XM-Sirius merger wins Justice Dept. approval
This story was updated at 2 p.m. PDT with new information and again at 10:30 p.m. with the correct title for Mel Karmazin. He is the CEO of Sirius.
The proposed union of XM Satellite Radio and Sirius Satellite Radio won approval Monday from the U.S. Department of Justice, after more than a year of review.
Antitrust officials said they concluded that combining the only two satellite radio players would not "substantially lessen competition," beating back concerns raised by consumer groups and an intense lobbying campaign from broadcast radio operators.
"The evidence did not show that the merger would enable the parties to profitably increase prices to satellite radio customers for several reasons," the Justice Department said in a statement.
The proposed deal--an all-stock deal now valued at $5 billion--still awaits a decision from the Federal Communications Commission, which had warned that the companies had high hurdles to surmount before gaining approval.
That's because in 1997, the FCC adopted an order prohibiting such a merger when it would result in only one operator controlling all satellite radio spectrum. The commission has asked for comments from the public about whether to waive or modify that rule, and FCC Chairman Kevin Martin said last week that a decision is getting closer.
XM and Sirius shareholders approved the merger in November.
XM and Sirius issued a statement acknowledging the Justice Department's decision but did not immediately comment further.
The companies have argued in various regulatory venues over the past year that the deal would not result in increased prices for subscribers and that, in fact, it would actually produce more programming choices, such as options to buy themed bundles of channels that are cheaper than either company's existing packages. Sirius CEO Mel Karmazin argued that those changes would be possible in large part because of "efficiencies" gained through merging the companies.
Consumers would also, in theory, be able to hear programming that's specific to one service--such as Howard Stern on Sirius and Oprah on XM--without having to purchase a new radio, if the companies merge.
At the moment, accessing channels offered by both satellite radio providers--for instance, Howard Stern on Sirius or Oprah on XM--requires a separate $12.95 monthly subscription and receiver for each company. If the deal is approved, company executives have said subscribers will be able to access channels from both XM's and Sirius's lineups without purchasing new radios, and that prices for either service won't climb above the $12.95 rate currently charged.
Under a post-merger pricing plan revealed last summer, consumers would also have numerous other options, ranging from a 50-channel "a la carte" package costing $6.99 per month, to a 180-channel bundle of combined XM and Sirius offerings for $25.90 per month. But to subscribe to the new "a la carte" channel packages, consumers would have to buy new radio receivers capable of processing those requests, which would reportedly cost the same amount as existing receivers (ranging from about $50 to more than $200).
Consumer advocacy groups, such as the Consumers Union and the Consumer Federation of America, had questioned whether consumers will really be able to take advantage of those promised benefits without incurring new costs.
Christopher Murray, senior counsel to Consumers Union, told CNET News.com on Monday: "The result for consumers is likely to be higher prices, more advertising on pay radio, and fewer choices for programming. This is an unthinkable and disappointing result. Let's hope the FCC does a better job in reviewing this deal."
National Association of Broadcasters Executive Vice President Dennis Wharton said the organization was "astonished" that the Justice Department had signed off on the deal.
Monopoly or not?
One key question facing antitrust officials was whether a combined XM-Sirius entity would constitute a monopoly. The politically powerful National Association of Broadcasters and radio conglomerate Clear Channel Communications had argued that would be the case and that the deal should be thrown out. XM and Sirius contended that satellite radio should be viewed not in a market by itself, but in competition with traditional and Internet-based radio services.
In reaching its conclusion, the Justice Department sided with the satellite radio operators' interpretations. Because of the existence of "a variety of other sources of audio entertainment, including traditional AM/FM radio, HD Radio, MP3 players (e.g., iPods), and audio offerings delivered through wireless telephones," along with whatever "next generation" audio-delivering technology may emerge, the antitrust overseers said they found no evidence that the satellite radio operators would be tempted to raise prices.
The Justice Department also argued that there has never been "significant" competition among the satellite providers because "customers must acquire equipment that is specialized to the satellite radio service to which they subscribe, and which cannot receive the other provider's signal." Moreover, the companies have begun entering into long-term contracts with car manufacturers to provide their services, which means there's no evidence that there will be competition between the companies on that front "for many years," the Justice Department said.
More than 70 members of Congress from both political parties had also urged that the deal be shot down, arguing that it was contrary to the public interest. Democratic congressional leaders were quick to criticize the Justice Department's ruling on Monday and to vow more oversight.
"We believe the elimination of competition between XM and Sirius is contrary to antitrust law and the interests of consumers," Sen. Herb Kohl (D-Wis.), the chairman of the U.S. Senate's antitrust panel, said in a statement. "We urge that the FCC find the merger contrary to the public interest and exercise its authority to block it."
Rep. Edward Markey (D-Mass.), chairman of a House of Representatives telecommunications and Internet panel that oversees the FCC, urged the regulators, if they approve the deal, "to appropriately condition any such approval to ensure consumer welfare with respect to long-term service plans and pricing as well as equipment compatibility and pricing."
be offered more or fewer channels of preferred content (i.e., will
they eliminate channels I really like as they combine lineups)? Will
my subscription prices go up?
Does the elimination of 'choice' EVER end in a positive for the
consumer?
As far as the actual content goes, there is PLENTY of variety and competition within the realm of paid audio entertainment. Ask the television industry about their level of competition with companies that don't provide content over the air!
To me, a lack of competition should only be a concern within categories of content...not within categories of delivery modes.
both Howard Stern and Opie & Anthony will be available. My real
concern is for which hardware will be favored. Of course, we
should expect prices to increase (1 more channels & 2 no
competitive services)...
