Joe Nocera has a nicely written piece in today's New York Times, I Want My Howard Stern and Oprah, that takes on the consumer's viewpoint... and he actually is in favor of a Sirius + XM merger.
It's an intriguing take on the situation, especially since in my half-hour conversation with Mr. Nocera the one quote he chose to include was the following:
"Choice is always a good thing," said Ryan Saghir, who blogs about satellite radio at Orbitcast.com — and opposes the idea of a merger.
It's an appropriate quote though because when I boil down my feelings on the rumored merger, especially from a consumer's standpoint (and one who subscribes to both services), I do believe that choice is always a good thing.
The article goes on to point out that since both services are mutually exclusive from each other, it actually reduces the amount of choice for the customer. This is especially the case when you look at automobile purchases, "nobody chooses a car based on whether it carries XM or Sirius," the article points out.
A significant aspect to highlight, especially for merger-hopefuls, is that former FCC Chairman Reed Hundt (who led the commission when it passed the rule preventing a satellite radio merger) said that he believes that the rule he helped formulate should be repealed. As Mr. Levin put it, "Circumstances have changed." (For those who are trying to keep pulse of what the FCC's underlying stance is on the possible merger, this may be your best indication yet.)
Nocera continues on with the theory that vehicles will eventually be Internet-enabled, at which point satellite radio will be "just another technology fighting to keep pace with the Internet." That with just under 14 million subscribers, satellite radio "has had a modest impact," and will eventually need to compete with "the greatest business model destroyer ever created: the Internet."
What Nocera fails to notice is that satellite radio is growing faster than any other consumer product sans the iPod. A fact that was highlighted in the New York Times only a couple weeks ago. While his piece is refreshingly fair and unbiased, the reality is that auto manufacturers are notoriously slow to adopt personal technologies (e.g., iPod jacks, Bluetooth, etc), and that the realistic expectation Internet in the car is quite a long ways away. It's not necessary for XM and Sirius to merge in order for them to survive.
But back to the issue of choice.
From a consumer's standpoint, it's not a merger that will allow for the increased availability of choice. Mergers never lead to more choice for the consumer (*cough* Comcast *cough*). XM and Sirius are far more than just Howard and Oprah, or NFL and MLB - the majority of what we listen to is music - and the result of a merger would be the inexcusable loss of the unique programming styles from both services. Those who say that the music offerings from XM and Sirius are "essentially the same" have obviously never listened to them.
No, the consumer doesn't need a merger. What the consumer needs is interoperability. Interoperability is something that is also mandated by the FCC, and hopefully soon, it's something that is becoming a reality.
[New York Times (subscription req'd)]
Interoperability would be nice, but both companies have said while they have developed a receiver that works with both services, it is not economically viability because there's not an economic model to support its use. Neither company wants to subsidize a receiver that might be used by the other service. The merger would solve that.
Those that believe that a merger would hurt the services seem to forget that the main competition isn't XM vs Sirius. Both of these companies are struggling against competition that didn't exist 10 years ago -- MP3s, internet radio, cell phones, Wifi -- with likely more to come. They will have to keep their content fresh and prices competitive even after the merger. Try to look at the bigger picture rather than just XM vs Sirius.
Amen. Saying that XM and Sirius both make the same product is like saying Coke and Pepsi are exactly the same, since they're both colas.
I totally agree. I subscribed for Stern but fell in love with Sirius for the music. My uncle has XM in his Tahoe and its just not my style. If I was forced to listen to that crap because of this merger I'd just go back to my mp3s and listen to Stern in the morning.
Dont people alreayd have a choice? Even if you buy a GM you can convert it to Sirius pretty easily right? Same with a Ford I think.
All you investors are pretty selfish if you ask me. The only people that a merger would help out would be you.
oh and congrats on being in the NYTIMES! first CNN and now the Times. thats pretty cool.
"Mergers never lead to more choice for the consumer. XM and Sirius are far more than just Howard and Oprah, or NFL and MLB - the majority of what we listen to is music - and the result of a merger would be the inexcusable loss of the unique programming styles from both services. Those who say that the music offerings from XM and Sirius are "essentially the same" have obviously never listened to them."
