Antitrust Institute Urges DOJ To Block Merger
The Antitrust Institute today filed a paper citing their reasons why the Department of Justice should sue to block the proposed merger of Sirius and XM. The well written document hinges their stance on the fact that they feel that SDARS is a relative market, and that a broader definition of the competitive landscape should not apply.
The institute quotes an excerpt from Section 7 of the Clayton Act which states that a merger that, “may be substantially to lessen competition, or tend to create a monopoly”
According to the Institute, “Satellite Radio, Standing Alone Is The Relevant Market” under section 7 guidelines. While the Antitrust Institute can pose this argument, they offer very little in way of backing up their stance. Their stance is that satellite radio is in and of itself the relative market. Others feel that the audio entertainment landscape is full of competitors.
The Institute argues that Ipods, AM, FM, and Internet radio do not offer the nationwide coverage of satellite radio, the content of satellite radio, the features of satellite radio, or the ability to aggregate demand. Again, there is nothing to really support this statement by the institute. AM and FM are available on a national basis. Particular stations are not. Do people really care what station is delivering the content though? Is Beyonce’s latest hit different in San Francisco than in Boston? Does a consumer in Boston care what is playing in Boise? Is or is not Internet radio available on a national (in fact global) scale? Just today we covered a story where CBS radio is advertising on their New York stations the on line feed of one of their Jazz stations in L.A. Internet radio for terrestrial radio is booming. These feeds generated well over $200,000,000 for terrestrial radio in 2006, and the revenue curve is still pointing sharply up. People indeed are listening to music on line. The argument that these other forms of audio entertainment do not have the content that satellite radio has is another falsehood. Look at I-Tunes. Where do you find Rush Limbaugh. Isn’t Rush available to a national audience? Look at all of the syndication that happens. Music is music. People are getting the same music on their iPods that they hear on terrestrial, the Internet or satellite. lastly, the Institute speaks of the ability to aggregate demand. SDARS represents 5% of the radio world. 50% of those exposed to SDARS do not stay. The ability to aggregate demand may increase a bit with a merger, but let’s be realistic. SDARS isn’t exactly on the minds of most audio entertainment consumers.
The Institute argues that there is no evidence to support that the other audio entertainment venues have the ability to constrain prices. BUNK. Once again, there is a 50% take rate for SDARS in the OEM channel. Half of those exposed do not care to keep the service. If prices were to rise what would the take rate percentage be? This in and of itself shows market constraint. Next look at retail. Retail sales were off to the tune of at least 30% in 2007. Consumers were not clamoring over the shelves at Best Buy to buy a SDARS receiver. Even with promotions offering discounted service, consumers were not adopting SDARS at a rate that they were a year ago.
The Institute speaks about the high cost of entering the satellite radio sector. Very true. It is quite expensive. However, there are solutions that have been demonstrated to be viable. Slacker has already demonstrated that they can update a users radio stations via leased satellite space. Additionally, the considerations are not limited to what exists today, but what is likely to exist going forward. Cell technology, which the institute neglected to mention (millions of iPhones have already sold), WiMax, and other technologies are being developed at a pace almost beyond imagination. The marketplace of the future needs to be considered.
The Institute states that there is “substantial evidence” that the merger will result in higher prices. Have they read the filings? Where is this “substantial evidence” they speak of. Have they viewed the A-La-Carte proposals? Did they fall for the “cost per channel is higher” argument. The Institute should step away from this and view it again. Look at what consumers do. Do they think that the average listener listens to all of the stations offered? Realistically people likely tend to listen to a dozen or so channels. With the merger they will be able to trim costs if they so desire.
The Institute claims that there is “substantial evidence” that there will be an increase in commercial time as a result of the merger. Again, where is this evidence? The companies have promised to keep commercial free music. They have also discussed increasing ad revenue on other channels for quite some time. Segments of the content are simulcasts of television shows. Does the institute want dead air when these shows go to commercial?
The Institute claims that there is “substantial evidence” that the merger will bring less innovation. Once again, why did they not cite this “substantial evidence”? These companies will continue to innovate. It will start with an A-La-Carte receiver and continue from there. Does the institute think that SDARS will sit back and be fat dumb and happy? That is terrestrial radio’s model that is now falling apart at the seams. Aple alone will be a driver of innovation. The OEM’s will demand it. The consumers are not going to sit back and remain with a service that does not innovate.
