XM/Sirius: What’s next?


The votes are in on the FCC’s 8th Floor at the Portals in Southwest Washington. Satcasters XM and Sirius went 3-0 among Republicans and 0-2 among Democrats.The tiebreaker turned out to be Republican Deborah Taylor Tate, who had no problem with the merger, but was not willing to look the other way regarding what she and her colleagues finally determined to be almost $20M worth of repeated repeater violations.

The late Friday FCC announcement  had the usual effect of catching Washington’s watchdog rapid response machine in repose for the weekend, so the normal rounds of applause and howls of protest will no doubt be forthcoming.

What will be most interesting is the speed with which XM and Sirius can get themselves down the aisle. And when they get to the part of the service when the MOC says “May those who oppose this union speak now or forever hold their peace,” who will speak and how far will they be willing to go to break up the nuptials? Will there be a petition for reconsideration delivered to the FCC? Will the case head to the courts? Will Congress decide to step in?

Some of the loudest howls will almost undoubtedly come from the NCE/minority communities, who feel more than a little shortchanged by the way the FCC has allocated this band of spectrum (read this morning’s Viewpoint from a trio on NCE broadcasters at rbr.com). On the other hand, for each and every action in Washington there is an equal and opposite reaction, and today it comes from the Mountain States Legal Foundation, which has written in to the FCC to warn that setting aside any channels at all would be unconstitutional.

Of course, for subscribers to the new 300-channel service, they will be able to instantly enjoy the wealth of programming options – oops, not possible. One of the license violations committed by the two companies has been not making interoperable receivers available. This devil’s bargain made it much more difficult for one satcaster to go after the subscribers of the other, but it allowed both to try to keep a lid on the churn rate. The only problem, of course, is that it is collusive and anticompetitive – but apparently there is not so much as a wrist slap for these offenses included in the consent decrees the companies have agreed to. It would seem it takes a monopoly to get such devices out on the market.

Artists, program producers, air talent, musicians will begin to enjoy negotiations with a lone gatekeeper to the satellite space. Providers who used to enjoy having two gatekeepers will now instead have two choices: take it or leave it. And don’t worry, subscribers, your turn will come too, in three years when subscription caps melt away.

After the Friday vote approving the merger, NAB’s Dennis Wharton said, "Today’s vote certainly comes as a disappointment to NAB. We continue to believe that consumers are best served by competition rather than monopolies." The NAB has reason to be disappointed – not only did it come out on the short end of the stick in its attempt to derail the merger, it was unable to force inclusion of an HD chip into the interoperable receivers the merged entity will be putting on the market.

RBR/TVBR observation:  Both XM and Sirius have been saying that the merger is not a prerequisite for their continued existence. Some analysts think otherwise; and go so far as to speculate that the merger may not be enough to save a business model which is in danger of being overtaken by wireless internet service. Hell, the skyrocketing price of gas is a double edged sword for this service, siphoning discretionary income even as it reduces TSD (time spent driving), which in turn makes a paid audio subscription that much less of a attraction.

We’ve heard many times that the RBR opposition to the merger is well-known. Much of our opposition is simple opposition to monopolies – we all happen to be consumers ourselves. We also are stunned that the bad behavior of these two companies is sometimes cited as a positive reason to grant the merger. This is especially true in the many areas they have avoided competing with one another, including squashing retail interoperables, the failure of either to offer a la carte to get a leg up on the other, engaging in and failing to contest exclusive receiver deals with automakers, and more.

We have never made a big deal about the economic impact of a merged satcaster on real radio, however. The radio business is facing many challenges right now, and XM/Sirius is not anywhere near the top of the list. If there is a silver lining to the merger cloud, it may be that it will take one distraction away from radio execs that have plenty of other things to worry about.

We say this with one caveat: Radio and the NAB must make the utmost effort to enforce the national charter of the merged entity and keep it 100% out of the local media business. If the merged entity were to eliminate 100 duplicative program services and suddenly offer automated traffic and weather for the top 100 radio markets, radio should fight them all the way to the Supreme Court.

Internet audio is not just going to make life difficult for the merged entity – it is going to make life difficult for radio too. But internet radio will also be behind the curve when it comes to local service. And smart radio operators will begin harnessing the power of the internet themselves. They will make sure it is more than an adjunct to the station.

But the key is local, local, local. Radio cannot simply keep others out of the local market, it must make sure it continues to earn the loyalty of its local audience. Local is where radio’s greatest offensive power can be unleashed, and it is the sacred territory that must be defended at all costs