Many heard that the Satellite Radio Providers Sirius and XM announced a merger today.

This merger has been rumored for sometime, just as the rumors of a possible Directv and Dish merger.

In both cases, the FCC has been very lukewarm to cold on the prospects (actually turning down the merger of D* and E* several years ago).

However, as has been noted, the climate has changed since the D*/E* merger was attempted with Baby Bells and IPTV entering the scene once dominated by cable.

You can bet that D* and E* will both be watching this one very closely to gauge the mood of the FCC - especially as Satellite Radio technically has no competitors - compared to DBS Satellite.

If approved, D* and E* would no doubt look for a way to do the same.

Even if the Sirius/XM merger is allowed, a stumbling block could arise if they wait too long and the climate changes again after the November 2008 elections.

Thus, the next few months could be interesting.

But since the Liberty/DirecTV deal has been before the FCC for a while now, (and the satellite radio deal hasn't been officially presented to the FCC yet) would the XM/Sirius merger jump ahead of it?

But since the Liberty/DirecTV deal has been before the FCC for a while now, (and the satellite radio deal hasn't been officially presented to the FCC yet) would the XM/Sirius merger jump ahead of it?

Nope.

They are talking up to 18 months to close on the XM Sirius deal.

However, they will look to queues of the way the wind is blowing on the XM Sirius deal along the way.

Think of it as test balloon.

Got it.

Although the XM-Sirius statement today hopes for far faster action "...Pending regulatory approval, the companies expect the transaction to be completed by the end of 2007."

I know that Liberty hopes to have gained control of DirecTV by 3Q 2007.

I wonder if Sirius-XM will be pressured to unbundle the sports programming (i.e. make the NFL/MLB/NBA/NASCAR/NHL a-la-carte) as a condition of their merger.

That would be great, George -- and would increase the a la carte pressure on cable/satellite/telco TV providers.

Got it.

Although the XM-Sirius statement today hopes for far faster action "...Pending regulatory approval, the companies expect the transaction to be completed by the end of 2007."


I've seen news stories with both 12 months and 18 months listed today....thus I went with the longer - as it still completes it prior to November 2008.

I agree it seems pretty crucial both get done before the 2008 election.

any idea of who's equipment will be used post merger?????

any idea of who's equipment will be used post merger?????

If I were betting I would say XM.

Personally, I don't understand why so much is being made of potential approval problems for an XM/Sirius merger. It's not like these companies have a huge subscriber base, or that they will be hurting smaller competing satellite radio providers. Satellite radio hasn't even been around long enough that this should be an issue.

Didn't one come out slightly before the other? The FCC/FTC didn't disallow that one from starting up because there wasn't competition, right?

I agree it seems pretty crucial both get done before the 2008 election.

Don't forget that there are Canadian regulatory hurdles as well.

Personally, I don't understand why so much is being made of potential approval problems for an XM/Sirius merger. It's not like these companies have a huge subscriber base, or that they will be hurting smaller competing satellite radio providers. Satellite radio hasn't even been around long enough that this should be an issue.right? (Snip)

Agree. They are also reportedly both money losers, making the merger a possible matter of survival.

The same arguments cannot be made in favor of a D*/E* merger.

any idea of who's equipment will be used post merger?????

one of the news stories mentioned that new hardware would be needed. in the meantime, they will try to figure out how to share programming for each service...

one of the news stories mentioned that new hardware would be needed. in the meantime, they will try to figure out how to share programming for each service...

A couple of stories have mentioned that engineers from both companies have been working for some time on a new technology both can share.

Personally, I don't understand why so much is being made of potential approval problems for an XM/Sirius merger. It's not like these companies have a huge subscriber base, or that they will be hurting smaller competing satellite radio providers. Satellite radio hasn't even been around long enough that this should be an issue.

Didn't one come out slightly before the other? The FCC/FTC didn't disallow that one from starting up because there wasn't competition, right?

FCC Chairman Martin’s initial statement— “The hurdle would be high, as the Commission originally prohibited one company from holding the only two satellite radio licenses.” He’ll be looking at #1, consumer choice and 2, “affordable prices.”

