Sirius announced a few months ago that they were purchasing XM Satellite Radio. To me, it does sound like there would be some DOJ issues with getting this approved. This would mean one satellite radio provider - what kind of choice does that give me as a consumer? However, I can also speculate that other consumer devices, like the iPod, will get into satellite radio, in which case the competition is there to approve this merger.
However, my gut tells me that this merger will get approved. This is more of a bet on Mel Karmazin than anything else. My point being, wouldn't Mel have anticipated this kind of scrutiny? Wouldn't he have already known that he could get this approved before announcing it? If he didn't do this due diligence, then shame on him. He will have lost a lot of credibility with me.
My last point to this is if the radio companies are putting up a fuss over the merger and claiming it to be anti-competitive, doesn't this action validate that terrestrial radio feels as if they are competitors to satellite? Wouldn't this hurt their cause? You would think so.
I am long 5,000 shares of SIRI. Maybe I am wrong, but I've got to figure Mel knows what he is doing here. Only time will tell.
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Todd, I do a bit of consulting with the NAB on this issue. While time will tell if Karmazin knows what he's doing, I'm not buying his predictions of streamlined costs, increased choice for consumers. There are sure to be hidden costs and confusion if XM and Sirius attempt to merge two business philosophies and two different technologies which have never been interoperable. According to the engineering firm of Meintel, Sgrignoli & Wallace (MSW), a merger between XM and Sirius would not allow existing satellite radio customers to have access to more programs than they have now without buying a new satellite radio. Also, the two satellite systems cannot be expanded to fit in more channels beyond their current level without incurring loss of audio quality so much for better programming choices.
This new monopoly would pose a threat to terrestrial radio, specifically local broadcasters, due to the national reach of satellite radio. They can compete against broadcasters in local markets, yet these broadcasters cannot compete nationally.
There are definitely monopoly concerns here. It wasn't that long ago a similar merger between satellite television companies DirecTV and EchoStar was rejected by the FCC because of anti-competitive concerns. That merger was probably less problematic than XM and Sirius, as the relevant market included cable as a competitor. XM and Sirius have no other satellite radio competitors.
Thanks.
Thanks for the feedback, Nolan. I agree with your points here. My point being, I am betting that Mel Karmazin knew he could get this approved before he announced the merger, that's all. There are a lot of reasons why it may be anti-competitive, but I think Mel and his team have thought this through. If not, he will look pretty silly in the end - we'll see!
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