I bought satellite radio to drive across country 3 years ago and I couldn't name a radio station in the city I live in. I like to hear things that I would never find on one of those prepackaged stations on fm. When the general public finally figures out how good Satellite radio is they will begin an exodus that will finally cut the head off of the NAAB. Who knows, maybe in the aftermath we might get some decent stations back on am and fm. Music that we want to hear... not music they want us to listen to. Stuff thats not "JACKED" (LA STATION REFERENCE)
If getting the program offers that are currently available via separate subscriptions to each company mean that to get the "Premium package" will cost more- - - - I'm not so sure.
We all are seeing the later come to bear everyday. The FCC has mandated no more analog signals, the TV manufacturers have put a premium on most digital TV sets, the cable providers have put a premium on getting HD signals.... etc, etc, etc...
I had a dual subscription to XM AND to Sirius for several years. I just recently dropped Sirius due to the pending merger (and cost). Hopefully they will do the right thing and combine the services at the same price.
They took on their business model the wrong way from the start and thus cut each others throats and their own in the process.
The good news is this should usher in more customers for the merged service than both combined could have brought in. Auto makers won't care who they carry when they sell cars built with the feature. Consumers will have one choice to take satellite radio or not.
With this move I doubt we will ever see any real competition in this market space ever again. Costs for the merged company will go down, profits will go up. What impact that has on the consumer is up to the company.
I subscribed to Sirius solely for the NFL game coverage, and XM for cross country radio access + local traffic reports + weather.....
If the merger reduces channels or ups the price by very much at all they will go down as a niche that died.
I would love to see XM carry my local stations so I can hear them while out of town. The local content is really lacking for satellite radio.
As an XM subscriber, I'd like to have Sirius' NFL coverage to go with my XM MLB coverage, so I'm in favor of the merger even though I'll probably end up paying a little more with this proposed ala carte billing system.
I've seen both services' losses from the past few years and it concerns me that XM could go bankrupt and then I'll be out the dough. I'm hoping now I won't have to fear losing my service in the middle of my annual contract because the two shall be stronger and hopefully they'll figure out how to make money together.
And, like the high definition DVD format, it won't matter.
Once the analog TV bands are re-allocated for mobile use, getting music in your car or hand-held device via WIFI will eclipse all of these arguments.
Hang on.
This ride is about to get interesting.
They can do whatever they want behind their doors. If I don't like it, I'll let them know with my wallet.
a) NAFTA would increase U.S. jobs. We actually lost 3 million mfg jobs, and have a net trade deficit with Mex/Can of $1.5 trillion
b) There were weapons of WMD in Iraq. There was Duncan Hines frosted yellow cake from Niger?
c) Diebold voting machines were secure
So now we are going to believe the stooge bureaucrats? Who the heck signs their paychecks? Ha, ha, LMAO.
Combining two weak companies CAN create a viable single company, although it's not guaranteed. Of course, the easiest way to create a stronger combined company is to cut costs. One of the headquarters will be sold off and many of the executives will be let go. Customer service can be combined. (Yes, this means layoffs.) I don't know whether the two networks are compatible in terms of possibly sharing transmitters or back-end technology but if so, that would be another way to save money.
It's possible that the combined company will be forced into bankruptcy in a couple years anyway, but that might be a good thing. They could renegotiate some of those contracts (like Howard Stern's) to get their costs in line with their revenues.
The merger isn't a magic bullet but it does make it more likely that at least one satellite radio company will survive in the medium term.
It is like two sides in a war running out of bullets and then a third rival arrives on the scene. They really need to join forces so they can recover, but a merger is not the only way to accomplish this.
We'll see what the FCC does with these two. It is still a bit early to go out and buy that new XM radio for my car...
With yesterday's DOJ ruling the FCC will be compelled to deal with the inevitable and formulate a migration plan for XM's customers. It is pretty much clear that XM will go away. XM leases their satellite space in the 900 Mhz Band. Sirius owns their transponders which ride on Hughes satellites and oerate in the 800 Mhz band. Sirius has already hinted that that many music channels will go away. My hunch is a considerable number of Sirius Music Channels will go and almost all of XM's music channels will be axed. Then Sirius will incorporate the unique material offered on XM into it's line up. As an example the Open Wheel Racing carried on XM will move over but the NASCAR material on XM will be cut. Major League Baseball will move to Sirius but only selective bits of the Sports Programing. Whether Mel Karmizan wields a meat ax remains to be seen but we could see Oprah Winfrey fall through the cracks
As to XM's Customers that could be a tricky issue. There is little doubt in my mind that XM Subsrcibers will have to purchase new hardware in the next year or two. My guess is that Sirius will offer to XM subscribers a complementary subscription to Sirius for 1 year or a credit to the purchase of a lifetime subscription. These are the types of issues the FCC has to work out with the principles in the coming months.
- This deal paves the way for the removal of all Media ownership laws
- by JCPayne March 27, 2008 8:26 AM PDT
- This whole thing paves the way for the removal of all media ownership laws in the USA. Reason being XM-Sirius is now a *national* company broadcasting in all areas and it is competing against local radio stations... Media ownership says something like the local stations can only cater to (I think) something like no more than 30% of US radio markets (or so). The radio stations next will cry foul saying they are hindered and XM-Sirius is broadcasting everywhere and they will lobby to remove those restrictions etc... Just like how Comcast is claiming that they are competing against Satellite and the Baby Bells (+ Ma Bell) and the cable companies believe they should now be entitled the right to control over 30% of the total US market share.... The gov't sooo totally opened up a can of worms on this.
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