XM Satellite Radio CEO Hugh Panero told analysts today that XM remains positive in their outlook for a merger with Sirius. “We continue to believe we will ultimately receive the necessary approval to continue with the merger,” Panero said.

Indeed, in response to the swarm of negativity coming from analysts about the merger passing regulatory muster, a spokesman for XM said after today’s conference call that other analysts are more positive.

He cited a report last week from the Washington Telecom, Media & Tech Insider, which retains former FCC chief of staff Blair Levin as an analyst. The report gave the merger better than a 50 percent chance of receiving federal approval.

The positive outlook from XM doesn't just come from the top. Internal sources tell me that the majority of people at XM feel the merger will go through. Something that Sam Litzinger from Washington Post Radio apparently has heard as well.

It's good to see XM keeping a chin-up even in the face of negativity. But there's still a business to run, and as Hugh Panero said at the earnings call this morning, "we continue to operate XM as very much a stand-alone company."

[TWICE]
Thanks MUSCLE13!

Year-over-year retail sales fell 28% in March (up from the 33% drop in February, 44% drop in January and a whoppin' 46% drop in December). We're slowing crawling out of the "Stern Effect" comparison bubble, so this is going to continue to get easier from this point forward.

The Quick Glance:

• Sirius March 2007 Retail Sales:
  Down 31% YoY
• XM March 2007 Retail Sales:
  Down 23% YoY

For the full quarter:

• Sirius 1Q07 Retail Sales: -40% YoY
• XM 1Q07 Retail Sales: -29% YoY
  

Marketshare:

• Sirius Mar '07 Retail Marketshare: 53%
• XM Mar '07 Retail Marketshare: 47%

XM is finally making a bit of a comeback in retail, gaining 3 percentage points against Sirius, and climbing up from a 35% YoY decline last month (though Sirius still beats XM in retail marketshare). Sirius also continues to show a bit of a comeback from a 33% drop last month, and the dismal earlier months.

Still, a decline is a decline, so don't go popping the champaign just yet guys.

I think it's time to get more creative with retail. Father's Day is looming and we need to see some new products, as well as some more aggressive marketing efforts. Mergers are distracting, (that's a fact) but if you want Wall Street to stop pummeling you... well, you need to show growth. Simple right? (Well, no not really, but we've got some ideas.)

That's the question being posed by SeekingAlpha contributor M&A Researcher, as the FCC still has not started its review "clock" just yet.

They point out that there has been an unusually long delay from application filing to clock start, but given the magnitude and publicity surrounding the Sirius-XM merger, maybe it's not all that surprising.

No new filings have been posted to the FCC's transaction page in the last seven days. It could be an indication that the staff is preparing to launch the review clock shortly, or maybe that the volume of filings coming in is so large that the staff simply is unable to keep up.

Either way, another batch of ex parte filings can be expected to appear shortly, as can the beginning of the 180-day informal review period. Tick-tock.

[SeekingAlpha] 

With the CBS takeover rumor surprisingly still keeping warm, let's look at this from a theoretical standpoint. What if the timing is off? Maybe, like with most rumors, the overall concept is there but it loses out in the details?

Forget about a takeover while this merger process is underway, that would be too messy, but what if the merger is not approved? Sure, both companies have said that they would survive just fine without a merger, but we all know what would happen if it doesn't go through: the stocks would take a nose dive (more so than the already baked-in assumption by the Street that it won't happen).

So why wouldn't the merger be approved? Because regulators would buy the "satellite is its own little market" argument. And in turn there wouldn't be much in media ownership issues. If satellite radio is its own separate market, there's little in the way of a terrestrial radio company (any terrestrial company for that matter) scooping up one of the satcasters for itself.

Food for thought.

