Sparks

4 Comments

    • The 'Real' Story Behind the XM/Sirius Merger [view article]
      Excellent article. Allow this merger and the public gets the short end of the deal. Mel won't have to compete for exclusive rights to sports programming. He can charge whatever the traffic will bear, and pay as little as he wants for his sports product. Expect the new radio to have perhaps a dozen “free” channels, loaded with commercials. That will create demand for the radios and allow him to end the subsidy. That should be good for revenues but there are other problems / opportunities. If Mel moves too fast the next administration might force him to divest himself of one of the systems. To prevent this from happening, the current satellites will need to be scrapped and replaced with a single system. They are getting pretty long in the tooth anyway and the next generation of satellites should be able to handle more channels than the combined capacity of the current systems. Full motion video on a small number of channels should also be within the capability of the latest technology. Mel could compete with DBS for sports programming with a much smaller “dish”. Naturally the shareholders will have to wait a while for any real dividends because the capital investment will be significant. It will be worth the wait because any new competitor will need to get the FCC to find new frequencies. Then another set of satellites will need to be launched. Naturally the dual channel radio won’t receive the third frequency so the FCC will need to mandate another radio standard. Any new competitor will have a really wide moat to cross. Mel will probably feel concerned for the welfare of the departing members of the FCC, but that shouldn’t be expensive, considering the overall benefit he will derive from a favorable decision. He has the Billy Tauzin history to provide a guideline for his budget.
      If the FCC should deny the merger and set a deadline for the exclusive sale of the combined radio then the following might happen.
      Both companies will probably provide free programming and end any subsidy to manufacturers. Both will offer a la carte service that all new customers can access. Since their potential audience will double their subscriptions should increase. The new radios will become a standard offering in all cars since the incremental cost of adding the service will be the cost of the external antenna, and that is already combined with On-Star in that product offering. Expect to see On-Star type service in all cars in the future, since that has to be a profitable business.
      That’s probably the best scenario for all concerned, even the stockholders. IPods can’t do sports and the Internet still need a “cell phone like” data channel which won’t be free. Satellite radio is here to stay, no matter what the FCC decides. Stay tuned.
      Jul 11 03:17 PM
    • $5 Billion Expected in Radio Merger Synergies - Bear Stearns [view article]
      Gekko13
      You are right on with most of your analysis. Adding to the odds for an approval is the fact that the FCC is led by political dirt bags who will be out of a job in the near future. Mel should be able to find a home for those poor unfortunates. Your point 3 is a good argument for calling the merger a monopoly. I wonder why Justice missed that point. Mel will need more office space in DC, I guess.
      Your PS suggested that eventually the FCC would grant a new frequency because Sirius would become a monster. A new frequency would require all new radios and a new satellite system. Mel already has plans for a new dual frequency radio. Building another three channel system in the future isn’t likely even if the FCC could find a frequency block for a third system.
      I bought XM and Sirius after I saw the Sony XM system when it first went on sale at Best Buy. I sold when they went on that buying binge for “talent”. I’ll buy again if the merger is approved, and sell after it hits an all time high if the fine print in the ruling gives anyone the opportunity to compete at any time in the future.
      Apr 10 12:55 PM
    • $5 Billion Expected in Radio Merger Synergies - Bear Stearns [view article]
      "given this will result in significant dislocation for millions of existing subs". Thats not a given. The FCC could require a dual frequency radio be developed and sold exclusively before the merger is finalized. After a set period of time one system would be sold and the buyer would have an audience. With the production of a dual radio in the market, building and adapter for most existing systems should be relatively cheap. Dislocation of existing customers would be minimal and delayed for as long as it takes for the new radios to gain reasonable market penitration. Apr 09 11:36 AM
    • FCC Seems Close to Rendering Sirius/XM Merger Decision [view article]
      A merger which eliminates competition will be good for stockholders but bad for the consumer. The most desirable programs will be duplicated on both systems. Some programs will have to be dropped to make room for them. Duplicate programming is a waste of spectrum and bad business. The next step will be a new radio capable of receiving both systems. All satellite radios now in use will rapidly become obsolete. The price for premium channels will not be cheap. As for commercial free programming, the following is taken from an article by Devin Leonard in Fortune magazine, November 14, 2005 “Karmazin started selling radio ads when he was 17 and ran Infinity Broadcasting for 15 years before selling the company to Westinghouse, then CBS's parent. The joke about him was that he was so pushy that advertisers used to buy airtime from Mel just to get him out of their office.” If the FCC really gives Sirius what they want, the company will be “priceless”. Mar 31 10:48 AM
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