Sirius and XM Trying to Merge

After announcing on February 19, 2007, that they intend to merge, countless praises from CEO of Sirius Radio, Mel Karmazin and Chairman of XM Radio, Gary Parsons, were made about the benefits of combining their conglomerates, as Karmazin discussed the proposed merger at the National Press Club, today.

There is, however, a serious problem for SIRIUS: that this merger would eliminate all competition as SIRIUS and XM are the only two satellite radio services.

"It's a merger of the only two companies in a defined market, and such, a merger to monopoly" says Mark Cooper, Director of Research for the Consumer Federation of America.

Also according to the Consumer's Union, the proposed merger violates both SIRIUS and XM's licensing agreements to the public airwaves according to Gene Kimmelman.

However, if it goes through, the merger will offer eight plans to choose from, anywhere from the basic packages to more customized plans ranging from $6.99-16.99, based on whether the consumers want added or custom additions such as premium, family-friendly, etc., which SIRIUS and XM radios are calling the "A la Carte" option.

Karmazin's aims for this merger are to give the consumer exactly what they want, and for lower than the current $12.95 a month deal, which works out to less than $43 cents per day, for SIRIUS and XM separately.

The plans according to Karmazin would start right away at start at a mere $6.99 a month upon the merge. In combining the satellite radios, Karmazin and Parsons express that there will be more options for the consumer to choose from and a better variety of channels to accommodate to each individual consumer.

The package for $6.99 offers up to 50 channels monthly, and the consumers are given the option of choosing up to any 50 SIRIUS channels, or 50 XM channels.

With the $6.99 plan, "They can only choose from one or the other, based on which one they currently subscribe to," says spokesman for SIRIUS, George Ross, from Joele Frank, Wilkinson Brimmer Katcher Corporate Communications firm.

The base price for the other package of 100 channels runs at $14.99, offering the same option of choosing 100 channels of strictly SIRIUS or XM, but also includes the bonus choice to mix some from SIRIUS and XM, based on consumer's channel interests.

According to Karmazin there will also be a family-friendly plan which would "exclude adult talk shows and content."

The $12.95 plan offers basic sports, talk shows and music channels also offers the possibility to get a credit back if the consumer "wanted everything except maybe a couple things, such as shows like Howard Stern or a Rap station," Says Ross.

As a result "the consumers won't be paying extra for services they don't use. For the first time ever, they will be getting a credit" said Karmazin.

On the other hand, anything that sounds this good must have a flaw right?

"[It's a] defined product that consumers are willing to pay for without competition," says Cooper.

The bottom line according to Karmazin is that this merger is "all about the consumers," and how they can benefit from the plethora of combined music, talk shows, sports, or whatever they desire to listen to as a result of the merger.

On the other hand, "[It's a] defined product that consumers are willing to pay for without competition," says Cooper.

Beyond all the bells and whistles of the benefits and perks to be expected if the merger passes, the National Association of Broadcasters Executive Vice President, Dennis Wharton adds to the skepticism.

"The history of business in America demonstrates that consumers benefit when there is more competition for a product instead of one provider. Competition means more attention [to the consumer] lower prices, better service, better technology and more attention," said Wharton.

"Without competition there is no incentive to offer the best prices," says Wharton.

However, as Karmazin pointed out today at the NPC, "these are the lowest prices today, out there that we are offering," and that is as Karmazin stated part of competition is and it appeals to the consumers to have more choices.

"It is the elimination of this competition that drives the two to seek the merger. The main reason to support the merger is to ensure that at least one satellite radio service survives without going through bankruptcy. If they do not merge, one or both may end up in bankruptcy," says Danny Adams, a Telecommunications and Antitrust and Trade Regulation lawyer with Kelley, Drye & Warren LLP.

With all the struggles between the FCC and the NAB, about this merger being a monopoly, Karmazin did address the fact that, "both SIRIUS and XM would continue fine separate," but that "if I have any say, it will be passed."