when, as one article says, users already see the service’s monthly fees not in terms of dollars, but as “the equivalent of 13 iTunes downloads.” Again, the competition these companies face is much bigger than just the competition between the two of them as standalone entities, so it’s unlikely that combining them will result in drastically increased prices and a worse product for consumers. The other potential problem? As always with Martin involved, it’s indecency. The FCC doesn’t currently have the power to regulate programming on satellite radio, and Martin could insist the companies “voluntarily” comply to some oversight or federal standards as a condition of merger approval. XM and Sirius appear to recognize this, though, as they’ve already mentioned a desire to let customers pick channels on an a-la-carte basis of sort — hitting on one of Martin’s favorite pet ideas.