The XM / Sirius merger rumor started late last year but it's been resurfacing again lately. Language used in recent speeches by executives from both Sirius and XM include lines like “Consolidation creates value…” and “Significant benefits…”. So it looks like we're up for another round of satellite radio merger rumors.
Why would Sirius and XM, the competing satellite radio brands in North America, want to merge?
Easy, because neither company has yet to post a profit. XM projects breaking even for the first time next year. But both companies have extended their credit lines in a war that has escalated to a sort of satellite scorched earth policy. Both companies have been handing out lucrative contracts to radio content providers like Howard Stern and professional sports in an effort to woo customers. The spending by both satellite radio providers has been excessive. A merger is one way they can join forces to compete with other radio formats instead of each other.
The big set of roadblocks for a potential merger between satellite radio providers are legal issues. Regulators could consider an XM-Sirius merger a monopoly. One interpretation of satellite radio’s market could include other forms of digital entertainment like MP3 downloads, podcasts and even traditional AM/FM radio. If these were considered fair competition to satellite radio then a merger would become legally justifiable.
When EchoStar Communications and DirecTV tried to merge it was rejected by the FCC and dept of Justice on the grounds that satellite TV were separate markets from Cable TV. Boy, did those satellite TV companies get a raw deal there.
Is it fair the government should be such a huge consideration in a potential business deal between private companies?
There are too many competitors to satellite radio, namely my own MP3 player I hook up easily into my car stereo. It provides me way better digital quality audio than Sirius or XM and I have practically unlimited music I can download for the road. So, from my perspective satellite radio certainly is already competing with MP3 download services.