The Institute claims that there is “substantial evidence” that there will be reduced programming choices with a merger. Please forgive me for stating the obvious, but if I have Sirius now, and can add the best of XM, where is the reduction coming from? Again, satellite radio has to compete for the ears of consumers. If satellite radio offers less, consumers will go elsewhere.
The Institute claims that Sirius and XM may argue that the merger is benign because they will state that they do not compete with each other. Once again, where does this come from. Sirius and XM have always acknowledged that they compete. They have done so for years. They are not yet to the point of “poaching” subscribers from each other, and the obvious reason is that as a whole SDARS only has 5% of the market. There are plenty of consumers to try to win over without going after the other subscribers.
The Institute suggests a form of collusion must exist if Sirius and XM do not compete. Where do they see this? They have cut exclusive deals left and right. they have competed on every level. They had differing price points for a long time. The hardware of Sirius is priced higher than XM. Collusion i simply not there. This aspect of the Institutes argument is all over the map, and getting into conspiracy theories that make the JFK assassination look tame.
The Institute closes their argument by suddenly looking into the future and arriving at the conclusion that Sirius and XM will not innovate. Again, the innovation is driven because things are moving much faster than these think tanks want to consider.
The Antitrust Institutes paper is well written, but lack substance. The arguments sound good in theory, but do not gel with reality. The Institute formulated a narrow market definition, and then filled in their argument from there. The correct way to look at the landscape is to look at what exists, what has the potential to exist, how consumers utilize the various mediums and then arrive at a market definition. The Institute simply went about this backwards, and that is obvious.
One last note……did the institute even bother to get consumer poll information prior to arriving at their market definition? It does not appear that they did. HMMM
Position – Long Sirius, XM
I find it absolutely amazing that the anti-merger camp refuses to acknowledge the “demand” side of the market, i.e. consumer decision-making. The market is not defined by what the companies supply – it is defined by what the consumer is BUYING.
Sure, satellite radio is the only “market” that SUPPLIES 150+ live nationwide channels. But individual consumers sure as hell aren’t buying “nationwide” or “150 channels”, and “live” is pretty much meaningless to the vast majority of consumers.
Satellite radio consumers are simply buying content and convenience – and neither the “content” nor the “convenience” will ever protect Sirius/XM from external competition. The merger does nothing to change the fact that, to justify the subscription costs, they have to prove to consumers that their product is substantially better than the competition.
This PR, and the comments they provided last June, are absolutely the most cogent and credible of any that have come forth during this debate. This is a PR, not a legal brief — so, it is not designed to provide in-depth analysis of the situation. Still, for the layperson it offers the most sensible look at the merger, from an antitrust perspective, of any I’ve seen.
Apparently, Charles would prefer not to have any in-depth criticism of your posts here on the blog, preferring instead to take it to the forum. So, I’ll say only that your entire point-by-point criticism of the AII’s position is amateurish and incompetent.
If one looks at it in terms of a “debate” you scored not one point against that PR, which was exceptionally well-written and supported, given the concise nature of a PR.
That you chose to criticize this document in such an incompetent manner suggests you are either ignorant of the subject matter or cannot see through your pro-merger bias sufficiently to be able to know a reasonable argument when you see it.
Frontmed
When you refer to AII I assume you are meaning AAI.
Where you post your comments do not matter to me. You can be critical all you want. That is what you do. You do not agree with the merger, and that is fine. Whether the comments are critical of me or not does not matter to Charles or myself. His point was that the forums are a better place to carry on a discussion. I wont speak for Charles, and neither should you, because it appears that his comment to you went over your head.
You agree with the AAI stance. Does that make a stance against their points irrelevant?
This is not about “points”. This is about antitrust matters and the definition of the relative market. AAI hinges their whole argument on a “narrow market” definition. If the market is not narrow, the whole AAI argument falls apart.
You can call me ignorant, you can call me incompetent, you can call me whatever you want. Your opinion and mine mean very little.
