Merger Annivesary Comes With No Fireworks
In the past year Sirius and XM have been trapped in a trading pattern that is dictated by the merger. Investors have been leery to jump on board, and the arbitrage spread has never seen a position stronger than 7%. Analysts seem to be riding the safe road with many simply giving odds of approval that equate to a coin toss. One year has passed, and people are simply waiting.
Opponents of the merger say that it will create a monopoly. Of course, most of the mergers opponents are companies and mediums that dominate the audio entertainment landscape. Proponents of the merger argue that the competitive landscape is diverse and healthy.
A-La-Carte programming was thought to be one silver bullet that Sirius and XM had in their arsenal. They offered up a variety of programming packages at various price points to entice not only regulators, but perhaps additional consumers as well. A study of the subscriber metrics shows that there are many who when exposed to satellite radio simply elect not to subscribe. The OEM take rate is 50%. If lower pricing structures could get the take rate to above 60% it would be a positive. A higher take rate would translate to better penetration. Lowering prices to garner a larger audience could very well prove the point that the ability of a merged satellite company to hike prices without restraint simply does not exist. Yes, some core subscribers would hang on with higher prices, but is that group large enough to ultimately constitute the ability to turn a profit? The answer is likely no. These companies require a larger subscriber base than they currently have to reach a profit stage.
The merger has been about many things. A-La-Carte programming, interoperability, licenses, bandwidth, the competitive landscape, and synergies. The merger has had it’s share of “pork-barrel” hangers on with Primosphere looking for a license and spectrum, Ibiquity seeking inclusion into satellite receivers, U.S. Electronics trying to use the FCC to argue their arbitration case, and Georgetown Partners seeking a 20% spectrum and support handout, just to name a few
In the end, the same few questions are what will direct the decision. Is the merger proposal good for consumers? Is the merger proposal good for the competitive landscape? and what the political landscape will be when the decision is considered and rendered.
The Department of Justice and the Federal Communications Commission have all of the information they need, and have had it for quite some time. It is time to deliver decisions. For consumers, for investors, and for the competitive landscape.
Position – Long Sirius, XM
Oh my God. The world is coming to an END. We now have a monopoly. No more Toshiba HD-DVD players. ONLY SONY Blue Ray.
I need to call the FCC, DOJ, FBI, CIA, NSC, UN, and the police. We need our government’s HELP Big time.
Tyler ,
Couldn’t agree more brother . It is far past time. At this moment in time I could really care less what the decision is as long as they render one quickly . This is exactly what is wrong with politics today . Most every politician opposed to the merger has either been bought and paid for by the NAB or they have a conflict of interest with personal , direct or indirect involvement in the terrestrial radio buisness . And of course the industry with the most money can delay and influence with their lobbying tactics as we are seeing . Is it any wonder the average Joe never gets heard in our government of , by and for the people !!!