XM/Sirius Merger Still a Long Shot 32 comments
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It has come to the point with XM Satellite Radio (XMSR) and SIRIUS Satellite Radio (SIRI) where decisions from the DOJ and FCC can be anticipated, with some degree of confidence, in the very near future. This is not based as much on the FCC's projection or the companies' general statements on timing, as it is on the perception that the regulators, companies, and third parties have essentially exhausted their arguments for and against the merger. This is also the general time frame this publication has projected since very early in the transaction, so we are obviously relying heavily on the entire deal file in assuming the DOJ and FCC will act soon.
Of course, there is literally no way to determine if events will occur over the course of the next two weeks as appears to be the prediction du jour. The first quarter end is an attractive point of speculation, but it has no real bearing as far as the FCC or DOJ is concerned. This was made abundantly clear when the respective reviews continued into the new year with virtually no material developments. Put another way, slippage into the second quarter would come as very little surprise.
That being said, there continues to be very little solid evidence to suggest that regulatory approvals will ultimately be granted. Despite the obligatory optimism expressed by the companies today and recently, both regulators have been amazingly efficient at controlling leaks and offering indications either way in this case. This is rare indeed for a transaction of this magnitude and constant publicity. It is also perceived by this publication as foreshadowing of either rejections from both regulators or approvals with conditions beyond what the companies may be willing to accept.
In short, this publication has seen no legitimate information to suggest that the initial assessment of this proposed combination should be altered. With or without concessions, it is still very difficult to conceive of DOJ approval of the merger based on the relevant market involved. While the companies and supporters have gone to great lengths to show that alternative technologies present competition to satellite radio, not a single case has been made that any one product or service can adequately offer radio broadcasting comparable to all the advantages that satellite radio offers. Ironically, this is essentially the message the companies, particularly SIRI, highlight in their national advertising campaigns.
For example, any consumer can download music to an iPod and claim that is every bit as enjoyable as a satellite radio station. However, that same consumer can not use the iPod product to listen to live broadcast of sporting events or talk shows, which the companies rely on heavily for subscribers. Similarly, while many consumers are now able to listen to live broadcasts via various Internet technologies, these technologies are dependent geography which is not an issue for satellite radio. An individual driving from Boston to New York during the Super Bowl would not be able to listen to the game, without interruption, using a mobile Internet service, or for that matter terrestrial radio, which would require a variety of stations.
This concept is true of literally every alternative offered as competition to satellite radio. Combined, every alternative product/service could conceivably represent a substitute; separately, there is not one device or current service which can provide the national coverage, variety, and overall convenience of satellite radio. That is precisely why consumers choose to subscribe to the services in the first place.
The Department of Justice certainly has the option to define the radio market broadly in reviewing this potential combination. The fact that the HSR process is nearing the one-year mark is a very strong indicator that market definition for this deal has been as complex as anticipated. A narrow-market definition -- if that is in fact the DOJ's inclination -- should have resulted in a conclusive decision by now. This suggests that the narrow-market definition is not winning the day at Justice.
This concept seems to be bolstered by the FCC's veiled frustration with the timing of its own review, which will not move forward until the DOJ has provided something definite to Commissioner Martin, et al. Third-party filings are still coming into the FCC on a fairly regular basis, but it is rather apparent there is little more information supporters and opponents can now provide to the regulator. Thus, it is not surprising that the FCC has indicated a decision is possible during the current quarter.
This will possibly be the final detailed analytical entry for this transaction. The expectation now has changed very little from day one, and until information surfaces from one or both regulators to contradict the original expectation, it will remain essentially unchanged. The successfully completion of this merger was a long-shot from the start (in terms of major merger transactions), which the companies themselves openly acknowledged more than a year ago. It remains a long-shot in the opinion of this publication, with the odds perceived at roughly 20% for the required regulatory approvals and successful completion.
Disclosure: We have no positions of any kind, in any security. We are a completely neutral source of research and analysis.
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This article has 32 comments:
Did you know your article was going to be such ideal flame fodder that you purposely didn't put your real name on it? Gimme a break. Looking at your past articles, none of them faired very well either. Stick to research and leave reporting to journalists.
Everything. Look to the future and think global.
Pass the freak'n merger! (The politics involved make me sick)
You obviously don't have sat radio. I did NOT buy it for the "national coverage". I, like everyone else, bought it because it offers better music playlists without commercials and better organizations of channels. Besides just music, I can get CNBC or CNN or Entertainment news in my car or listen to sports game that I can't get on tv. Could I get that sports game on the internet too? Sure. Can I listen to music on the internet? Yes. Can I download Jim Cramer on iTunes? Sure. Can I watch Lost for free on ABC online? Yes.