“Merger Bias” has nothing to do with the definition of the market debate. The AAI believes that the market should be narrowly defined. They have every right to present their case, and have done so. I simply showed the other side of the coin.
What do people listen to? How do they listen? What price will people pay? Will innovation be hampered? These are questions to consider. The AAI started with defining the market narrowly, and filled in their argument from there. Why not conduct surveys and gather data to understand the landscape prior to defining the market as SDARS alone?
>>>Apparently, Charles would prefer not to have any in-depth criticism of your posts here on the blog, preferring instead to take it to the forum.
When did he say that? Do you just like to argue for the sake of arguing? Any decent point you make loses its value because of who it is coming from.
>>>So, I’ll say only that your entire point-by-point criticism of the AII’s position is amateurish and incompetent.
The way you continue to defy obvious, common, logical views of this industry is amateurish and incompetent. You need to step back and look at what the true landscape is and not what you think it is. You continue to base your arguments on totally unrealistic views.
If you define the market as just satilite radio then the AAI makes a valid arguement. The proplem is, the arguement has always been what makes up the market.
Since everything that is written here is so amateurish/incompetent and you have so much to say…why not run your own blog and share your spot on point of view with the world?
I am not being facetious. You spend enough time on all of the SATRAD blogs/forums that it would seemingly make more sense to just create your own.
So, why spend so much time criticizing others if you can do a better job? We are all waiting…
Bill my favorite was when FrontMed signed in again as “anonymous” just to agree with himself. One would think after Tyler called him out on it, he wouldn’t have even posted again. What a moron.
>>> You do not agree with the merger, and that is fine.
I do not agree with it because it is clearly counter to existing antitrust law.
Now, I have also said I don’t agree with it because the purported synergies will not materialize, about which I am correct. But my opposition, principally, is and always has been, on antitrust grounds.
It is indisputably the creation of a monopoly which will negatively impact consumers. As one of the earliest consumers of satellite radio, that is not something I want to see happen. I would point out that I continue to hold a small amount of XM stock and would likely benefit financially were the merger to be approved.
However, I believe that antitrust enforcement is important, and if DOJ allows this merger to proceed it will signify the end of ANY antitrust enforcement in this country.
Charles, I do operate blogs on other subjects, but I choose not to operate one on sat radio because I believe there are already far too many. I also think it is important to challenge Tyler on his views because they are so convoluted, uninformed, and confused.
If you believe your blog is better served by eliminating my dissenting view, just say so and I’ll gladly go away and leave Tyler’s followers to wallow in it. I’m sure most of the people who post replies to his entries would rejoice, although, it wouldn’t do much for the balance presented here.
It is “SiriusBuzz”, after all — so I can respect it if you simply say, “Hey, we don’t want ANYTHING posted here that isn’t pro-Sirius, pro-Karmazin, or pro-Merger.” It is your blog and I will respect your wishes if you prefer I don’t post here.
Frontmed….
You say you want balance. Balance is what this very article is about. The AAI posted their views, I posted counter views. Readers can choose whichever views they want to align with. I linked to the information, and presented an opposing view.
Many posts on the subject of satellite radio I do not even offer an opinion in. I simply post the information and let readers read.
This site covers Sirius as well as XM. The name of the site was a calculated. Sirius has a higher brand awareness and Sirius will be the parent company of a mergeco. You also get here by typing http://www.satellitestandard.com.
You feel that I am not critical of Sirius. That is your opinion. In the last week I have been critical of the lack of a Stern alternative in morning drive. I have been critical of Sirius’ “flagship talk station” not having a regular morning drive show. I have been critical of Bubba The Love Sponge for “mailing it in”. I have been critical of Sirius’ new Indie Talk. I was critical of Sirius for letting Bubba have a terrestrial show.
Am I for the merger? Yes. Do I enjoy Sirius? Yes. Do I believe in the potential of this sector? Yes. Do I have stock in these companies? Yes, although far less in each of them than I had in late 2005.
>>> Balance is what this very article is about. The AAI posted their views, I posted counter views.
