XM Gets Sirius
Monopoly may be coming early to the budding satellite radio industry as XM Radio and Sirius attempt a marriage of convenience (with just a hint of desperation). A joint statement from the companies calls the move an "all-stock merger of equals." Word on the street is that the companies would likely keep much of their offices both in New York (Sirius) and Washington (XM), but certainly some layoffs and job consolidation would follow. There have been little specific details so far regarding programming changes, job cuts or even a new name.
One thing that has been established is the new structure. According to the Post, Sirius Chief Executive Mel Karmazin will be heading XMius (just a thought) while Gary Parsons will remain as XM Chairman. One certain departure will be XM CEO, Hugh Panero, who plans to leave after the deal goes through.
The companies hope to be much stronger together, arguing that the collective force of MP3 players, internet radio and traditional radio are too great for them to bear individually. While both XM and Sirius have grown in subscribers, neither company has yet to turn a profit. Expensive deals with major league sports and bidding wars for high-priced talent have eaten away at the bottom line. Howard Stern’s program brought up Sirius’s subscriber numbers, but cost them a fat $500 million. XM countered by offering Oprah a three-year contract at for $55 million per year.
One big, navy blue-blazered obstacle to the deal is the FCC, which has rules specifically forbidding this type of merger. But, as is typically the case with high commerce, there’s a possible way around the regulation. The Post story quotes FCC Chairman Kevin J. Martin, saying that the rule can be changed but “[the hurdle] would be high. ... The companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices.” This logic might sound a little funny considering the new company would have a monopoly on the satellite radio market, but considering subscribers from one company could have the programs of both companies available to them, and theoretically prices could stay low thanks to reduced administrative costs and competition from terrestrial and internet radio, there's an argument that at least could be made here. Then again, we all know what only having one option in cable television can bring.
Listeners are not the only ones watching this deal. Local sports guy Tony Kornheiser has a program on XM, as does Joe Solomese, president of the D.C.-based Human Rights Campaign.
DCist only has to think about Clear Channel/Infinity/Bonneville’s ravaging of the radio to be skeptical of the wonders of consolidation. Also, if you're an XandO fan, you know that mergers with New York companies can become a lot less appetizing than they originally appear.
Photo of XM building by Flickr member eteel