Analysts still on the XM/Sirius case


Last week at Motley Fool, an analyst called XM and Sirius stock a bad investment, whether or not the proposed merger ever gets to green light from regulators at the DoJ and FCC. A different Fool has since weighed in wondering why the merger hasn’t been approved yet, and yet another observer from is standing by a prediction that the deal will be done.

After Motley Fool’s Philip Durell panned the stock, Rick Aristotle Munarriz has penned a piece calling for the wedding to go forward. He thinks FCC Chairman Kevin Martin is inclined to give thumbs up on the basis of his love for a la carte channel offerings, but that DoJ approval has been tougher to come by. Paul R. LaMonica at expressed a similar view, and said that he still thinks it’ll go through, even though a month and a half have passed since analysts were tripping over one another to announce that approval was "imminent" last November.

Munarriz made an interesting comment, saying that "…it’s naive to believe that XM and Sirius would return to their adversarial roles if the merger were somehow axed. They’ve dug too deep into each other’s books. They’ve spent too much time mapping out synergies and sidestepping the closet skeletons."

RBR/TVBR observation: Huh? Munnariz seems to be prescribing thinly-veiled collusion between the two companies should the merger be derailed, underscoring why two companies do not add up to free open-market competition, much less one. In calling for this collusion, Munarriz makes precisely the point that some antitrust experts have made in opposition to the merger. If a la carte is such a great deal for satellite radio subscribers, why isn’t one of the two "competitors" offering it right now? What an edge that would be, what a selling point! The answer is that a la carte isn’t good for subscribers (or producers, or artists). At this point, we would suspect that the percentage of DARS subs getting the service for the benefit of their children is minimal; the biggest effect of a la carte is to kill value per channel; and the a la carte program they are offering is restrictive anyway.

No, a la carte isn’t for subscribers, it is there strictly to appeal to the national nanny proclivities of Kevin Martin, just as Munarriz noted.

The fact that neither is offering it independently is an example of collusive behavior, and is yet another reason to expect the merged entity to use its newfound market power with its own welfare in mind, not that of its captive, option-free subscribers. This merger should follow DirecTV-DISH into the reject pile.