XM Looks to the Future, for Serious

XM Satellite Radio and Sirius Satellite Radio announced on February 19th of this year that they would be merging in an effort to combat recent losses within both firms. The National Association of Broadcasters (or the NAB) has urged policymakers to reject the proposed merger based on the grounds it is an "anti-consumer" proposal. Furthermore, they look to a past merger attempt in the satellite TV industry between DirecTV and DISH Network that was rejected by the FCC. The NAB claims the industry structure of the satellite TV and satellite radio industries to be similar enough to reject the XM-Sirius proposal based solely on the failed merger in the satellite TV industry. They will tell the FCC that the combined debt of the companies (at 1.6 billion) and the increased prices for consumers are the two major reasons why the merger should be denied.

Sirius CEO Mel Karmazin disagrees with the NAB's outlook. He believes the satellite radio market has changed drastically since the DirecTV and DISH Network proposed merger, siting iPods, mp3-playing phones and high definition radio to be in competition with satellite radio in today's market.

The NAB's position on this merger may require a closer look. On one hand, the NAB which lobbies for traditional radio and TV stations says that satellite radio is in a separate market which does not compete with these entities, and thus the need for anti-trust legislation negating the merger. On the other hand, the NAB argues that they do compete and the current limitation on the maximum number of stations traditional radio companies can own should be dropped. This doesn't make much sense.

The FCC and other regulators should conduct a market study independently to determine the true market structure and if iPods, mp3-playing phones and other accessories really compete against satellite Radio. If this is the case, the merger should not be denied.

Posted by Patrick Giesecke, Melissa Barry, and Jonathan Sutton