Sector followers have been well aware of a weakness in retail throughout this year. The reason for retail weakness can be attributable to various factors that include ramped up OEM contributions, and comparisons to a strong response to the Howard Stern move last year. However, the overlooked component that is not often discussed is merger confusion.
Those that already have satellite radio understand and know that their retail bought satellite radio will work. Sirius and XM have even assured consumers that these radios will still work after the merger. However, despite these facts, thee are still consumers who are simply holding off a satellite radio purchase until they know the status of the merger. this consumer confusion and hesitation will be most strongly felt here in the fourth quarter as well as in the first quarter.
Satellite radio sales in the fourth quarter have always been the bread and butter for both Sirius and XM. Huge numbers of sales during the quarter bolster not only end of year subscriber rolls, but also spill over into January of the next year. Uncertainty about the status of satellite radio will dampen sales, and will inevitably cause material impact on these companies.
A merger decision being held off this long is quickly eroding any chance that these companies can enjoy at least some certainty for the quarter, and this will quickly erode the spill over effect that satellite radio has enjoyed in it's brief existence. Regulators have had data, performed second requests, discussed concessions with the companies, and considered the scope of the marketplace. It is time to render a decision. The lack of a decision is at this point is not consumer friendly.
Consumers want to know with a degree of certainty what exactly they are buying. Without a decision on the merger, there is a chasm that asking a consumer to overcome is unrealistic. Selling satellite radio has enough challenges without the merger question. To be fair, it is the companies that decided to go down the merger path, so some of this was and should have been anticipated, but dragging it on further does no one any real good. Not only are the companies and investors impacted, but the consumer is as well.
It is time for regulators to decide. They have all of the information, and have had ample time.
Position - Long Sirius, XM