Merger Fever


Don't worry. It's a good thing!

A few weeks ago, I scheduled a meeting with Brent Hatley, executive producer for the Bubba the Love Sponge show on SIRIUS Satellite Radio's Howard 101. At the time I had a lot of things I wanted to discuss, including one thing that I never thought would end up becoming a reality: a merger between SIRIUS and rival XM.

Yes, there has been talk about a proposed merger between the two companies for a while, but the talk really took off after Howard Stern made his SIRIUS debut on 1/9/06. Since the announcement of his arrival, SIRIUS' subscriptions went from about 600,000 back in October 2004 all the way to over 6 million at the beginning of the year, and closing the gap with XM.

XM tried to counter the SIRIUS juggernaut by purchasing big money content, such as Major League Baseball and Oprah Winfrey, but neither item combined can counter the momentum that the "Stern effect" has provided. It became so bad that two members of the XM Board of Directors resigned, one of which warned of an impending crisis within the company.

But even with the Stern effect on their side, SIRIUS was losing a lot of money. Although they reached their first positive cash flow quarter milestone last fall, as did XM, it still would not have been enough to stop the bleeding. Since early last Spring, many financial analysis in the media, including Mad Money's own Jim Cramer, who always seems to have SIRIUS' CEO Mel Karmazin on his show, had been predicting bad things for satellite radio.

Karmazin himself kept saying to the press over the previous year that he had no interest in purchasing out XM, but instead beating them in subscribers. Who would have thought that last Monday, when the stock markets were closed, that Karmazin would do a complete 180 and announce that SIRIUS and XM would combine forces in what is being considered a "merger of equals?" Karmazin will assume the CEO position, while XM's Gary Parsons will take the role of Chairman.

Given my love of satellite radio, ever since that Monday announcement, I have received a lot of questions about my opinion over the merger, and many were surprised to find out that I am heavily in favor of it.

Why am I in favor of the merger? Well for starters it will mean a larger variety of programming choices. In the past I said I had an alternate way of listening to Major League Baseball broadcasts since they were only available on XM. In the same vein, XM subscribers would feel the same way about listening to NFL games or Howard Stern. Now with a merger, both of these services can be made available on a single radio. In addition, this gives the opportunity to offer tiered programming choices. Rather than force customers to buy every channel, customers will have the option to offer blocks of programming to prevent unwanted channels.

Surely families with children will not want Howard 100 or 101 on all their streams, so that can be provided as an alternate tier. In addition, genres that are available on XM only (movie soundtracks, 90s music, etc.) can be available on SIRIUS as well, and vice versa. And how great will it be for sports fans to have play by play for EVERY sport available: NFL, NBA, NASCAR (all on SIRIUS) as well as MLB and NHL (XM exclusive after 2007.) Even better, as Mel Karmazin proposed to Congress, listeners can choose to only have music streams for a lower price, and I can deal with options like that.

Of course, there are those who really want to have the merger fall through. The worst offender is of course, the National Association of Broadcasters. This is the same organization that is scared of all forms of media that will entrench on old fashioned terrestrial radio, and that includes CD players, Ipods, and even cell phones for crying out loud! They also have complained against XM and SIRIUS because they provide live traffic and weather on major nationwide networks. Same can be said with emergencies such as Hurricane Katrina (covered by XM via Red Cross Radio) or Amber Alerts (covered by SIRIUS' Weather and Emergency channel.)

And go figure, the NAB wants to curtail this. Oh that's just great! Let me give you this suggestion, Mr. David Rehr (president of the NAB.) Say your someone you know is kidnapped and taken to Los Angeles. Wouldn't you want an Amber Alert to be broadcast nationwide? Or do you just want it in your local market? Why are you so afraid of this? Or then again, why are you afraid of SIRIUS and XM merging?

Oh that's right. You only care about the same old, boring, corporate radio. The same radio that introduced the meaningless JACK FM format that caused well known DJs (i.e. Cousin Brucie Morrow) to lose their jobs (but thankfully to be picked up by SIRIUS) and play the same old boring payola-based playlists. Can't give consumers a choice to listen to MP3s on their Ipod, Howard Stern on SIRIUS, or Major League Baseball on XM, can you?

Just this Wednesday, Mel Karmazin testified in front of Capital Hill to propose the merger, and in doing so, he was able to tell off Rehr by stating that SIRIUS and XM's merger does not constitute a monopoly as it gives another choice in addition to Ipods. In fact, it is Rehr who favors the monopoly by forcing local terrestrial radio as the only choice.

Go get ’em Mel, and let's hope the merger becomes a reality!


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