June 2008 Archives

Senators John Kerry (D-MA), Claire McCaskill (D-MO) and Ben Cardin (D-MD) weighed in on the merger between Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. saying that the concessions don't go far enough.

In a letter sent to FCC Chairman Kevin Martin on Friday, the high-profile Democrats said that the 8% of spectrum set-aside is not enough to ensure "viable competition" to the combined company.

Kerry (pictured), McCaskill and Cardin added that it needs to be at least 20%, or as many as 50 channels, to be to their liking.

The senators also want Sirius-XM to be required to build HD-radio capability into their receivers, calling it an "essential check" on the ability of the merger company to "stifle" competition from digital-radio broadcasting.

"The proposed conditions fail to provide meaningful competition in the SDARS marketplace and would leave the merged entity in a position to exercise its market power in anticompetitive ways against other media, including free, over-the-air radio," the senators wrote.

Kerry, McCaskill and Cardin closed the letter by saying that they still opposed the merger, but that their suggestions would "mitigate the harms to the public and consumers" if the FCC goes ahead with the deal.

[Broadcasting & Cable]
Thanks Gregg!

• Total synergies, net of the costs to achieve such synergies, for the combined company are expected to be approximately $400 million in 2009;
• Adjusted EBITDA for the combined company is expected to be approximately $300 million in 2009.  Adjusted EBITDA is net income/(loss) before interest and investment income, interest expense (net of amounts capitalized), depreciation expense, and non-cash stock compensation expense
• The combined company is expected to achieve positive free cash flow, before satellite capital expenditures, for the full year 2009.

To date, neither Sirius nor XM has reported positive adjusted EBITDA or achieved free cash flow for a full year.
 
"The upside potential from this merger is significant.  In addition, the synergies, adjusted EBITDA and free cash flow are expected to continue to grow in subsequent years, and we look forward to providing more detail of this growth in coming months," said Mel Karmazin.

The company's financial guidance for total net synergies, adjusted EBITDA and free cash flow assumes, among other things:  that the merger will be consummated in the third quarter of 2008; that XM will incur certain incremental interest expense as a result of refinancing certain of its debt; that the combined company will realize certain additional advertising and subscriber revenue synergies as a result of the merger; and that the combined company will achieve cost savings and efficiencies in nearly all aspects of its operations. No assurance can be given that any of these objectives will be met or that the amount of incremental interest at XM will not exceed that anticipated by the company.

Furthermore, the company's financial guidance also assumes that the combined company will, following the consummation of the merger, immediately take steps in nearly all operational areas to rationalize its operations and realize the expected synergies in a timely manner, but no assurance can be given that the necessary measures to realize expected synergies will be implemented in a timely manner.
 
When the merger was structured, the parties determined that Sirius would be the surviving public parent company and that XM would become a subsidiary of Sirius. As a result, the preponderance of XM's existing debt will require refinancing in connection with the merger.  Because of the refinancing, the combined company expects XM to incur incremental interest expense as a result of refinancing certain of its debt. Principally as a result of this higher interest expense at XM, among other factors, substantially more of the free cash flow before satellite capital expenditures in 2009 is forecast to be realized at Sirius, the parent company, than at XM. 

In addition, Sirius and XM expect to refinance certain debt in 2009 that is scheduled to mature during that year.

• The "merger-to-monopoly" implications.
• The rule in the 1997 license barring the two companies from merging.
  
• The fact that neither company has used the "failing" company argument.
  

"Here's a guy suspended all of 2007 following shooting at a Vegas nightclub," said sportscaster Warner Wolf. "He's been arrested six times since being drafted by Tennessee in 2005."

"What color is he?" Imus asked in response. "He's African-American," Wolf said.

"Well, there you go," Imus said. "Now we know."

• Area 33 is becoming Area 38 (and moving to channel 38)
• Sirius Disorder is moving to channel 33
• Met Opera and Sirius Pops are moving to channels 78 and 79 respectively
• Universo Latino, Rumbon and Reggae Rhythms are moving to channels 82, 83, and 84

• A La Carte packages - made available 3-months after merger is consummated.
  