One of the best informed CEOs in the Communications Business who has said from day one that Satellite Radio's Business plan was flawed and they would never make money - and has continued to say it every quarter since Y2K says: “If it is approved, and I don’t think it will be, it would be one of the most anticonsumer mergers ever allowed in business. You don’t allow the only two players in a space to combine and own monopoly pricing power over consumers.”

And NAB EVP/Media Relations Dennis Wharton says “Given the government’s history of opposing monopolies, (the) NAB would be shocked if federal regulators permitted a merger of XM and Sirius.” He reminds the Commission that it “summarily rejected” the proposed merger of the only two satellite TV companies (DirecTV and Dish).

Wharton brings up the question of content on satellite — something FCC Commissioner Michael Copps and others will probably weigh in on. Wharton says “policymakers will have to weigh whether an industry that makes Howard Stern its poster child should be rewarded with a monopoly platform for offensive programming.”

So you really think this is a slam dunk and no big deal?

This is why D* and E* will watch every step on this because if it goes through, a DBS merger IS a cakewalk.

And let's not forget, that even with a merger, success is not guaranteed.

The 2 companies together would have about 14,000,000 Subs and $1.6B in revenue in 2006 - but the 2006 losses are expected to be a combined $1.7B between the two.

All this from 2 companies that told Wall Street and Investors they would break even at 4 Million Subs.

Radio Business Report 2/20/2007

RBR observation: Despite the report issued last Friday by Bear Stearns analyst Robert Peck that an XM-Sirius merger would "likely pass" FCC and antitrust approval, we beg to differ. The companies would need three yes votes on the FCC and we can't imagine how they would find one. And should any Commissioner dare to indicate their support, they would likely rethink that position after being called to Capitol Hill for a very public bi-partisan flogging. To be sure, Wall Street investors love the merger idea. Both companies are burning through cash at an astounding rate and are far off the financial projections of their original business plans. Merging is expected to save 3-7 billion by cutting overhead and being able to raise subscription rates. But just how are XM and Sirius going to make the case for any public benefit from merging the only two competitors in a field? We can only think of one - as a single company they would likely finally comply with the FCC rule which requires their receivers to be compatible with each other's satellite system.

EDIT: And that is exactly why D* and E* will use this as a test balloon. No one really expects it CAN pass. D* and E* have a much better argument for a merger than XM and Sirius.

So if it looks like XM and Sirius have a prayer, D* and E* will clearly be right behind them to the FCC Portals.

So, if the Sirius-XM merger is axed by the FCC, and one of the 2 companies folds after bankruptcy, what will the FCC do?

Today, I think the only way satellite radio will survive is if the 2 companies merge. I have 3 Sirius receivers, and I'd like to see the service continue.

On that basis, I hope the merger is allowed.

So, if the Sirius-XM merger is axed by the FCC, and one of the 2 companies folds after bankruptcy, what will the FCC do?


Ahh, but you are missing several important points in that question.

Bankruptcy wipes out all debt (also wipes out all lifetime subscriptions as well) as well as all shareholder value.

Just like Iridium Satellite Telephone, if you can pick up a company that cost around $6B to build for $25Million with no debt, its pretty easy to make a go at it (not to say XM or Sirius would go that cheap).

But regardless, remember this also has to be approved by the Justice Department as it would be a Monopoly.

And let's remember that US Air tried to merge with United and was turned down by the the Government right before 9/11 (and of course they were only 2 of the top 7 airlines at the time - not the only 2 of 2).

US Air did go bankrupt after that (of course the combined US Air / United would not have fared any better are United is still technically bankrupt).

In the words of Forrest Gump, S H.

That's why D* and E* will be watching this one like hawks.

Personally, I don't understand why so much is being made of potential approval problems for an XM/Sirius merger. It's not like these companies have a huge subscriber base, or that they will be hurting smaller competing satellite radio providers. Satellite radio hasn't even been around long enough that this should be an issue.
I agree, although I am curious as to the impact this will have on car radio.

I wish apple computer would buy XM. That way if hear a song that you like you can bookmark it download later from itunes store. Also ipods that can pick up the service anywhere how cool would that be.

