Here's Hoping Cramer Gets His Satellite Radio Merger

I can’t tell if Jim Cramer really hates radio stocks or if he just desperately wants the Sirius (SIRI) and XM (XMSR) merger to be completed and is boycotting the broadcasters out of spite. I am a big fan of Cramer, and though I think he’s wrong about the general state of radio broadcasters I do agree with him that the satellite merger should go through. Broadcast radio simply has nothing to fear from a consolidated XM and Sirius, and should stop trying to block this merger.

I may be the only person connected to the radio industry who thinks this, but in my opinion it’s a completely hypocritical position that the broadcast radio industry has taken here. The industry can’t credibly argue for less ownership restrictions of its own and push for cross ownership with newspapers and then argue that consolidation in another sector is anti-competitive. Terrestrial radio and satellite radio have such different business models and competitive nuances that broadcasters can easily compete with a merged satellite radio operator. In many ways, they could even find ways to work together for everyone’s betterment.

The National Association of Broadcasters [NAB] is all over the place in their opposition to this merger, and is showing that this lobbying group determined on isolating and protecting the broadcast industry is simply a relic of the past. In the modern media landscape, the over the air signal is a luxury, but not a necessity to attract an audience. Radio stations don’t need the protection of the NAB to prosper, they simply need to focus on what they do really well- connecting local communities of listeners and helping local businesses prosper through advertising.

Broadcast radio has three significant competitive advantages over satellite- there is a widespread and common installed receiver base already in existence, the over the air signal is fairly ubiquitous, and its product offering is completely free to consumers- a price point that is hard to compete with. Most successful radio stations also have local sales forces that are deeply entrenched in their communities with long standing relationships with major local advertisers. Radio can win with those advantages and doesn’t need lobbyist protection to keep the upper hand.

Local radio is still extremely relevant to most of America, and lately many large advertisers are discovering that while the point and click advertising the internet offers is excellent for driving transactional messages, it is horrible for building large branding campaigns. Broadcast radio still has a place in the media landscape as a reach medium, just as satellite radio has its place for that smaller audience that desires greater content choice and fewer commercials. Both will survive, and could thrive together if they would stop fighting each other.

I don’t know what will happen with XM and Sirius, but I do agree with Jim Cramer that the merger has taken a ridiculous amount of time. I also agree with him that it is cowardly of the terrestrial broadcasters to try to deny this merger the way they have. I don’t agree with him that all radio companies are through as businesses though, despite the massive declines in most stock prices and flat-lining of revenue growth. Some of these companies will not be around in a few years, but there are others that will be major winners when the weak hands fold.

The radio industry has seen this cycle and been written off before. It is different this time, but the industry is responding differently as well. There is a massive movement afoot at most companies to modernize, and solid interactive strategies are forming that will allow radio to use its strengths to capitalize on the local interactive advertising pool which is now growing at an exponential rate.

Broadcasters should be extremely careful in the way they use the NAB going forward as it simply does not have the clout it once had in Washington. Additionally, there are lots of individual technology companies that have far greater financial resources at their disposal if they want to pick a fight with broadcasters down the road in this era of convergence media.

The days of protectionism and isolationism are over for the broadcasting industry. As free market capitalists, the industry has as far better chance of winning the fight with satellite and other competitors head to head, and not hiding behind lobbyists.

I hope for the industry’s sake that Jim Cramer gets his satellite merger. Perhaps then his venom for radio broadcasters will finally subside, and even he will begin to see that not all broadcasters are cut from the same cloth.

Perhaps he will also see that right now there is real value to be had in certain radio stocks.

Disclosure: None

Disclaimer: This article reflects the individual views of Mr. Hannan and may not be attributed to any person, company or other entity with whom Mr. Hannan is affiliated.

Comments

[stinkaroo:]

I keep hearing all the predictions on whether the merger will pass or not but I would like to hear what predictions there are on Siri stock value if the merger were to pass... and/or fail.

2008 Mar 11 11:07 AM

[BobbaBoey:]

Cramer is right, the 4.2+ million dollars that have been spent to block the merger should have been put towards modernizing the stations. But the NAB has to take a stance to some level, but I think the proposed lower prices and other actions Sirius has sent to the FCC in response to their concerns is something they can't argue against. Satellite radio controls a very small segment, but with the current state of terrestrial radio stations, terrestrial radio cannot afford any further decline in market share. Terrestrial radio will never go away, but no company wants to see their market share slide. I say the merger goes through and Sirius expands their capabilities of streaming media to your car - such as the tv capabiliites just released.

2008 Mar 11 12:23 PM

[BobbaBoey:]

In response to stinkaroo, this is the only article I have seen that projects a merger/stand alone projection.

seekingalpha.com/artic...

2008 Mar 11 12:52 PM

[stinkaroo:]

Thanks Fa-Fa-Flo-Hi!

2008 Mar 11 12:57 PM

[wilber:]

All of the opposition to this merger is actually having the opposite effect, giving Satellite Radio more exposure than they ever would have had if it had gone through quietly within the 90 day normal timeclock. The "NAB" needs new leadership. APPROVE ALREADY!

2008 Mar 11 03:30 PM

[OldGaDawg:]

I too believe that the NAB & The FCC are all full of IT! As long as these people receive monies from political opponents who have nothing but terrestrial stations in there hip-pocket? They will continue to receive these offerings and ignore the people to whom pays there salaries. This merger should have been all ready passed & approved long before now. "FM" stations will eventually go as did the way of "AM" stations.

2008 Mar 11 04:20 PM

[jenna-lee:]

NAB--are you listening???? Let the merger go through. Listen to Cramer. I also agree with Mr. Hannan about the general state of radio broadcasters. I'd like the legislators to get on the ball and do the right thing, please...

2008 Mar 11 05:04 PM

[ladders11:]

Cramer is a broad daylight thief. How could anyone pick or pan Cumulus stock without mentioning the merger?

2008 Mar 13 02:33 PM

[FilthyLucre:]

Provocative.

2008 Apr 09 11:39 AM