This consumer wants the choice of listening to Howard, The NFL and MLB on ONE SATELLITE RADIO SUBSCRIPTION not two. Why do I have to subscribe to 2 services to get that?
Yeah guess what happens when two companies with a ton of debt merge? They increase their prices. You'll get Howard, the NFL and the MLB all in one subscription..... for the same fucking price as if you subscribed to both right now!
NO MERGER!
Okay ..everyone stand back. I'm going to blow......
1. If both services were " equal " Sirius wouldn't be taking 66% retail share would they ?
2. My good man Ryan. Oaky...You can have your way. I/O radios appear next year. XM goes titties us the year after. So much for your " competition " theory.
My point: People assume that what they enjoy now from both XM and Sirius will always be there. This is a fallacy.
WITHOUT a merger prices will increase and services will decline.
Want lower or fixed prices with the WHOLE taco ?
......... Vote Merger if you do.
Sure, right! They will double the sub price so people will drop the service to listen to Terrestrial radio, HD radio, Ipods, internet radio and cell phone radio. Great Business move huh?
Anybody who thinks that competition from other audio services including FREE services doesn't exist is living in the 1990s.
Ryan - Thanks for pointing out the article. I just picked up the paper to read it. Great article by the NY Times writer. Best I have seen yet. I have never seen a more publicized media merger rumor without anything actually happening so far. If and when there is an announcement it may be the least surprising media merger in history. The press has been all over the rumor for months now.
and its free press for the sats
I suppose that we should have been up in arms when Chrysler and Mercedes after all they both produced a unique product. Chrysler produced cars with inferior styling, performance and longevity but they where still unique. Mercedes produces some of the finest cars the world has ever know and they where truly unique.
Since the companies have merged the quality of Chrysler product has dramatically improved
(all that German engendering). Still made in America but made with European style and Mercedes quality.
Once XM and Sirius merge the same is sure to happen. The first thing that will happen is that subscription prices will go down and the quality of programing will go up since the two companies will no longer be spending time trying to cut each others throats and will concentrate on competing with the other media that is emerging and taking away their market share.
XM is bleeding as is Sirius. Both these companies are burning money and not showing anything for it. If they do not merge one or both will die and there will be one winner or Satellite Radio will be off the air. Both have huge fixed costs and both can go bankrupt and Satellite Radio will just vanish. Over regulation has hurt other industries and the consumer has suffered for it. Remember both these companies are borrowing money to keep afloat, they are paying huge interest on the money they borrow because stock and bond holders know they may loose all their money over night. Both companies are duplicating fixed costs so for the industry the fixed cost would be cut in half if they merge.
No bureaucrat cares if you enjoy your Satellite Radio in your car, it is NOT a choice between Coke and Pepsi it is a choice between Satellite Radio or no Satellite Radio. Or the bankrupts of one of the players leaving the market totally in the hands of the other player.
(hopefully XM since I own their stock) ..... if you have a differing opinion .. please feel free NOT to voice it since you will be showing your ignorance ... ;-)
Ryan said:
"Mergers never lead to more choice for the consumer (*cough* Comcast *cough*)."
You got that right, Ryan. For the past several years, I've been fond of saying, "Every merger is my enemy."
The Law of Supply and Demand applies here, folks. If you decrease the supply (in this case, the number of companies in the sat rad business), the price WILL go up.
Also, does anyone think that a single satellite radio company will NOT cut approximately half the channels and lay off a bunch of people? There's no guarantee that one of the channels to go won't be YOUR favorite.
When I was a kid in grammar school, the teachers were fond of telling us that Communism was Evil with a capital E because there was no competition in business and therefore no choice for the consumer. They may have overdone it with the "evil" stuff but it IS bad for the consumer to have little or no choice.
All you have to do is look at terrestrial radio since Clear Channel was allowed to own 1500 or so stations, more than any company in the history of broadcasting. Anyone want to argue that that has been GOOD for the radio listener?