I don't buy into the arguement that this limits consumer choice in any significant way. Most of these services utilize a car radio for the majority of subscribers. Well, guess what: Those radios can play standard radio broadcasts, CDs or tapes, can receive FM or line input MP3 player audio and newer units can access HD Radio services.

This isn't an issue like satellite TV, where some rural viewers may have a significant drop in programming choices. Satellite radio is a service on top of what is available to you in a vehicle - or even your home. If people don't like the programming choices or pricing, it's not a signifcant hardship to cancel the service.

Really, this isn't a monopoly issue. It's a broadcast license issue. The FCC is simply all in a huff about the two spectrum licenses ending up with one company. They need to grow up and realize this move would increase choice by allowing consumers to get all the programming from both providers instead of having to make compromises.

The only real consideration should be ensuring existing hardware can be used with the combine service.

Ahh, but you are missing several important points in that question.

Bankruptcy wipes out all debt (also wipes out all lifetime subscriptions as well) as well as all shareholder value.



That's why I added that if one of them folds. I'm thinking more of a Montgomery Ward type of bankruptcy where the company is liquidated, not reborn.

That's why I added that if one of them folds. I'm thinking more of a Montgomery Ward type of bankruptcy where the company is liquidated, not reborn.
Sorry to go off topic, but wasn't Montgomery Ward pretty much the first store to offer an actual store credit card? I think everyone from my parents' generation had one of those things...

A couple of stories have mentioned that engineers from both companies have been working for some time on a new technology both can share.


hey, wasn't one of the first stipulations in the fcc approving the licenses for xm and sirius that they had to make their hardware interchangeable? did this drop by the wayside over the past few years?

“If it is approved, and I don’t think it will be, it would be one of the most anticonsumer mergers ever allowed in business. You don’t allow the only two players in a space to combine and own monopoly pricing power over consumers.”

I don't understand this. Between the internet and over-the-air radio (and HD radio), radio offerings are just much, much too decentralized for this type of merger to be considered "anti-consumer." The only thing that would be anti-consumer is if both companies went belly-up and there was no satellite radio offering whatsoever.

In my eyes (and this is a sloppy hypothetical here), this would be like forbidding Company A and Company B from merging because they were the only two companies that produced plasma televisions. There is more to television than just plasma.

I guess it all depends on how narrowly you draw the pie. Maybe my hands-off libertarian approach is coloring my perception here.

That's why I added that if one of them folds. I'm thinking more of a Montgomery Ward type of bankruptcy where the company is liquidated, not reborn.

Again, as noted, just like Iridium, one will not go Monkey Wards style out.

I know someone who has lined up $1.5 Billion with a B and has been waiting for 1 of them to go under to scoop it up. In fact, Dr. Don used to work for him at one time. They had even offered to buy out Sirius debt intact for the last 2 years for $1B.

Just like Iridium, which was able to shed $6B worth of capital equipment costs in chapter 11 and was picked up for $25 Million, its then very hard not to make a go at it.

You don't have to worry about the a Monkey Wards type of liquidation.

hey, wasn't one of the first stipulations in the fcc approving the licenses for xm and sirius that they had to make their hardware interchangeable? did this drop by the wayside over the past few years?

re-read post #18

This isn't an issue like satellite TV, where some rural viewers may have a significant drop in programming choices. Satellite radio is a service on top of what is available to you in a vehicle - or even your home. If people don't like the programming choices or pricing, it's not a signifcant hardship to cancel the service.

Really, this isn't a monopoly issue. It's a broadcast license issue. The FCC is simply all in a huff about the two spectrum licenses ending up with one company. They need to grow up and realize this move would increase choice by allowing consumers to get all the programming from both providers instead of having to make compromises.

The only real consideration should be ensuring existing hardware can be used with the combine service.

You could argue the same thing for those rural listeners - just as what happened during the E* and D* merger talks.

Again, this is the only reason I put this thread in this section - E* and D* will be watching it for clues as to how far (if any) the climate has changed.

