XM/Sirius sees ‘White Smoke’


The FCC brought to conclusion the final stage to bring XM Satellite Radio Holdings Inc and Sirius Radio Inc into one as the expected vote was 3 to 2. The $3.3 billion buyout by Sirius gives its CEO Mel ‘ZenMaster’ Karmazin what he has wanted– Control of all satellite delivery content.

Approval late Friday, 7/25/08, really was not a surprise as FCC Chairman Martin, Commissioner’s Robert McDowell and Deborah Taylor Tate said Yes and as usual Commissioners Michael Copps and Jonathan Adelstein voted No. But it was touchy for a slight period as Tate was the swing vote and got what she wanted – Tate insisted that the companies settle charges that they violated FCC rules before she would approve the deal. So they agreed to pay $19.7 million to the U.S. Treasury for violations related to radio receivers and ground-based signal repeaters.

According to the AP, under the terms of the consent decree, XM will pay $17.5 million and Sirius will pay $2.2 million to resolve interference complaints and violations related to land-based signal repeaters the companies operate to deliver programming.

The final merger agreement did not require the combined company to include a chip in its radios that will allow customers to receive digital signals from land-based radio stations, which would have helped the land-based radio industry.

There is an agreement by XM/Sirius to conditions which will includ a three-year price cap and an 8 percent set-aside of "full-time audio channels" for public interest and minority programming. Also they will adopt an "open radio" standard that may lead to a greater variety of features in radios and greater competition among manufacturers.

Another promise is to include a limited "a la carte" offering that would be available within three months of the deal closing allowing listeners to pay only for the channels they want to receive.

The approval was a major blow for the land-based radio industry, which the NAB lobbied against the deal as well as a number of consumer groups not wanting the merger arguing that the merger was not in the public interest.

RBR/TVBR observation: Just because it was approved does not make this a sure thing for today or the future. Wall Street does not feel that it will drive any movement on the stock and as the internet gains more control this could end up as just a lot of smoke. Worst of all, there are now ample ways for consumers to get music – HD radio (which RBR/TVBR feels is or maybe never going to truly work), Apple has iPods and various digital music players and don’t forget cell phones with all types of music capabilities.

Remember this merger has been just about 2 years in the making and much has happened in the internet biz. Web radio via wireless connections storing thousands of songs have taken the world by storm. Research shows that 23% of people use the Internet for audio and 26% own an iPod. So you have to figure XM/Sirius are facing an up hill battle against both of these free providers. End result – the consumer is in control. It is what it is.