Mel Karmazin, gave some more light on the possible "A La Carte" packages and pricing at today's House Judiciary Committee Antirust Task Force hearing on the proposed satellite radio merger.

First, Karmazin clarified that at this time "per-channel" A La Carte packages is not possible in the current infrastructure. In other words, the ability to pick and choose a completely customized subscription (labeled a "consumer advocate's dream") won't be a reality right now.

But what is possible is the choice of tiers based on different consumer interests.

Karmazin also stated that the $12.95 per month pricing is currently the ceiling that is possible for a subscriber. There's "no scenario where we're raising that price," said Karmazin in his testimony.

"What we're also saying is that we'll provide the consumer with a choice to be able to get satellite radio for less than [the current price]," he added.

For instance, in the scenario of a "music only" a la carte package, the consumer could likely pay less than a current satellite radio subscriber does today. I can imagine a "family package" with children/family-friendly programming, a "sports package" with live play-by-play sports, and a "news/talk package" with only (wait for it) news and talk.

More choice, and lower prices. It's rare that you see a merger scenario with those possibilities becoming a reality. 

Gigi B. Sohn, co-founder and President of Public Knowledge, testified in front of the U.S. House Judiciary Committee antitrust task force hearing on the proposed XM/Sirius merger. Interestingly enough, Gigi was actually in favor of the merger.

...but on a few conditions:

1. The new company makes available pricing choices such as a la carte or tiered programming.

2. The new company makes 5% of its capacity available to non-commercial educational and informational programming over which it has no editorial control.

3. The new company agrees not to raise prices for three years after the merger is approved.
   

David Rehr, president of the NAB, testified in front of the House Judiciary Committee antitrust task force. He had five main points as to why this merger should not go through.

1. The national satellite radio industry is a duopoly that is looking to become a monopoly
2. It would violate FCC rules, precident, and anti-trust principles. "Ironically" Sirius was the one who asked for competition in the 1997 FCC SDARS license.
   
3. It would undermine audio content competition. In contract negotiations, the new entity could unfairly leverage their monopoly to maintain exclusivity or to reduce prices unfairly.
   
4. Two entities that have had a pattern of violating FCC rules cannot be trusted with monopoly power. The FCC mandated that an interoperable radio be developed - 10 years later, nothing has been developed. Both companies violated Part 15 rules. Both companies have violated repeater rules.
   
5. XM and Sirius are, by their own admission, not failing companies. And should not receive a government bail out.
   

Mel Karmazin will testify today in front of a new House Judiciary Committee antitrust task force today at 3pm ET. The hearing will discuss the proposed XM-Sirius merger.

Also in attendance will be the NAB's President David Rehr, Gigi B. Sohn (co-founder and President of Public Knowledge), and Mark Cooper (Consumer Federation of America).

John Conyers Jr (D-MI) became chairman of the House Judiciary Committee after Democrats took control of Congress in the last election. He said he created the bipartisan antitrust task force within the committee to focus on antitrust and competition policy issues. It will have a limited term and operate only through the end of August.

A live feed of the hearing will be available here, or on CSPAN-3.
Thanks MB!

In Arbitron's Fall 2006 ratings survey, respondents were asked to indicate whether they're listening to satellite radio, Internet radio or AM/FM, for the first time. Arbitron found that the sum of all satellite radio channels listed totaled up to 3.4% of credited quarter hours.

Respondents listed 297 separate satellite radio channels with the highest share of quarter hours for an individual satellite radio channel was 0.2%.

In total, approximately 5.6% of the half-million respondents listed a satellite radio channel in their Arbitron diary. The analysis also showed that satellite listeners are heavy listeners to radio in general (surprise surprise).

Satellite listeners spent an average of 33 hours a week with radio, compared to the typical listener who listened for about 19 hours a week. Also, the findings showed that people who listened to satellite radio spent more time with AM/FM radio (14 hours) than they did with satellite radio (10 hours, 45 minutes) or Internet stations (8 hours, 15 minutes).

[FMQB] 

BusinessWeek has published an article about what the XM, Sirius merger "won't fix" in terms of the basic business model. Essentially they're saying that the model is flawed.

It's an unfortunate conclusion that many people seem to be taking as a result of this merger, and concern I voiced in the height of all the merger rumor hub-bub. The feeling is that the merger isn't in the pursuit of "synergies" but rather as a result of the business model being screwed up.

The notion, as stated in the article, that satellites are a "soon-to-be obsolete method of delivery" is absolutely ridiculous, but it does lead to a thought that I hope XM and Sirius realize. That they're both not in the "satellite" business, but rather in the "content" business. Who cares how it's delivered, just that it's delivered.

But... maybe that's the whole point of the merger.

[BusinessWeek]
Thanks to everyone who sent this in!