I think if the XM-Sirius proposal includes a hard a la carte stipulation, the merger will be approved by the FCC. The Commission could then use that as a cudgel to force a la carte on TV providers. Here's what Mel Karnazin had to say about that subject today....

A La Carte and the FCC
Multichannel News February 20, 2007

In a story today about the merger plans of XM and Sirius, MultiChannel News reported about a meeting Sirius CEO – who would become CEO of the merged satellite radio company – had with Sirius employees today.

Some of his comments spoke directly and indirectly about the future of a la carte in the cable/satellite/telco TV world. Here is an excerpt:

“…Karmazin also hinted that one way to achieve regulatory approval for the merger -- which many analysts believe will be almost impossible -- is by offering some form of a la carte programming.

He added that he has already met with all five Federal Communications Commission members, and their top priorities in evaluating whether the deal is in the public interest concern consumer choice and pricing.

‘Three of the five commissioners have said that what they would like to see -- and they would also like to see this in cable television -- is a service where the consumer can decide which of the channels they want to get if they’re going to be expected to pay for it,’ Karmazin said. “If somebody wants to have fewer choices, they’d like to see a service that we would have available to them with fewer channels and at a lower price’….”

http://www.multichannel.com/article/CA6417928.html?display=Breaking+News

You want to read the funny thing fredfa?

Check the Reuters Story on USA Today.com

http://www.usatoday.com/money/media/2007-02-20-xm-sirius-deal_x.htm?csp=34

.........

The deal would create a company with about $1.5 billion in 2006 revenue and bring together shows from shock-jock Stern, entertainer Winfrey, singer Bob Dylan, Major League Baseball and motivational guru Deepak Chopra.

Subscribers may eventually be able to pick the shows they prefer and pay a related monthly fee, much like cable TV.

First, though, the companies would have to supply their customers with technology that would allow them to tap into both services. Some analysts have expressed concerns that product and service development could suffer as executives faced regulatory scrutiny.

.................

When did BSwanni start writing for Reuters?

It was not the most insightful article by any means.

The NY Times certainly seems to feel HDTVF has a valid point:
The Business of Television
New Climate May Benefit Radio Deal
By Andrew Ross Sorkin The New York Times February 21, 2007

Mel Karmazin, the chief executive of Radio">Sirius Satellite Radio, made a lot of phone calls seeking advice before he entered into a merger deal with Radio">XM Satellite Radio on Monday.

Maybe he should have called Charles W. Ergen, the founder and chairman of EchoStar Communications.

Mr. Ergen could have given Mr. Karmazin an earful about his failed effort to merge EchoStar with DirecTV four years ago, a deal that seems eerily similar to the one Sirius and XM have proposed.

Will the government see things differently this time?

Michael K. Powell, the former chairman of the Federal Communications Commission who blocked the EchoStar-DirecTV deal, is not so sure.

“I do think it could get through, but I don’t think it’s going to be an easy one,” he said. “It’s going to be incumbent on the companies to demonstrate that the analysis in EchoStar-DirecTV is different.”

In opposing that deal, regulators — both from the F.C.C. and the Justice Department — argued the merger would create a monopoly. EchoStar and DirecTV, on the other hand, argued that the market should be defined more broadly than simply satellite television and should encompass cable television operators and telephone companies providing video over phone lines.

When Sirius and XM announced their merger on Monday, they made a similar argument — that their market is much bigger than just satellite radio.

“In addition to existing competition from free ‘over-the-air’ AM and FM radio as well as iPods and mobile phone streaming, satellite radio will face new challenges from the rapid growth of HD Radio, Internet radio and next generation wireless technologies,” the companies said.

There is no question that times have clearly changed: a decade ago, the argument for a Sirius-XM merger would have never had a chance.

Joel I. Klein, then the acting assistant attorney general in charge of the antitrust division, gave a speech to the radio industry 10 years ago this week, suggesting that merging terrestrial radio stations in the same market was “no different from a situation where all soft drink manufacturers would seek to merge and control 100 percent of that market. We wouldn’t walk away from such a merger — and if you like soft drinks I should think you wouldn’t want us to walk away — merely because there are lots of other beverages out there, such as milk, juice, beer, wine, et cetera.”