Choice is where it's at in a capitalist system. If this merger goes through, in a few years, satellite radio will be as shitty as terrestrial radio.
NY Times excerpt -
"Reed Hundt, the former FCC chairman back when the commission passed its rule preventing a satellite radio merger, told me that when they were preparing to auction the spectrum for satellite radio in the 1990s, it wasn't clear that satellite radio would compete with local terrestrial radio. So the commission wanted to be sure there were two companies that could compete with each other. But now it is quite clear that satellite radio and terrestrial radio do, in fact, compete. One reason Sirius has never raised its rates- and XM has done so only once- is that the competition from free radio keeps prices in check."
The article then goes on to describe other forms of competition such as Ipods and and the internet.
Personally, I believe that there has never been more competition in home and car audio entertainment than there is today. Terrestrial/HD radio, Ipods/Podcasts, Cell phone radio, internet radio, cable radio etc. The monopoly argument is almost laughable when you see the competition out there all over the country. Even in Bismark North Dakota you can get terrestrial radio, Ipod, internet radio etc. Also just about every terrestrial station is in on the internet now nationally. So the rural argument that held up the Direct TV and Dish merger is irrelevant.
Today's NY Post
Excerpt -
A combined XM/Sirius would be able to negotiate a 20 percent decrease in each contract upon its renewal, given the increased leverage of only one satellite radio operator versus two previously," RBC Capital Markets analyst David Bank surmised is a recent report.
http://www.nypost.com/seven/01212007/business/contract_hit_business_peter_lauria.htm
I hope the Fcc takes them both to task on the interoperal device issue as a matter of public interest.
i also think all the related information filed in the past few years, by both companys should be made available for public review.
Im sorry,but I feel both companys may have short changed their shareholders.while directly slowing industry growth by offering only devices for a single provider.
they claim it was do to the technology, I hope the new birds under contract for both operators contain a correction for that claimed shortfall.
they could have collectively, operated a vast selection of formats. always on free to air ad supported promotional channels. nationaly, primarly for the exposure while offering a broader offensive position with the riaa and others..
The Fcc should have some troubling questions to ask of each service. Prior to even considering a merger...
Crankymediaguy's got it right. Isn't the whole consolidation of terrestrial radio one of the reasons why we all subscribed to satellite? Why would we ever want to do that again?
and for the guy who's doing a comparison to DaimlerChrysler.... news flash, DaimlerChrysler was fourth place in US sales for 2006 for the first time ever. While DaimlerChrysler's cars look nice, they're not selling so well.
Mel's already said he's gonna raise prices. You think as a monopoly, prices would go DOWN? Wow, wake up man.
MUSCLE13: Comments to a couple of your points...
RE: "20 percent decrease in each contract" -- unfortunately you do not work in the radio business and know what is involved in contract negotiations. Unfortunately, the precedent is set -- given a merger, most content suppliers will just assume walk, rather than take a pay cut... especially with other mediums available for their delivery. Not to mention the fact that most of the contracts don't expire for many more years. STERN, NFL, MLB, NHL all have 4 or more years left on them.
Even if what they say is true, 20% savings on Programming costs that are 4 or more years out -- when the industry should have the cashflow to cover those payments -- is not what I call very beneficial. I want savings now, not 4 years from now... especially when there's no guaranteed savings. This "savings" belief is way overblown and pumped by people that don't work in the business and know anything about big programming contracts.
RE: "Reed Hundts" commentary --- be very careful what you read from him. First, he says in his comments that "it wasn't clear that satellite radio would compete with local terrestrial radio". Oh really Mr. Hundt? Did you not read paragrapshs 77 and 78 of the licensing that you helped architect? Those CLEARLY state that DARS will compete with terrestrial radio, CD's and more... the licensing was even contemplating having MORE than 2 licenses because of this. I will be more than happy to supply the licensing comments that state what DARS would be competing with.