This is true. However, AAI’s views are based in well-documented legal reasoning (I refer you to their comments in June, which were far more detailed and frankly, which helped me immensely in formulating my view of the merger), while yours involve no legal expertise or special knowledge of the antitrust law. Your views are based on your pro-merger attitude, but you have never presented any legal reasoning for your views at all.
In short, they are experts on the subject, and you and I are not. Their stated purpose is to promote competition, which I’m sure you agree is a worthy goal.
I do find it interesting that you are all for competition between the satellite radio companies with respect to OEM installs (where that view suits your purpose), but are opposed to competition between them, generally.
I don’t recall seeing you explain exactly why you DO support the merger. Would you care to enlighten your readership with that explanation?
Frontmed….
You formulated your view on the merger well before June of 2007.
The AAI is a thinktank dedicated to antitrust issues. This does not however make them the end-all and be-all on the subject. They are but one organization with opinions on the merger.
Experts can be marched out on any side of an issue. Further, one does not need to be an “expert” to arrive at an informed decision. You feel that AAI has given you all of your answers. That is fine. I feel that AAI has hung their hat on a narrow market definition that is contrary to what is actually happening in the audio entertainment landscape. You feel that SDARS is a stand-alone market. That somehow people with SDARS listen to nothing else. It simply is not reality. The facts are that people have many things that they want to listen to and many avenues from which to listen.
It so happens that they formulated a narrow definition of the audio entertainment market and then filled in their stance from there. Broaden the definition of the relative market and their stance falls apart.
Much of their stance is based on opinion. They say the merger will stall innovation. This is an opinion.
They say that the merger will generate price increases. Again, this is an opinion. Elasticity in price is a function of many factors. Terrestrial radio, iPods, Cell phones with audio, Internet radio are all viable alternatives that help keep prices in check. If anything SDARS has been offering lower prices when subscribers say they want to cancel. A lot of people take them up on these lower prices. This points to the fact that there is a limit as to what people are willing to pay.
Legal reasoning for the merger is already out there. The audio entertainment landscape is diverse and consumers have many choices. In fact consumer choices are increasing all of the time. Because consumers already have a wide variety of choices, and there are more arriving all of the time, the competition simply gets more abundant. SDARS is one distribution system for audio entertainment.
I am for creating a better scenario for the SDARS consumer. This would include choice in the OEM channel, and a merged company that would increase choice in programming that a subscriber receives. I do however think that free rides such as the Ibiquity proposal or the Georgetown proposal are bunk unless these people are willing to pony up dollars. Neither has come to the plate with any semblance of an offer. Both are trying to get a cut via regulation rather than by negotiation. I don’t mind seeing HD incorporated if they pay for it.
I support the merger because I think it will create the best situation for not only SDARS, but for consumers. It is really that simple.
>>> I do not agree with it because it is clearly counter to existing antitrust law.
There are plenty of experts that disagree.
>>> I also think it is important to challenge Tyler on his views because they are so convoluted, uninformed, and confused.
So do I but, why not do so in a civil manner? Is it crazy to think for a second that there might be another point of view? One that is so strong that this merger might actually pass based on it? Why do you have to be right about everything? Is it possible that you might be wrong? If in fact you are will you eat crow? It sounds to me like you will simply vanish without a trace because being wrong is not something you are not capable of stomaching.
>>> If you believe your blog is better served by eliminating my dissenting view, just say so and I’ll gladly go away and leave Tyler’s followers to wallow in it.
I never said that it would be better served without you. Although you continue to paint yourself a victim.
>>> It is “SiriusBuzz”, after all — so I can respect it if you simply say, “Hey, we don’t want ANYTHING posted here that isn’t pro-Sirius, pro-Karmazin, or pro-Merger.” It is your blog and I will respect your wishes if you prefer I don’t post here.
Now you are a martyr too? Stop acting like a child. I have bashed Sirius and their decisions on a number of occasions along with Tyler. I don’t plan on discussing why the name was chosen but, it had nothing to do with us being fans of Sirius and not XM.
If the merger happens and satellite radio benefits from it…will you still be mad? OR will you be happy that the service you love improved and settle with the fact that you were dead wrong?
For some, engaging them in give-and-take does nothing more than goad them into agitating the issue further. They agitate for no other reason than to get under someone’s skin and provoke a response.
