sirius xm logoIn C3SR's latest filing with the FCC, C3SR has taken a leap that runs so far from the beaten path that one must begin to question the thought process of these people and their attorneys.

C3SR attorney Julian Shepard, of Williams Mullen, penned a letter that will leave even the most anti-merger people scratching their heads. In fairness to Shepard, he is likely simply writing the thoughts of the organization he represents. However, he should have also warned his client that such a stance does not hold much water as it centers around an assumption, and fails to even consider the growth stage of satellite radio. For anyone who has followed satellite radio for any legth of time will attest, Karmazin has had the 10% goal on ad revenue for over 2 years, and in point of fact has stated that he feels that 10% would likely be the long term position of ad revenue regardless of the subscriber base.

The letter centers around Sirius' goal to make advertising revenue rise from about 4-5% to 10% of overall revenue. Where the C3SR leap happens is with the ASSUMPTION that the method for doing this means adding more advertisements to channels. One can understand how they come to this determination though. After all, C3SR is supported by the National Association of Broadcasters, whose membership is well known for packing as many advertisements into each hour as possible. However, what if the increase comes not from the number of commercials, but in the dollars they are able to get for existing commercial allotments? As the reach of satellite radio grows, it is only natural that the advertising on satellite radio will become more desirable. It is also a question of supply and demand. If a non-music station has currently allotted ten minutes of advertising per hour, and that allotment remains consistent, the price for advertising will begin to appreciate because there are limited advertising slots available, and more companies that will want to advertise. A basic understanding of where satellite radio is in it's growth cycle illustrates this.

The other humorous part of the Shepard letter is with the assertion that if additional commercials were added that the consumer is effectively seeing a cost increase via a less valuable experience. While the theory is true, there is irony in the people delivering this it. The organization effectively delivering that message (the NAB as they are major supporters of C3SR) is widely known for carrying 20 minutes of commercials per hour on their own stations. Does this now mean that terrestrial radio is not free? Was terrestrial radio shafting consumers each time they added to the commercial load? Were consumers getting the short end of the stick because station announcements and self promotion do not count as commercials?

It seems these anti-merger organizations are simply throwing as much mud at the wall as possible in hopes that something will stick.

Position - Long Sirius, Long XM