The internet is "international". I can get music on itunes or my cell phone nationally too. And as for terrestial local radio -- bottom line here -- it sucks, has lame djs, and too many commercials. The product is simply not as good as what innovative substitutes offer....and it isn't willing to change and is scared of competition and is trying to do everything to block this merger.
Go buy sat radio and you'll see how it compares. It's not a "national coverage" thing -- it's a better product thing!
5 years from now we'll laugh at this debacle while we drive down the road with our always-on internet connected radios.
The DOJ/FCC has much more important topics. Approve this merger!
The true reason behind this fact is not based on the author's comments though about competition and monopoly, but instead on terrestial radio's lobbyist and members of Congress getting their palms greased by this local stations to help defeat this merger. I am not a subscriber to either satellite radio company, but as a person who still believes in a free market society and capitalism, this deals needs a decision much sooner than later. Typical government slow decision stalled by red tape and $ passing hands. Call your Senator and Representative today and raise hell asking them why this is taking so long. Decision should be made one way or the other, we can go to war in a day, crush the economy with knee jerk reactions from the fed in a few minutes, but cannot approve a merger within a year. What a freaking joke. Approve this and move on!
Nobody is going to die if this merger passes. Approve it now!!!!
"This will possibly be the final detailed analytical entry for this transaction."
We should all be thankful if that turns out to be true.
Good riddance.
As a Sirius AND XM user, I have never been able to travel more than about 50-75 miles without having to pause or leave the broadcast I was listening to in order to search for an available FM frequency. I would speculate that the same would hold true in the Boston to New York example cited.
As a result, the broadcast is not only "interrupted", I have actually found myself exposed and listening to a wider number of terrestrial radio stations, which without satellite radio I would never have taken time to find. I had my morning commute and drive home radio stations and didn't care or bother to seek alternatives. Satellite has forever changed that for me.
The technologies competing for "ear-time" ALL offer unique and exclusive features as well as remarkable overlaps. These nuisances create only a small competitive advantage for each provider and none create an appreciable reasoning to deny a merger on the cited grounds.
You want a Texas example?
I can shoot you with a gun. I can't shoot you with a knife, but I can kill you with both. The unique properties of knives shouldn't preclude Ginsu and Bowie from merging.
In many mergers, one or both of the merging companies have unique abilities that competitors lack and visa-versa. Thus the concept of merging for business advantages. If Justice wants to benefit this consumer, they can do it by eliminating one of my Satrad bills...GET THIS DEAL DONE!!!
Let me ask a question of someone smarter than me. If i developed a product to shave my ass with out a blade and I had a competitor who developed a similar product, and we sat down and decided if we merged, we would have a better chance at success, would that be something we would need the goverment to approve? Do the citizens of this country want to spend their tax dollars examining this deal? But with our present form of goverment, Gillette will have a venue to make it difficult, and your elected politicians will have a venue to line their pockets. And Free Enterprise and citizens suffer!!
Our Goverment is getting way to involved and actually taking powers away from the citizens. In order to get anything done in this country anymore, you need to have money to grease the elected politicians. Its a JOKE.
And the most ironic thing is our federal goverment feels compelled to impose our political belefs on the rest of the world.
This country needs citizens like Ben Franklin and Thomas Jefferson to start another revolutionary war. Your being taxed, double taxed at every transaction. The goverment has the best racket going.
Let me ask another question, Why are not goverment workers income not tax free? Example, a teacher needs 45K to live on, the goverment pays her 60K so they can take back 15K ad tell the tax payers their expenses are 60K for that teacher. Make all goverment workers tax exempt and your property and inclome taxes will go down 20%.
Another question, Dow we really need 50 states and a million or so municipalities? or is it just another clever way to give more people goverment jobs?
We need new leaders with no ties to parties
It is however a luxury item that not all can afford..
I'm a subscriber to Sirius and have been for a number of years. I would love to see the merger approved with NO STRINGS ATTACHED from Clear Radio or that from others that claim that "minorities are not benefiting" from this for reason of equal ownership. Another I think is a "Witch Hunt" for Howard Stearn. And how the terrestrial radio station are working to bring censorship to SatRad.
To end... Is that.. if the merger is not approved - And the final reason for none approval is not a reasonable one?
I certainly hope to see "If possible" - A huge law-suit brought against those to whom made a sizable profit of not listening to the people and decided that "monies in there pockets" out weight justice.
.. Old Ga. Dawg...