Satellite Television
In the 1980s, the NAB fought the FCC's decision to award DBS licenses, claiming that the Communications Act forbade a nationwide licensee. The NAB's position was so extreme that a federal appeals court described the NAB as "luddite[s]," saying it would be irresponsible to deny consumers "new technology that offers the promise of substantial public benefit." The court also chided terrestrial broadcasters, commenting that "the Act does not entrench any particular system of broadcasting: existing systems, like existing licensees, have no entitlement that permits them to deflect competitive pressure from innovative and effective technology."
(NAB v. FCC, 790 F.2d 1190, 1197-98 – D.C. Cir., 1984)

"Drop-In" Stations
In the 1980s, the FCC issued a decision allowing the allotment of additional FM frequencies. The NAB and other broadcasters sought to have restrictions imposed on the operation of these so-called "drop-in" FM stations, which were made possible by technological improvements in radio receivers. The NAB also filed a petition for reconsideration of the FCC's decision to authorize the new stations.
(Modification of FM Broadcast Station Rules to Increase the Availability of Commercial FM Broadcast Assignments, 87 F.C.C. 2d 279, 1984.)

Low-Power Radio
The FCC first proposed the establishment of rules for low power radio service in 1999. The NAB and other broadcasters submitted comments vehemently opposing this new service. The then-FCC Chairman William Kennard said this opposition was "about the haves—the broadcast industry—trying to prevent the have-nots—small community and educational organizations—from having just a little piece of the pie. Just a little piece of the airwaves which belong to all of the people."
(Statement of FCC Chairman William E. Kennard on Low Power FM Radio Initiative, 2000 FCC Lexis 1536 – March 27, 2000)

Low-Power TV Band Devices
In 2004, the FCC proposed to allow certain types of unlicensed devices to operate in the broadcast television spectrum at locations where the spectrum is not being used. As the Commission explained, permitting such operations would enable "more efficient and effective use of the TV spectrum and would have significant benefits for the public by allowing the development of new and innovative types" of broadband devices. The NAB and other broadcast interests sought to impede the operation of these new devices, though they would operate only on channels not being used for licensed services. Even after the FCC issued a decision in 2006 authorizing the devices, the NAB and other broadcast interests asked FCC to impose an extensive set of restrictions on the operation of the devices.
(Unlicensed Operation in the TV Broadcast Bands; Additional Spectrum for Unlicensed Devices Below 900 MHz and in the 3 GHz Band, 19 FCC Rcd 10018 – 2004)
(See Joint Comments of The Association for Maximum Service Telelvision, Inc. and the National Association of Broadcasters, ET Docket Nos. 04-186 and 02-380 - filed Jan. 31, 2007)

Satellite Radio
From the start, the NAB vehemently opposed allocation of spectrum for and licensing of satellite radio, asserting that it would destroy local radio broadcasting. The radio industry’s evidence was embarrassingly thin ranging from studies that assumed satellite radios would be free, claiming that a temporary revenue fall-off during a recession was indicative of the declining fortunes of terrestrial broadcasters, to a survey of radio station executives, each of whom claimed that satellite radio would be the death of localism. Ultimately, NAB’s opposition delayed licensing satellite radio for seven years. Now the organization is looking to stop the Sirius-XM merger from going through, using any means necessary.
(Rules and Policies for the Digital Audio Radio Satellite Service, 12 FCC Rcd 5754, ¶ 19 - 1997)
(Reply Comments of CD Radio, at 29 - filed Oct. 13, 1995)

In an incredibly descriptive article entitled Dinosaurs vs. Satellites, senior editor Radley Balko paints a clear picture of the NAB's efforts to undermine the satellite radio industry.

From their consistent flip-flops in defining competition, to anti-satellite radio advertising (which, miraculously, has disappears from their website) to vehement protection of "localism" - we see the true colors of the NAB through this article.

One interesting thing I didn't know: "... the NAB lets members of Congress and their families record public service announcements in NAB studios free of charge. The commercials are then broadcast in the members districts on NAB stations, also free of charge. That's broadcast time politicians often have to pay thousands of dollars to reserve."

