Satellite Radio Merger Rumors Gather Steam, Again
from the less-talk-more-merger dept
Despite coming off their strongest year yet, the performance of satellite radio companies Sirius and XM still isn't quite good enough, and the companies continue to be the focus of merger talks. As we've wondered before, though, would a merger really help? The fundamental problem the companies face is that the economics of a satellite-based business are quite difficult, given the high cost of infrastructure and large initial outlay required. This is something that won't change, regardless of any merger. And despite execs from both companies saying a tieup could make sense, plenty of obstacles remain, including regulatory issues. All that aside, though, would merging really help all that much? The common thinking is that the companies would be able to combine their overlapping music programming into one, and eliminate redundancies. But it's hard to believe that operating so many music channels is really a significant cost for either company -- the real programming cost is in the millions they're throwing at celebrity hosts like Howard Stern and Oprah Winfrey, and to get exclusive deals for major sports leagues. Perhaps the thought is that by reducing the amount of competition in the marketplace, they could eventually lower the cost of these deals, but it seems awfully optimistic to think they'd be able to do this, and significantly cut costs, very quickly. Particularly when you consider they're not competing only against each other for these deals, but against terrestrial radio and other media as well.