Further, Mr. Hundt's comments concern me. Mr. Hundt has been an advisor to the Blackstone Group since 2000. Those that don't recall... the Blackstone Group was a major early investor in Sirius. As recently as September 2004 they exercised their warrants into over 30 million shares of Sirius stock. I don't know that they or their affiliates own them any more, but the fact that Mr. Hundt has been an advisor to Blackstone this whole time raises SERIOUS credibility issues with anything he says about DARS.
Show me guaranteed savings on operating costs -- not big number speculation. I want to know what savings there can be, where they are and when they'll come. NO ONE has done this yet. Until then NO on any merger... unless you name the right price - which my price is pretty damn high.
"the licensing was even contemplating having MORE than 2 licenses because of this."
Fixing my own statement -- I meant to say that the FCC cut the number of licenses from 4 down to 2 BECAUSE of the competition from terrestrial radio, CD's and more. But they stopped there because the knew that had to have at least 2 licenses to ensure competition in that marketplace.
Merge or die XM. It's that easy.
Sirius is taking names and kicking ass.
XM is giving up names and kissing ass.
David said:
"Crankymediaguy's got it right. Isn't the whole consolidation of terrestrial radio one of the reasons why we all subscribed to satellite? Why would we ever want to do that again?"
True, David. I think the rise of Clear Channel has showed us what you get when one company owns too much of a single form of media: mediocrity (or should I say "mediacrity"?)
"and for the guy who's doing a comparison to DaimlerChrysler.... news flash, DaimlerChrysler was fourth place in US sales for 2006 for the first time ever. While DaimlerChrysler's cars look nice, they're not selling so well."
The Chrysler/Mercedes comparison is unfair for a simple reason: the two companies appeal to different segments of the car-buying public. Chryslers are bought by the average person while Mercedes are luxury cars. Sirius and XM compete for the same potential audience, at exactly the same price.
"Mel's already said he's gonna raise prices. You think as a monopoly, prices would go DOWN? Wow, wake up man."
Someone, ANYONE, name the last time one company was allowed to dominate an industry and prices went DOWN as a direct result of that. No, I'm not talking about temporary price cuts, but permanent decreases over time.
Remember, you have to factor out things like the cost of raw materials going down for some reason. I'm talking about permanent price decrease as a direct result of industry domination by one company.
When mergers are proposed, the principals always issue a statement like, "The resulting company will be so effecient that it will be able to offer lower prices to the consumer." The key words in those kind of press releases are "WILL BE ABLE TO". Even if they are able to, they never do. After all, the reason for the merger is NOT to "better serve the customer." It's to increase profit and the stock price.
To argue against this is to say that the Law of Supply and Demand doesn't work.
Crankymediaguy - How can you call it a monopoly situation when they are competing against Terrestrial radio, HD radio, ipods/podcasts, internet radio. cellphone radio, cable radio etc.?
homer985 is correct.
Keep in mind that if they merge, the content CANNOT go over to the other half without renegotiations. That means you can't get MLB on the Sirius half and NFL on the XM half of the bandwidth. This may actually cost more money, rather than save 20%.
Also, while a merger might sound good, the merged company will most likely do away with the niche music programmings that make each service unique....why? They have to cut channels to save bandwidth, plus there is some overlap.
A merger spells disaster for music fans. Comparing the music on SDARS to that on terrestrial is a joke, they are not competitors in that arena whatsoever.
MUSCLE13 said:
"Crankymediaguy - How can you call it a monopoly situation when they are competing against Terrestrial radio, HD radio, ipods/podcasts, internet radio. cellphone radio, cable radio etc.?"
Muscle, it would be a monopoly in the SATELLITE RADIO business. Yes, those other content suppliers would be competition for the attenion of the listener, but if sat rad didn't supply something those other systems do, why would anyone be paying for it?
My previous questions stand unanswered. Does anyone think that if the two companies are allowed to merge, the result won't be about half the channels going away, hundreds of jobs lost and at least some of the unique programming ended? Oh, and the price will go up, too.
Competition benefits the consumer. Always. That's capitalism at its best.