• 50 channels, for $6.99/month (add channels for $0.25/each)
  
• "However, in no event will a customer subscribing to this a la carte option pay more than $12.95 per month for this programming."
• 100 channels for $14.99/month.
• Other programming packages ("Best of Both," Discounted Family Friendly, Music or News or Talk) - also made available 3-months after merger goes through.
• Broadcast infrastructure set-aside:
• 4% from Sirius, and 4% from XM - approximately 6 channels each, or 12 channels in total.
• Set-aside for noncommercial, educational and informational programming within the meaning of 47 C.F.R § 25.701(f)(2) of the DBS set aside rules.
• Additionally, within four months of the merger, MergeCo will enter into long-term agreements (leases) for 8% of Sirius-XM broadcast infrastructure to a "Qualified Entity or Entities."
• "As digital compression technology enables the company to broadcast additional full-time audio channels, the combined company will ensure that four percent of full-time audio channels on the Sirius platform and the XM platform are reserved for a Qualified Entity or Entities; provided that in no event will the combined company reserve fewer than six channels on the Sirius platform and six channels on the XM platform."
• Open Device Access
• Licenses made available within one-year of merger.
• "Each licensee shall be responsible for, and bear all costs associated with, the design, development, manufacturing, including parts procurement, logistics, warranty, sales, marketing, and distribution of such satellite radios."
• Service to Puerto Rico
• Available within 3-months after merger
• Interoperable Receivers
• Available within 1-year after merger
• Price Freeze
• Sirius-XM will lock in all the packages, including base and A La Carte packages, and will not raise prices for 36-months after the merger.

• DSLreports - "I guess the FCC didn't think much of the recent GAO report that slammed the agency for leaking news..."
• TheStreet - "...a final vote on the transaction could take place as soon as three weeks from now if certain conditions are met."
• MediaFile - "The question is, have the delays made the whole issue mute?"
• Silicon Alley Insider - "Consumer apathy plus increased competition are much harder to overcome than federal regulators."
• Gizmodo - '...there are a few caveats that the companies would need to accept--but it's all good news for the consumer."
• paidContent - "Justice Department antitrust officials signed off on the deal, but FCC officials disagree with the assessment that there's enough competition from the likes of online radio, iPods and other sources."
• Electronista - "...approval in as soon as three weeks and has received the early blessing of FCC chair Kevin Martin, who states that the union would be 'in the public interest' as long as the unified company continues to voluntarily abide by certain conditions."
• Engadget - "...all that's left now is to circulate Martin's recommendation for final vote from the FCC's four other commissioners -- a vote on a merger which, as strange as it seems, was expressly prohibited by the FCC when it licensed the satellite radio industry back in 1997."
• BloggingStocks - "The real question is whether the approval will come too late to save the companies."
• Gawker - "The fact that the story starts with 'EMBARGOED!' signals that the Journal's copy editors are stretched quite thin this summer weekend"

• A three-year freeze on prices and packages that include programs from both services.
• "A La Carte" programming to be available within 3-months after close of the deal.
• Open Device Access, providing technology standards to allow for any device manufacturer to make satellite radios.
• Interoperable radios to be available within one-year of the merger.
• Set aside 8% of total combined spectrum (12-channels each) for noncommercial, educational and public safety programming - for those who have "not been traditionally represented" in radio, according to the Martin.

• 8-10am: Brotha Fred (WIBT/Charlotte)
• 10am-Noon: Kasper (WAKS/Cleveland)
• Noon-2pm: Melissa Chase (WRVQ/Richmond)
• 2-4pm: Randi West (WDCG/Raleigh)
• 4-6pm: Toby Knapp (WIHT/Washington D.C.)
• 6-8pm: Kane (WIHT/Washington D.C.)
• 8-10pm: Big Boy (WKQI/Detroit)
• 10pm-midnight: Java Joel (WAKS/Cleveland)
• Midnight-2am: Geller (WDCG/Raleigh)

"The FCC also holds an open meeting on the XM-Sirius merger."

