Day 3 of the Sirius - XM “merger of equals” takeover: Reactions and speculations
Are XM Satellite Radio and Sirius Satellite Radio merging, as they claim, or is Sirius acquiring XM, as many newsreports claim? Reuters “mergers and acquisitions reporter” Michael Flaherty tries to explain what’s causing the confusion. It’s complicated enough to have made different analysts reach different conclusions and Sirius and XM have contributed to the confusion by not disclosing the proposed share count resulting from the deal (ie. how many share XM stockholders end up with vis-a-vis how many share Sirius stock holders end up with).
Flaherty is of the opinion that Sirius is buying XM and will hold 52% of the shares of the combined entity.
Charles Warner, “Media Curmudgeon,” sees the merger as a desperation play and he doesn’t think satellite radio has much of a future, regardless of whether the FCC aproves of the deal or not. Like many of the bloggers we linked to yesterday, Warner believes that both broadcast and satellite radio are being hammered by iPods and other forms of individualized audio programming.
Casey Lartigue, “a monthly guest and an occasional host on XM 169″ is “happy about the deal,” as it will bring high-value programming, such as the NFL, under one umbrella. He thinks his station (XM 169) will survive, as “it is the only national black talk station.” Lartigue also addresses the idea that satellite radio is or should be commercial free:
A big misunderstanding that many people have about satellite radio is about it being commercial free. Yes, the music is commercial free. The talk and news channels are not commercial free. So people who want commercial free music can still get it. But with the news and talk stations? Think about it. You still need commercials because the hosts don’t wear NASA diapers. They still need to take breaks–and during those breaks, if you don’t hear commercials, then you get to hear the same promos for different shows on the station.
Howard Bloom takes an in-depth looks at the role of sports programming and its financial impact on XM and Sirius. It’s an eminently readable post and I use the following paragraph merely to whet your appetite:
Its great to offer an NFL, MLB, NBA, NASCAR and NHL channels, but if you turn on your car radio, access ESPN, FSR or Sporting News Radio on your computer you’ll be able to listen to all the NFL, MLB, NBA, NASCAR and NHL talk you’ll ever care to listen to and it won’t cost you a dime. It remains to be seen when XM and Sirius merge in the coming months if they’ll keep the league centric channels as part of their programming. The costs associated with talk radio programming are much higher than most can imagine.
Being a subscriber to both XM and Sirius, Bryan Caplan at EconLog welcomes the deal:
I severely doubt that prices will go up by much (thought perhaps they should - satellite radio has yet to turn a profit), and I’m confident that there will be more selection. And perhaps more importantly, it also boosts my confidence that satellite radio will continue to exist despite the indifference of the iPod generation. (I pre-paid XM for five years, and I get nervous every time I poll my undergrads and find that none of them subscribe).
In my opinion, Caplan’s undergradute students shouldn’t spend $13 a month on satellite radio. They should do whtever they can to avoid credit card debt, and not subscribing to satellite radio is a good way to do that. Once they gradute and get measly-paid jobs they should get it.
I think Caplan is right that subscription fees won’t go up all that much because so few people have satellite radio and very few, I imagine, view it as anywhere near as must have as cable TV, market where consumers are positively gouged by providers. I don’t satellite radio will ever be in that position unless they’re able to develop some killer content or, even better, services.
Tony at Rolling Doughnut is a Sirius shareholder, a Sirius subscriber, and a Howard Stern fan. He thinks the merger/takeover “is ultimately the right deal.” He sees short-term downside on the revenue side:
As for potential subscribers, what incentive will they have to sign up now? The rational decision is obviously to wait this out until the executives offer answers. That will hurt both companies financially…
I guess that depends on the share of subscribers XM and Sirius acquire through car sales. I don’t think the anticipated merger will hurt those sales, unless, as Business Week speculates, the auto makers decide to hold off “until it’s clear which company’s model of radio receiver prevails—or until a hybrid is developed.”
