February 21, 2007
Sirius-XM Merger
I suggested last month that an XM-Sirius merger would not be approved by a Democratic 110th Congress and I am not giving up on that speculation.
Against prescience points, however, I am hoping for the deal to succeed. I don't think either firm is strong enough to compete and innovate by itself. A strong satellite provider could bring new offerings to the market. (Maybe I'll even get my beloved Luna back.)
The real issue is whether our beloved Federal government will continue to meddle in business, based on ghosts of Theodore Roosevelt and robber barons. The WSJ Ed Page joins me (paid link, sorry) in realizing that the market is too complex for regulators to understand.
Beltway critics of the deal see a media monopolist around every corner, scheming to limit the public's access to content. And it's true that the merger would create a lone satellite radio company. But a pure monopoly is one that exists in a market where there are no close substitutes. By contrast, a combined Sirius-XM would have to compete not only with free broadcast radio but also with MP3 players, online radio and even music channels offered by cable providers.Heaven only knows what the cellular companies will bring to the party. They're already gearing up to provide more video options, but there's nothing stopping Verizon or Cingular from coming up with a device that includes a couple of dozen radio stations to compete with satellite.
Which is why the real danger here isn't the creation of a "monopoly," unless you define the market in a way that has no resemblance to the real world. The bigger concern is that regulators will repeat the satellite television mistake and in the process reduce consumer choice. "The reason for this merger is not to exclude others from the market," says Adam Thierer, who follows telecom issues at the Progress & Freedom Foundation. "It's to make sure they can compete in the broader market against the various players they face -- serious competitors that have satellite radio providers scrambling for their lives."
If the shareholders wish to merge, let them. The idea that a global entertainment market is so segmented as to allow a monopoly is laughable.
Economics and Markets Posted by jk at February 21, 2007 10:00 AM
As the resident ThreeSources Sirius lifetime subscriber, I wonder how this is going to work out in the end.
Somehow I think we're going to get a bland mix of the two services.
In terms of approval, I think there's plenty of competition to satellite radio. FM radio... AM is still around... iPod/Zune etc... they're all hanging around. I suspect most (sub)urban commuters are already plugged into an MP3 device of some sort in their cars or bus or subway.
We'll see, I guess.
Posted by: AlexC at February 21, 2007 10:52 AMI think existing subscribers could benefit from the merger. Collapse the proprietary wall between the different receivers and allow subscribers to shop 300+ stations. You'd still end up with 100 hip hop stations and 100 bad country stations, but you could expand choice around the periphery.
Posted by: jk at February 21, 2007 11:29 AMA neighbor of mine in the satellite business think they're going to go with the Sirius satellites because of their orbit (lower and less need for repeaters) vs XM's (geostationary orbit). XM's satellites can also be then leased out. I can't imagine that either has the bandwidth for 300 channels. Would any of the recievers support tat many?
Posted by: AlexC at February 21, 2007 3:20 PMI have the -- admittedly unconventional -- view that Satellite Radio suffers from a lack of bandwidth.
I got 300 assuming that the merged company might be persuaded to keep both systems operating to keep current owners enrolled. New hardware might enable a single device to access both. Cable was "150 channels and nothing on" as Truman Capote said until cable TV had 500 channels to pursue a true long-tail strategy.
I think Satellite Radio needs a lot more choice to catch hold. It's competition is the iPod and they are going to have to provide more programming than either company does now.
Posted by: jk at February 21, 2007 3:56 PM | What do you think? [4]