• High-speed 3G connectivity (almost as fast as WiFi, see the speed comparison photo after the jump)
  
• Battery life: 5-6 hours browsing time, 7 hours of video use, 24 hours of audio and 5 hours of 3G talk time.
• Built-in GPS
  
• Will be available in 70 countries over the next several months.
• Price: 8gb version for $199 (down from $399),16Gb for $299.
• Available: July 11th

1. The mandated leased spectrum should consist of "a minimum of 20% of the channels now allocated to satellite radio service." The State AGs noted that they are "well aware" of a similar proposal by Georgetown Partners, but they "did not advocate any particular firm."
2. The interoperable radios must also integrate HD Radio reception., stating that this "could yield a significant benefit to consumers."
   

"Tennessee's local radio stations do not fear competition," writes Adamson. "No station in Nashville, or anywhere in America for that matter, has the national presence that XM and Sirius enjoy. And so while the satellite radio companies can pipe their programming into every town and city across America, it defies the laws of physics for a local radio station to match that national footprint."

"By approving this government-sanctioned monopoly, the Justice Department disregarded common sense and made a mockery of its alleged antitrust enforcement. Let's hope the FCC and Commissioner Tate heed the advice of numerous consumer groups, minority organizations, antitrust experts, economists and 80-plus members of Congress and summarily reject this monopoly/merger."

• Failure to make available an interoperable radio
• Non-compliance with tower and antenna placement authorization and allowable transmitting levels
• "Deliberately" exceeding FCC emission standards.

• Tuesday: "Take the Money and Run," Steve Miller Band
• Wednesday: "Pay Me My Money Down," Bruce Springsteen
• Thursday: "Back in the U.S.S.R.," Paul McCartney
• Friday: "A Change Would Do You Good," Sheryl Crow

XM's morning golf program "Making the Turn with Peter Kessler" will be at the show from the Torrey Pines media center June 11-13. Pro golfer Chris DiMarco will host a U.S. Open edition of his weekly XM show "oPINionated" on June 10th, and best- selling author Matt Adams will weigh in on the U.S. Open on his weekly program "Fairways of Life" on June 13th.

Angel Cabrera will be defending the U.S. Open title he won a year ago at Oakmont Country Club. Top-ranked Tiger Woods announced on May 27th that he plans to compete in the championship, which would be his first event since his arthroscopic surgery on his left knee April 15th.

Following Pioneer's scathing filing with the FCC, iBiquity Digital went on a series of marathon meetings with the agency.

On Thursday, May 29th iBiquity met with...

• Rick Chessen of Commissioner Copp's office
  
• Rudy Brioche and Shawn Donilon of Commissioner Adelstein's office
  
• Marcia Glauberman (MB), Rosemary Harold (MB), Jamila Bess Johnson (MB), Royce Sherlock (MB), Rebekah Goodheart (MB) (via telephone), Susan Crawford (MB), Joel Rabinovitz (OGC), Amy Brett (MB), Stephen Duall (IB), Marilyn Simon (IB), Ann Gallagher (MB) and Jim Bird (OGC).

iBiquity reviewed it's proposal to require that all satellite radios that are able to receive AM/FM (read: the majority of OEM receivers that have been installed by automakers) must also include the ability to receive HD Radio.

"iBiquity explained that this proposal will help promote the development of a level playing field between satellite and terrestrial digital radio," writes the company in the filing.

The question the FCC should be asking: if satellite radio only brings in 4.1% of radio listening, how would mandating a terrestrial radio technology "level the playing field" between the two?

Sirius and NYU have built a state-of-the-art broadcasting studio in the lobby of the Manhattan-based NYU Langone Medical Center to be the broadcast home of Doctor Radio. Doctors are minutes from the O.R., the E.R., and seeing patients, and can often be seen performing their radio shows in scrubs.