But the regulatory tone in Washington has changed. Inside Sirius and XM, executives are bullish on government approval.

In a conference call with analysts yesterday, Mr. Karmazin said that “I would not have gone to our board,” if he “didn’t think there was greater than a 50-50 chance of approval.” In fact, the deal’s timing was driven in part by a feeling that the current administration was more likely to let the deal through and that it needed to be done before that window closed.

The Justice Department’s surprising approval of Whirlpool’s acquisition of Maytag — a deal that created the nation’s largest manufacturer of appliances with more than 50 percent market share — has encouraged others to proceed with deals that might have seemed to pose regulatory problems.

But Sirius and XM should not necessarily take solace in the shifting attitude in Washington and the Whirlpool decision, some antitrust experts suggest, because the deal’s fate may be decided by the F.C.C., which issued two sets of satellite spectrum to Sirius and XM in order to create competition.

At the time, the F.C.C. defined free-to-air radio as a separate market from satellite because free-to-air radio, which included local programming like weather and traffic, was tightly regulated while satellite’s content would be unfettered.

“Howard Stern couldn’t do his current broadcast on radio,” said Mr. Powell, who had fined Mr. Stern several times for some of his lewd talk on terrestrial radio before his program moved to Sirius.

Mr. Powell said that in the end, the deal’s fate would lie in the evidence that both companies produce during the government’s review. He said that while EchoStar and DirecTV publicly talked up an assortment of competitors like cable and telephone, when the government got its hands on the companies’ documents about the way they internally defined their rivals, “it seemed that the only competitors who mattered were each other.”

Of course, perhaps the largest factor in their decision will be the precedent regulators want to set. “If the Federal Communications Commission grants a green light for this transaction, the brakes will be off for similar telecommunications industry hookups,” Carmi Levy, senior research analyst with Info-Tech Research Group, wrote to clients. If so, perhaps Mr. Ergen will get a second chance.

http://www.nytimes.com/2007/02/21/business/media/21radio.html?ref=media&pagewanted=print

The NY Times certainly seems to feel HDTVF has a valid point:


The last paragraph of the Story sums it up....


Of course, perhaps the largest factor in their decision will be the precedent regulators want to set. “If the Federal Communications Commission grants a green light for this transaction, the brakes will be off for similar telecommunications industry hookups,” Carmi Levy, senior research analyst with Info-Tech Research Group, wrote to clients. If so, perhaps Mr. Ergen will get a second chance.


and of course, even though I said it long before the Conference call, within hours of the deal being announced....as the story said


In fact, the deal’s timing was driven in part by a feeling that the current administration was more likely to let the deal through and that it needed to be done before that window closed.



So I guess this proves just as many have said, I am just a no nothing idiot who clearly doesnt get the way things work.

The articles notwithstanding, I think it is crazy to compare this to satellite behemoths merging. These are fledgling companies with relatively small subscriber bases, and a relatively new use of technology. They could merge their bandwidth and free up a bunch and give up one of their licenses for a second satellite company to emerge if one wanted to (although the business model is suspect).

The articles notwithstanding, I think it is crazy to compare this to satellite behemoths merging. These are fledgling companies with relatively small subscriber bases, and a relatively new use of technology. They could merge their bandwidth and free up a bunch and give up one of their licenses for a second satellite company to emerge if one wanted to (although the business model is suspect).

No way would they give up one of their licenses to merge. They need all the bandwidth they can get to do video and add traffic to more cities.

They could merge their bandwidth and free up a bunch and give up one of their licenses for a second satellite company to emerge if one wanted to (although the business model is suspect).


WRONG

One analyst offered a simple solution during yesterday's conference call, but it nearly sent Karmazin and Parsons into cardiac arrest. Why not avoid the whole FCC issue by combining the businesses and their subscriber bases, and turn in one of the satellite spectrum licenses? Oh, no! The satellite radio bosses said they couldn't do that. They need all of the spectrum from both companies so they can continue to serve the non-compatible receivers that each has in the marketplace (somehow they never mention that they have been ignoring the FCC requirement that their receivers be compatible) and to add video, data and other new services to make them more competitive with other media.