Comments on: FAQ: Serious challenges for Sirius-XM merger
Regulatory hurdles are huge for deal some worry could lead to a satellite radio monopoly. But the biggest impact would be on customers.
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There may be a ton of commercial radio stations in your market, but drive away from the cities and how many are there? How far away from your city can you drive before you lose your local station?
Satellite radio is different in that reception is the same on Isle Royale as it is in downtown Chicago. The particular stations are also the same in both locations. The number of satellite stations is many times the number of AM and FM stations combined in even the most dense radio markets. In fact these are points made in the marketing campaign of the satellite stations.
It is a monopoly. You will accept their terms or you will not have satellite radio. Period.
debt to finance the programming sorties. XM now has $710
million of debt on its books; Sirius $426 million. But both also
have plenty of cash. Sirius has tapped the capital markets six
times in the past 18 months and is now sitting on a cushion of
more than $800 million; Legal and lawsuits threaten and XM has
a cash hoard of $377 million. And so far the burn rate seems
sustainable: SG Cowen & Co. expects XM to go through about
$200 million over the next two years. What's more, analysts
trump, both companies have probably completed their most
expensive programming deals verbally."
Gerard Rotonda
debt to finance the programming sorties. XM now has $710
million of debt on its books; Sirius $426 million. But both also
have plenty of cash. Sirius has tapped the capital markets six
times in the past 18 months and is now sitting on a cushion of
more than $800 million; Legal and lawsuits threaten and XM has
a cash hoard of $377 million. And so far the burn rate seems
sustainable: SG Cowen & Co. expects XM to go through about
$200 million over the next two years. What's more, analysts
trump, both companies have probably completed their most
expensive programming deals verbally."
Gerard Rotonda
Sirius Satellite Radio Inc. (formerly CD Radio) on 2320.0 to 2332.5 MHz and XM Radio Inc. on 2332.5 to 2345.0 MHz
So they both own 12.5 Mhz of bordering radio spectrum between 2320.0 MHz and 2345.0.
This is good news because it means they won't have to develop 2 seperate chipsets/tuners to receive the signal like with the Sprint/Nextel merger.
On the other hand, this says nothing of the other technologies they are using to encrypt or encode data.
I believe each service is using a seperate encryption method, XM is using aacPlus (From MPEG-4 part 3), but I don't know what Sirius is using.
There is more info on some of their technologies on Wiki here:
http://en.wikipedia.org/wiki/Sirius_Satellite_Radio#Receiver_Technology
http://en.wikipedia.org/wiki/XM_radio#Technology
They do have an advantage in having bordering radio spectrum, and supporting the 3 encryption methods could be possible in a software update.
The other advantage of this is that if they hash out the technologies before they need to start replacing some of their satellites in ~6 years they may be able to deploy satellites that cover the full 25 Mhz, rather than 2 separate networks covering just 12.5 MHz each.
The trick will be creating a plan to migrate the services onto a common platform with minimal impact to existing subscribers.
With 25 MHz they should have room to broadcast music at much higher bit rates than currently on FM, and still have room for things like traffic/weather updates, licensing bandwidth to OnStar etc., and still have plenty of bandwidth left over.
I just pray that they don't use it for an opportunity to transmit 300 channels of low quality elevator music for $25/month.
Part of the reason they are merging is becasue agressive pricing and competition is causing them to lose money charging $13/month.
I had XM for a while and hated it. They almost never played mainstream music or anything I listen to, instead opting for a bunch of crap I have never heard and remixes of songs I have heard becasue the royalties are cheaper.
It is a pay-for service and they played radio edit versions of songs.
Some radio stations had no DJ's, and instead would just loop the same 30 songs over and over again.
I drove for 2 hours once without changing the station and heard each sone twice in even that short of a timeframe.
Even my GF who usually didn't drive my car complained about the quality of the service.
When I was in areas populated enough to have radio stations that are not just country music I usually listened to FM instad.
I have never had the Sirius service, but I have listened online and they do seem to have better content than XM did at least.
It would be nice to have the additional choices. The FCC probably won't let it happen because of their need to always "protect" us dumb ol' consumers......
Sirius Satellite Radio Inc. (formerly CD Radio) on 2320.0 to 2332.5 MHz and XM Radio Inc. on 2332.5 to 2345.0 MHz
So they both own 12.5 Mhz of bordering radio spectrum between 2320.0 MHz and 2345.0.
This is good news because it means they won't have to develop 2 seperate chipsets/tuners to receive the signal like with the Sprint/Nextel merger.
On the other hand, this says nothing of the other technologies they are using to encrypt or encode data.
I believe each service is using a seperate encryption method, XM is using aacPlus (From MPEG-4 part 3), but I don't know what Sirius is using.
There is more info on some of their technologies on Wiki here:
http://en.wikipedia.org/wiki/Sirius_Satellite_Radio#Receiver_Technology
http://en.wikipedia.org/wiki/XM_radio#Technology
They do have an advantage in having bordering radio spectrum, and supporting the 3 encryption methods could be possible in a software update.
The other advantage of this is that if they hash out the technologies before they need to start replacing some of their satellites in ~6 years they may be able to deploy satellites that cover the full 25 Mhz, rather than 2 separate networks covering just 12.5 MHz each.
The trick will be creating a plan to migrate the services onto a common platform with minimal impact to existing subscribers.
With 25 MHz they should have room to broadcast music at much higher bit rates than currently on FM, and still have room for things like traffic/weather updates, licensing bandwidth to OnStar etc., and still have plenty of bandwidth left over.