My grandfather taught me years ago that in times like these: “Let it go, walk away, and let the a**hole have the last word.”
This guy spends at least 4 hours a day, if not more, posting on SiriusBuzz and Orbitcast, plus wherever else that I don’t know about. I’ve known several cases of these pseudo-know-it-alls before – you know, the guys who have to “prove, without question” their opinion on politics, religion, etc. The better the logic against their case, the louder they get to compensate. It’s like there’s some deep-seated self-esteem issue that requires the person to “win” ridiculous arguments against “lesser” people to feel validated. We’ve all known the type, and I think StackPointer/FrontMed is their god.
And let us not forget the old saying, “Arguing on the internet is like competing in the Special Olympics: Even if you win, you’re still retarded.”
Ignore him, and maybe he’ll stop posting, leave his computer, and learn how to talk to people in the real world. But perhaps I’m too optimistic.
>>> You feel that SDARS is a stand-alone market. That somehow people with SDARS listen to nothing else. It simply is not reality.
While SDARS *IS* obviously a standalone market, that is not to say that people don’t listen to other things. These are not mutually exclusive. This concept is fundamental to understanding the issues, and it is, I believe, the source of your confusion.
I recommend you take the time to look up and READ the cases cited in AAI’s original remarks. If you haven’t done this, you do not understand the legal issues at stake.
I’m not naive enough to believe that DOJ won’t go against its previous decisions — it is, after all, a political process. But rationally, based on existing antitrust law, you cannot make the case.
You and Charles have both said there are experts on both sides of the issue. This is, of course, the case in almost all legal proceedings.
Could you or Charles please name one antitrust attorney, who is not being compensated by XM, Sirius, or other merger proponents, who supports the merger on legal grounds?
JB, I have come to the same conclusion about FrontMeds mental status also. I have stated it on previous articles. The question is how to help him. Bruce has given a way to help us avoid him, and when FrontMed had offered to leave I have to admit I was ready to comment “good riddance”. That is not a complete solution unless we can help him with his mental status. He has a major low self-esteem and inferiority complex. You have any suggestions that may help him.
I will say that I oppose the merger for one reason. After trying 6 times to get off of Sirius’ advertising call list for a Sirius radio in a car I no longer own, it is nice to know that have another option when the current Sirius subscription runs out. Modules for either sat service are available for my car, and since even the Sirius Legal Dept has been unsucessful in getting me off the list, I am now going to both the FCC and my congressman (bloody silly reason to bother someone who has important things to do). I will pay whatever it costs to get the Sirius pulled out of my car at the end of this subscription. With the new IPODs, I wonder if I will even bother…
Ahhh, the personal attacks. Where’s Charles and his talk about civility now?
But I really want to know who these so-called “experts” on the pro-merger side are?
The reality is that AAI is one of a very few organizations who has weighed in on this fiasco with absolute independence.
Their agenda, from their website, is clearly stated: “Our mission is to increase the role of competition, assure that competition works in the interests of consumers, and challenge abuses of concentrated economic power in the American and world economy.”
So, we have an unbiased panel of antitrust experts telling us that creation of this monopoly will adversely affect competition. And we have Mel, Parsons, Tyler, and 1,000,000 Sirius shareholders telling us the merger will “benefit” consumers.
I wonder who has the righteous position?
Kindly refer to the following from CEI
http://www.cei.org/pdf/6025.pdf
You may choose to hang your hat on what AAI states, and that is fine.
Organizations such as CEI and Public Knowledge (among others) have very compelling arguments that do not hinge their stance on a narrow market definition, but rather look at the audio entertainment sector in a way that consumers do, which is much more in tune with reality.
You are seeking out only what you want to seek out. If you were looking for other sides to the debate you would not be here asking “where are the experts on the pro merger side”. You would already be familiar with those who have commented on the merger.
Frontmed calm down, we were not attacking you, we are only trying to help you.
>>> but rather look at the audio entertainment sector in a way that consumers do, which is much more in tune with reality.
Suppose Mcdonalds, Burger King, and Wendy’s decided to merge.
Do you believe that DOJ would challenge that merger? Do you think they SHOULD?