Wow.

[Reason Magazine] 

Slacker's head of marketing Jonathan Sasse sat down with Mark Ramsey of Hear 2.0 in an incredible audio interview, and I highly recommend everyone take a listen to it.

Not only does Ramsey address the thought that Slacker, with their own satellite delivery system, would be competing directly with Sirius-XM (several times throughout the interview). But he delves deeply into exactly what Slacker does, and how it's going to change the face of radio as we know it. Both consumers and industry-watchers alike will find interest in this interview.

"This thing is going to be huge," Mark concluded... and honestly, I couldn't agree more. 

[Hear 2.0] 

UPDATE: SSG also has a nice interview with Slacker here. 

While the Senate was holding a hearing about the Sirius-XM merger, FCC Commissioner Michael Copps was talking with David Rehr during the annual FCC Breakfast at NAB2007 on the same subject.

When asked about the merger's prospects, Copps pointed to FCC Chairman Kevin Martin's comments, "Chairman Martin has already indicated it's a climb for him, well, it's a pretty steep climb for me."

Copps added that he would not prejudge the merger since it was currently before the commission.

Copps also said that there seemed to be quite the disconnect between the NAB's argument that broadcasters did not compete with satellite radio when it came to this merger, and the argument that it was "one big happy competitive family" when it came to seeking media ownership rule changes.

[Broadcasting & Cable] 

The Competitive Enterprise Institute (CEI), a non-profit public policy group, is urging federal regulators to approve the Sirius-XM merger, and to proceed with the modernizing of antitrust rules for all industries.

CEI feels that the satellite radio industry is not its own thinly segmented market, but rather a small part of a great media market that includes commercial radio, cable television, the Internet and more.

"The approximately $13 billion in market capitalization of both companies pales in comparison to $57 billion value of one major cable company alone," CEI stated.

“Regulators also should refrain from using the merger review process to extract a parade of concessions from these struggling companies,” added CEI Vice President and Director of Technology Studies Wayne Crews.

The CEI is a non-profit, non-partisan public policy group, that has long encouraged policy makers to reform antitrust law and its enforcement in the interest of fostering increased competition and innovation. 

[Competitive Enterprise Institute] 

When NAB President and CEO David K. Rehr delivered his opening keynote address at NAB2007 in Las Vegas yesterday, he unsurprisingly used the opportunity to voice the NAB's adamant opposition to the Sirius-XM merger. Rehr said the merger "certainly would not be in the consumer's benefit," adding his view that "this is not about the consumer. It is not about advancing technology. It is about lining the pockets of financiers and corporate executives."

So let's take a look at the NAB's long history of lobbying in Washington against the development of satellite radio. Afterall, this is an organization that is so concerned with the advancement of technology, the benefits of the consumer - and at same time, not concerned with the lining of one's pockets. Surely then they wouldn't try to stifle open competition from satellite radio right?

The reality is that for more than 25 years, the NAB has objected to the evolution of communications technology, including satellite television, "drop in" radio stations, low-power radio and low-power TV band devices... all in addition to their opposition to satellite radio.

Their latest effort to block the merger of Sirius and XM is actually only part of a massive multimillion dollar effort that began 17  years ago. Below is a timeline of the NAB's efforts against satellite radio, long before a single satellite was even launched:

1990: The NAB tried to make end run around government plans to create a satellite system by proposing a digital system using land-based radios.
1992: The NAB mobilized opposition to the FCC’s proposal to set aside spectrum for satellite radio.
1994: The NAB submitted a filing to the FCC opposing any licenses to operate satellite radio technology.
1995: The NAB filed a report with the FCC and mounted a publicity campaign warning that satellite radio “will fragment radio audiences and make local radio unprofitable.”
1997: The NAB paid Kagan Consulting to produce an “independent report” claiming that FM radio would suffer great financial harm from satellite radio.