Regardless of whether you are for, or against, the XM/Sirius Merger (and it's obvious that a majority of you are for it), I'd like to get a sense as to how many of you feel whether or not the deal will actually make it through the regulatory gauntlet.

Why is this important? Because readers of this site are likely far more knowledgeable in the satellite radio landscape than most other websites. So go ahead and cast your vote.

There's something I would like to briefly highlight from a previous post, that I think deserves a post of it's own. And that is that CBS Radio (and other broadcasters) actually have already defined the competitive landscape in their SEC filings.

Here's a snippet from CBS's 10-K (with emphasis added):

Radio Competition.
The Company's radio stations directly compete within their respective markets for audience, advertising revenues and programming with other radio stations including those owned by other group owners such as ABC Radio, Clear Channel Communications, Cox Radio, Emmis Communications, Entercom and Radio One. The Company's radio stations also compete with other media, such as broadcast, cable and DTH satellite television, radio, newspapers, magazines, the Internet and direct mail.

The radio industry is also subject to competition from two satellite-delivered audio programming services, Sirius Satellite Radio and XM Satellite Radio, each providing over 100 channels of pay digital audio services. Sirius and XM sell advertising time on some of their channels and compete with the radio industry for programming.

The Company's radio stations face increasing competition from audio programming delivered via the Internet and from consumer products such as portable digital audio players. These new technologies create new ways for individuals to listen to music and other content of their choosing while avoiding traditional commercial advertisements. An increasingly broad adoption by consumers of portable digital audio players could affect the ability of the Company's radio stations to attract listeners and advertisers. 

The statements made in these SEC filings would constitute admissions under the law. So they can't just go ahead and oppose a proposed market definition, or to just limit it to the satellite radio market (making it a 'monopoly'). They would look pretty damn silly if they try to contradict themselves.

The biggest "hurdle" in the merger is the definition of what is a "relevant market" and what constitutes a competitive marketplace. But CBS Terrestrial Radio has actually already adopted the same definition that XM and Sirius are advocating.

This is pretty big stuff in my opinion, and I hope the media picks up on it. 

UPDATE: Thanks to the work from several commenters, the 10-Ks from Radio One, Cox Radio, Entercom, and Clear Channel all also define the relevant market as including satellite radio as well as other audio entertainment sources like Internet radio and DAPs.

My favorite radio publication, Inside Radio, polled some radio CEOs about the Sirius-XM Merger. Guess what they had to say? Nothing but good things, of course...

Cox Radio CEO Bob Neil says "If it is approved, and I don't think it will be, it would be one of the most anti-consumer mergers ever allowed in business."

Triad's David Benjamin says "It further confirms that the business plan for satellite radio is just not working. No one was talking about a merger before subscriber targets and break-even points were being missed," Benjamin added "The two big winners in this are the investment bankers and the lawyers."

Connoisseur CEO Jeff Warshaw said "I can't imagine that it's in the public interest. It would be tantamount to a government bail-out of an industry (satellite radio) that has been ridiculously mis-managed. It is inappropriate for local radio to be disadvantaged by such a bail-out."

...yet the curious thing is that in SEC filings (e.g., CBS Corp's 10-K) made by terrestrial radio corporations, it's clearly stated that satellite radio is in direct competition with terrestrial; as is Internet radio and digital audio players. That opens up the argument that satellite radio is part of a greater audio marketplace.

Can't have it both ways boys. Either we're competition, or we're not. But since it's already in your filings, which constitute admissions under the law, then you've already defined the marketplace for us. So thanks.

Thanks Mark! 

Should the Sirius and XM merger not pass regulatory approval, both companies can still make it on their own, analysts told MarketWatch today.

Since both companies have been trading on the speculation of the merger alone, the value of the actual proposed merger has already been baked into the stock price. Let's face it, without the merger speculation, they'd be trading at much lower prices to begin with.

"The stocks have been trading on speculation about a deal rather than fundamentals," Tuna Amobi, analyst at S&P Equity Research, told MarketWatch.

But both companies were already on the road toward free cash-flow positive. Just not as quickly as once hoped.

"I think we'll see free cash flow from these companies on a sustained basis over the next two years," Maurice McKenzie, analyst Signal Hill Capital Group added. "These are still viable economic entities."

Pointing out that the decision to merge was clearly driven by economics, Don Hodges, manager of the Hodges Fund said: "You've got a couple of companies with extremely high overhead that realize that they've spent too much money, and that making a profit is way off in the future unless they're willing to cut some expenses.

In the event the merger is scuttled, neither XM nor Sirius would be dealt a fatal blow, according to Steve Mather, satellite analyst at Sanders Morris Harris.

"They're both going to have 10 million subscribers before long," he said. "And then 15 million."

[MarketWatch]