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.