The NAB’s efforts to stop satellite radio failed. That, however, didn't stop their opposition.

At the heart of NAB’s argument is the claim that the merger is anti-competitive. But to me, the best validation of the true competition in the audio marketplace is the fierce response that the NAB has had to the Sirius-XM merger proposal. Understand this: The NAB is not motivated by serving the greater good. They are in business to advocate for their members.

The NAB knows that Sirius and XM compete with over 10,000 free radio stations in the country. The NAB (and its members in numerous SEC filings), have admitted it:

• Last September, in his remarks to the NAB Radio Show in Dallas, Texas, NAB President and CEO David Rehr declared, “In 2006, we have satellite and internet radio [as competitors]. And barely a day passes without the introduction of a new competing device or service. But we have news for our competitors: ‘We will beat you – as we have beaten those change agents in the past.’ ”
• The NAB in October 2006 provided media ownership comments to the FCC seeking relaxation of radio ownership regulations (how ironic?) and cited satellite radio and other competitors as justification.
• That same month at the National Press Club, the NAB’s President and CEO, David Rehr, cited satellite radio as one of AM/FM’s competitors.  

But as soon as the merger was announced, the NAB embarked on a non-stop campaign to distract regulators and consumers from the facts surrounding the proposed Sirius-XM merger:

• Washington guns for hire...
  
  The NAB has used its money for any Washington hired guns it could find, notably John Ashcroft. The Wall Street Journal reported that "Former Attorney General John Ashcroft, who sent a letter…to his successor Alberto Gonzales blasting the proposed merger of Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc., approached XM in the days after the merger was announced offering the firm his consulting services." The NAB has since hired James C. Miller and Philip M. Napoli to send their own "independent" letters of opposition.
  
  
  
• And the verdict from the Carmel Group is...
  The NAB also paid the Carmel Group, a California consulting firm, to change its views about competition in the audio entertainment market. In an article written a year-and-a-half ago, before being hired by NAB, Carmel’s Jimmy Schaeffler described satellite radio’s competitors as "traditional analog AM & FM radio, as well as burgeoning services like MP3 players, terrestrial radio, and video- and Internet-to-the-vehicle." Yet, after receiving funds from the NAB, Mr. Schaeffler produced a white paper saying exactly the opposite.
  
  
• The best funded college student group I know...
  On February 28th, Corporate Crime Reporter uncovered the real story about the Consumer Coalition for Competition in Satellite Radio (C3SR), a group of law students opposed to the XM-Sirius merger. C3SR claimed to be an independent grassroots consumer organization and refused to say who funded it. But admitted to being "supported" by the NAB. And is able to afford commissioning reports (which reportedly can cost upwards of $400/hour) by Gregory Sidak of Criterion Economics.
  
  
• Legislators legislating on their own behalf...
  Mike Hubbard, Alabama's House Minority Leader, was the lead sponsor of a non-binding resolution against the merger of Sirius and XM, which was passed by the Alabama House of Representatives on March 29th. Interestingly, Hubbard is a member of the Alabama Broadcasters Association who owns a terrestrial radio station and an audio production company serving the national broadcast industry.

And, of course, their rhetoric has changed. NAB President Rehr now claims that satellite radio doesn't compete with AM and FM radio.

Now the competition is "one way" (how convenient), and the $20 billion radio industry will face unfair competition from a combined Sirius-XM (which together have a mere 3.4% of total radio listening, according to a recent Arbitron survey).

NAB members like Clear Channel claim that a merged satellite radio company would unfairly hurt "local" radio (imagine that, Clear Channel is now "local"). Of course, Clear Channel Communications is well diversified and is working to provide nationwide mutlichannel audio content for HD Radio stations, mobile wireless audio providers and more. Don't believe me? Just listen for yourself.

The harder the NAB works to quash competition, the easier it is to see their hypocrisy. "Words have consequences," Rehr said in his keynote yesterday. So true.