XM subscriber Lilsurfergirl had one immediate thought when she learned about the merger:
My initial thought in hearing about this merger today is cost. It is hard for me to think the potential merger of XM and Sirius was created to lower subscription fees. Increase shareholder value, for sure, but Jane on the street should look for a price increase….I can already envision the promo copy…”Now, with 500 channels and your favorite shows in one location”…all for $15.95…Most satellite radio subscribers don’t consider $12.95 per month to be that painful, but the closer you get to the $20 bill benchmark the more people reevaluate the expense.
XM subscriber youbdraug is giving the merged venture a short leash:
If the price goes up, or I have to buy a new receiver (I think I will), I’ll probably cancel my subscription.
XM’s FAQ page on the merger says flatly that current XM subscribers will not have to buy a new receiver. Not that I would take that statement to the grave.
Scott Long, who listens to both XM and Sirius, provides a breakdown of the two companies’ programming. He likes both but gives the edge to Sirius, unless you need the baseball package on XM.
Consumer Reports is weighing with a blog post on the merger and its potential consequences for subscribers. Among the recommendations are:
Ask the seller — equipment is sold by the providers themselves as well as by automakers and electronics retailers — what protection you have in the event that the merger renders your equipment obsolete. Ask for any assurances in writing before you buy.
That is sound advice, although I doubt Sirius - XM will open itself up to massive class-action lawsuits by dumping much of the cost for new or upgraded receivers on the laps of current customers.
Eric at Pardon My French thinks the FCC should
realize is that when you buy a new car it comes equipped with AM (free), FM (free), CD player (free), Tape player (free but who cares), and Satellite Radio (costs good money per month).
Looks to me like there is plenty of competition right?
Eric mentions that a lot of car buyers let the satellite radio subscription that comes with the new car expire once the promotional period is over. Unless the merged XM-Sirius comes up with a super-easy fix the already installed but now inactive receivers will become entirely worthless, at least the portion of receivers that aren’t compatible with the winning signal (XM’s or Sirius’s), so to speak.
Duffy at Pencader Days is a Sirius subscriber who also gets XM through his DirecTV service.
Sirius has much much better sound quality. XM stretches their bandwidth so tight the music is tinny and hollow. Sirius is much richer…
Content is really the big difference here. Clearly the music channels will be consolidated. There’s no need for two of the same channels with slightly different programming modulation. The talk channels and sports programming will be the big fight.
Duffy recommends whacking Martha Stewart and wonders how major Sirius shareholder Howard Stern will take to competitors Opie and Anthony who hold court at XM. He rounds off with six good questions about the effects of the merger.
XM-subscriber Frank Ahrens at WashingtonPost.com fears that the merger will mean less of the programming he wants and more of the stuff he doesn’t want (eg. Howard Stern, NFL, Martha Stewart). The post’s comment section reveals another hurdle for the combined entity to overcome: The strong distaste many of the subscribers have for the company they don’t subscribe to. It’s rather common, it seems to me, for Sirius subscribers to regard their satellite’s programming as superior to XM’s, while many XM subscribers think of Sirius as trash.
The commenters also point out that some receivers have the recording capability that Ahrens want.
One wonders why Sirius wants to buy XM, which has nothing if one is to believe Sirius.
Here’s a link to a PDF-document with the presentation delivered at the Tuesday morning press conference. One of the selling points for the merger is “Merged company is more attractive to large national advertisers that have a significant number of media alternatives.” Yeah, don’t expect much commercial-free content, not even on the music stations, after the merger.
Mike at The Malice Engine tried XM but found $13 a month more than it was worth:
When I bitched, people would say “But you get over a hundred channels!†Yeah? Big deal. I listened to maybe four regularly, and flipped through maybe half a dozen or so more. Tack on country for my wife and we’re still looking at less than 20 channels I give half a crap about.
Instead, Mike went the iPod route. He wishes satellite radio had gone for tiered service plans and less exclusive content. If the FCC approves the merger, I imagine it could strip the combined entity of one of its licenses and give it to a competitor that would have good reasons to go a cheaper route. On the other hand, original content, whether it is exclusive or not, is expensive, and if you all you’re doing is playing music, how are you any better than iPod?
