Business/Finance

Is the Sirius-XM merger really good for radio fans?

By Martin Bosworth

Sirius Satellite Radio posted smaller losses and lower subscriber costs to Wall Street this week, which is about as good as a business that loses millions a year can expect–and that may have helped burnish its image a bit as the company pushes for acceptance of its takeover buyout of merger with XM Radio.

The merger’s chief opponent, the National Association of Broadcasters, is resorting to increasingly desperate tactics to convince lawmakers and regulators not to approve the merger. On its face, this would seem like a classic David-and-Goliath struggle of the upstart little guys versus the behemoth forces of terrestrial radio, and the little guys seem to be winning.

But a closer look shows that the situation isn’t so clear-cut.

At a recent National Press Club event, Sirius CEO and long-term radio player Mel Karmazin revealed that if the merger between the two companies was approved, the combined entity would offer “a la carte” programming tiers that would enable subscribers to pick selections from both companies’ rosters at lower prices, as well as “family-friendly” tiers of censored and religious programming. Both of these moves were implicitly made to mollify FCC chairman Kevin Martin, a religious conservative who has long crusaded for “a la carte” programming for cable and more family-friendly (read: Christian) programming.

But Karmazin was evasive as to whether or not the new offerings would require subscribers from either company to buy new receivers (a not inexpensive proposition), or why neither company had ever made these offerings before. TechDirt’s staff has been covering the XM-Sirius merger substantively, and one of their commenters notes that the fine print of the new offering really has very little to offer consumers, and may actually leave listeners worse off:

For one, the technical incompatibility of the two systems becomes clear (even with a new radio, the most channels a Sirius subscriber can get from XM — at a hefty premium — is 11, of which there is almost no chance any will be sports or premium music). Two, the a la carte “deal” if taken to its logical extreme would substantially raise the cost for the average consumer. The “50” or “100” channel a la carte plans do not include premium programming like Howard Stern or play-by-play sports like the NFL. If you want those “super premium” channels you have to pay an extra $5 (for sports) and $6 (for Howard). So if you chose the 50 channels (you’re losing a lot for the right to pick) and add say sports, you are already paying more than what you would pay for the whole of one service

Given the tremendous losses Sirius incurred in ponying up to get Howard Stern and the NFL, it’s hard to fathom their pushing a platform that would bring in even less money, unless there was more profit to be pulled in from the back end. It’s also interesting to note that XM founder Hugh Panero resigned barely a day after Karmazin’s announcement, having apparently been marginalized and pushed aside in the course of the two companies becoming one. XM was the larger and marginally less costly company, but Sirius had a higher profile and a more industry friendly CEO, so it’s not surprising things went down as they did–but the timing does raise eyebrows.

XM program director Lee Abrams has publicly castigated Clear Channel and its ilk for the generally sorry state of broadcast radio today, and rightly so. I don’t have XM or Sirius, so I can’t say firsthand if they really present alternatives, though my fellow Scrogue Jim Booth recently criticized Sirius as turning into “Clear Channel by satellite.” I do get XM channels by DirecTV, and I generally find their output impressive–and I know several talented people who work there and truly believe in the company, which makes me wonder what will become of XM’s unique output in the course of this merger. XM’s also based in D.C., where I live, so I worry that the merger may cause job losses for my town.

Most of all, as a consumer advocate who always looks skeptically at mergers, I wonder if centralization and consolidation really serves the listener. Given that the fate of another alternative music outlet, Internet radio, hangs by a fragile thread, is it really wise to reduce the two (only two) competitors in the still-young satellite radio world to one?

I went into the Karmazin conference not convinced that this merger was the right move for radio fans and the radio business, and everything I’ve seen since then tells me I’m right to be skeptical. Playing political Kabuki to appease a business-friendly conservative fundiecrat and shafting your customers in the long run is not the way to ensure stability and innovation in your field. I never thought I’d be on the side of corporate lobbyists like the NAB (and I’m still not), but this isn’t a simple case of rooting for the underdog. Not by a long shot.

5 replies »

  1. We like the classical and easy listening options on XM. In addition, the Big Band era ’40s channel has a fantastic selection. At this point, I am not sure Sirius would add anything to our listening pleasure. Frankly, I would rather visit a dentist than listen to Howard Stern.

  2. Martin,

    Thanks for articulating the problems with the Sirius takeover of XM (and let’s be clear – that’s what this is).

    I was an early adopter of XM and have been a long time subscriber. Hugh Panero was a hero to those of us from music backgrounds who wanted radio to matter again – to be the medium that exposed us to exciting new artists. Mel Karmazin is the devil – he brought Howard Stern into satellite radio when Stern should be in ignominious exile – just as Don Imus is. He made Sirius all sizzle – and their music content as tightly controlled by computerized data bases as Clear Channel’s.

    And now he wants to restructure XM’s service into “a la carte” menus that force listeners like me who are all over the map – I may listen to music, radio plays, news, sports, comedy, or talk in a single day – to choose limited channel blocs that will force me to pay more because my tastes are eclectic.

    XM is already revamping its channels to tighten play lists and cut out artists who might not appeal to the Proles. It’s a disgusting thing to see. This is nothing compared to forcing equipment changes on customers like me who’ve made substantial investments in gear (I’m into XM for about $1000 for equipment alone).

    I hope the FCC blocks the merger and forces the two systems to stand on their own merits. XM is far better and consumers are figuring that out. Karmazin is nothing more than a pilot fish for the shark that is Clear Channel. There will be no decent radio left anywhere if this merger and the FCC ruling on royalties for Internet radio are allowed to stand.

  3. Martin,

    Thanks for shedding some light on this. I’m an XM Subscriber and really hadn’t looked into what the merger meant for me. I’ve noticed that for the channels I listen to, that the quality of programming has declined significantly.

    I bought XM for one station, honestly. And I found that since I purchased it, It traded its really awesome playlist for what seems to be an endless stream of remixes of pop and R&B princesses. If the merger means more of that, I’m checking out. I’ll go back to NPR all the time.

    And I agree, Stern sucks ass.

  4. Cool. Thanks for the article and comments. Great insight. I was considering satellite radio, mostly to catch hockey broadcasts, but will pass for now. It sounds like it won’t be worth the effort.

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