Will the merger get FCC approval, and what will that mean for radio listeners? Read our impressions of the big news for satellite radio fans.
The Sirius and XM satellite radio merger left more questions than answers. While the financial terms of the deal were laid out in press releases, specific details about how content will be handled, and which hardware devices will support the newly merged network remain up in the air, if not in outer space.
Content
We believe that, in the near term, at least, the two companies will pipe their content together to both network's satellites, with a reshuffling of channels on each, so that existing devices would support the new content. Sirius has Howard Stern and Martha Stewart, XM has Oprah and Opie and Anthony. Unless there are some problematic licensing issues, we see the new network offering all of the above. XM has recently begun playing more commercials than its former competitor, so we're curious, but not hopeful, about whether the combined network will follow this model. Also, Opie and Anthony have begun broadcasting a watered-down version of the first few hours of their show on syndicated terrestrial networks. We're curious about whether more personalities from the new network will partner with traditional radio stations. With Howard Stern and Eminem each hosting their own Sirius channels, we doubt we'll see more crossover, and perhaps the larger subscriber base would be reason enough to pull Opie and Anthony off FM stations once again.
Hardware
Eventually, it will be in the company's interest to force the obsolescence of one or the other type of receiver, rather than support two different technologies. Both networks use different audio codecs for their channels, so the hardware is technically incompatible. Sirius has been selling "lifetime" subscription packages, which are based on the life of the hardware, so forcing obsolescence on those customers could be problematic. However, XM has had more success with its portable models, which are into their second and third generations, and are built by a variety of reputable manufacturers. Sirius' portable units have so far relied on pre-recording content, or wearing a large, hardware-specific headset/antenna. Forcing obsolescence would generate new hardware sales, at the cost of customer satisfaction.
The monopoly question
The original broadcast licenses granted to Sirius and XM forbid their merging under monopoly rules. We don't believe the merged company would be a monopoly, for the same reason that cable television is not a monopoly. Though you may only have access to one cable provider in your area, the provider does not hold a monopoly on broadcast television, as you could opt for satellite television or over-the-air broadcasts. For the same reason, though XM and Sirius are the sole providers of satellite radio, consumers have plenty of audio broadcast options, such as FM, AM, or the newer high-def radio broadcasts. Kevin Martin, the FCC chief, has been equivocal on the potential merger, reiterating the original license's stipulation that "there is a prohibition on one entity owning both of these busines," but refusing to rule out a hearing to change the current license structure. The FCC rejected a similar merger in 2002 between DirecTV and DISH networks satellite television broadcasters.
The bottom line
Surprisingly, we think the merger will be good for consumers. The danger with satellite radio, for consumers, was not a monopoly, but rather that the network for which you own hardware would crumble, leaving you with a worthless lifetime agreement. Satellite radio already has competition from terrestrial radio, and offers a better product at an admittedly higher cost. With the most to lose, traditional radio networks, fronted by the National Association of Broadcasters, are already on the offensive. On its Web site, the NAB demonizes the new company as "an industry that makes Howard Stern its poster child." We think that, in the same way that HBO offers an adult alternative to traditional broadcast, satellite offers the same.
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