I just pray that they don't use it for an opportunity to transmit 300 channels of low quality elevator music for $25/month.
Part of the reason they are merging is becasue agressive pricing and competition is causing them to lose money charging $13/month.
I had XM for a while and hated it. They almost never played mainstream music or anything I listen to, instead opting for a bunch of crap I have never heard and remixes of songs I have heard becasue the royalties are cheaper.
It is a pay-for service and they played radio edit versions of songs.
Some radio stations had no DJ's, and instead would just loop the same 30 songs over and over again.
I drove for 2 hours once without changing the station and heard each sone twice in even that short of a timeframe.
Even my GF who usually didn't drive my car complained about the quality of the service.
When I was in areas populated enough to have radio stations that are not just country music I usually listened to FM instad.
I have never had the Sirius service, but I have listened online and they do seem to have better content than XM did at least.
It would be nice to have the additional choices. The FCC probably won't let it happen because of their need to always "protect" us dumb ol' consumers......
As independent entities:
-Double the OPEX
-Will have continuing double CAPEX expenditures into the future (satellite replacements)
-Plus, when you're Sirius you face satellite replacement cost SOONER than XM
-A lot of overlapping content costs
-Costs of fighting (marketing, advertising) in the same marketplace not only against one another but vying for attention against iPod, HD Radio, terrestrial radio, internet radio, not to mention up-and-comers in the wireless arena like VCAST Music. This is why you can't look at one SAT radio provider as a monopoly. It's the end product - audio programming. 98% of consumers don't care that the signal comes down from a satellite as opposed to a radio tower.
-Double the R&D cost. And the cost of maintaining two radio technologies rather than one combined technology. More hardware volume --> further commoditization --> lower equipment cost --> lower price to consumer, as well as the ability to concentrate on improving feature content (removes some of the intensity of focus on removing hardware cost).
It's pretty clear that the market size at current costs ($12.95/mo and various radio cost) is pretty limited. Personally, although I like the services both offer, I don't want to pay that price. So the only chance these guys have of attracting me is lowering their price or keeping it stable in the face of inflationary effects on competing technologies to the point where it looks attractive to me.
-There's another one: audio quality. There is a segment of listeners who aren't buying in due to the crappy encoding quality (low bitrate). To some extent, that also includes me. By elminating overlapping content, free up bandwidth to increase bitrate and make the service more attractive. If content were broadcast at least equivalent to high-MP3 quality, I'd probably be more apt to subscribe at the current pricing.
You have to be especially careful not to be seduced into the "big bad monopoly company" mindset in this case. I strongly believe this is a case where the consumer is better off, and this position is not one I'd often advocate.
Overall, there are a slew of compelling reasons why this makes sense both from the survival of both companies as well as benefits to the consumers.
There may be a ton of commercial radio stations in your market, but drive away from the cities and how many are there? How far away from your city can you drive before you lose your local station?
Satellite radio is different in that reception is the same on Isle Royale as it is in downtown Chicago. The particular stations are also the same in both locations. The number of satellite stations is many times the number of AM and FM stations combined in even the most dense radio markets. In fact these are points made in the marketing campaign of the satellite stations.
It is a monopoly. You will accept their terms or you will not have satellite radio. Period.
- 2 drowning cats...
- by Jim Hubbard May 6, 2008 10:04 AM PDT
- 2 drowning cats don't float any better when tied together.
- Like this Reply to this comment
-
-
- Easy to say that ... but,
- by sdnelson33 February 23, 2007 11:14 AM PST
- ... it's pretty simple microeconomics. Look at the factors weighting down each "drowning cat" on its own, fighting for the same POPS (available market @ $12.95/mo and current equipment cost).
- Like this View reply
Processing -
(44 Comments)As independent entities:
-Double the OPEX
-Will have continuing double CAPEX expenditures into the future (satellite replacements)
-Plus, when you're Sirius you face satellite replacement cost SOONER than XM
-A lot of overlapping content costs
-Costs of fighting (marketing, advertising) in the same marketplace not only against one another but vying for attention against iPod, HD Radio, terrestrial radio, internet radio, not to mention up-and-comers in the wireless arena like VCAST Music. This is why you can't look at one SAT radio provider as a monopoly. It's the end product - audio programming. 98% of consumers don't care that the signal comes down from a satellite as opposed to a radio tower.
-Double the R&D cost. And the cost of maintaining two radio technologies rather than one combined technology. More hardware volume --> further commoditization --> lower equipment cost --> lower price to consumer, as well as the ability to concentrate on improving feature content (removes some of the intensity of focus on removing hardware cost).
It's pretty clear that the market size at current costs ($12.95/mo and various radio cost) is pretty limited. Personally, although I like the services both offer, I don't want to pay that price. So the only chance these guys have of attracting me is lowering their price or keeping it stable in the face of inflationary effects on competing technologies to the point where it looks attractive to me.
-There's another one: audio quality. There is a segment of listeners who aren't buying in due to the crappy encoding quality (low bitrate). To some extent, that also includes me. By elminating overlapping content, free up bandwidth to increase bitrate and make the service more attractive. If content were broadcast at least equivalent to high-MP3 quality, I'd probably be more apt to subscribe at the current pricing.
You have to be especially careful not to be seduced into the "big bad monopoly company" mindset in this case. I strongly believe this is a case where the consumer is better off, and this position is not one I'd often advocate.
Overall, there are a slew of compelling reasons why this makes sense both from the survival of both companies as well as benefits to the consumers.