Sirius-XM Merger Raises Consumer Concern

By Erin Peterson

On Monday Sirius Satellite Radio and XM Satellite Radio announced their intentions to merge in an effort to increase services for consumers and value for investors. Since their introduction in early 2000, the two radio providers have been battling each other for new channels, shows and gimmicks to attract more customers.

In 2004, Sirius made a deal with shock jock Howard Stern to be the exclusive carrier of his popular and long-running morning show. Sirius also made a deal to broadcast games of the National Football League. On the other hand, XM has a contract with Major League Baseball to carry all games and also a deal with Oprah Winfrey to host the Oprah and Friends radio channel.

In addition to the big-name programming, both providers also carry a wide variety of commercial-free music and limited-advertising talk stations. Both companies have also put a great deal of effort into obtaining exclusive carrier rights with the major automakers. XM receivers are installed in vehicles from Toyota, Honda, Nissan, Hyundai and GM while Sirius radios are included with Ford, Chrysler, BMW, Volvo, Volkswagen, and others.

Due to this continued fierce competition for subscribers, neither company has finished a year in the black. Executives for both companies feel that the merger would significantly increase the value for their investors as well as programming options for customers.

However, before the two satellite providers can join forces they must gain the approval of the federal regulatory board that protects consumers from high-power monopolies. They hope to convince regulators that the merger will not create a monopoly since they operate in a broad market that includes AM and FM radio as well as other personal music choices, like iPods and CD players.

Current customers of both Sirius and XM are beginning to wonder how their services will be affected if the merger is a success. On the plus side, listeners will have access to the programming options of both providers, giving them an extremely broad range of listening options. Sports fans will no longer have to choose between the company that provides NFL games or the one that provides MLB games.

Unfortunately, this type of shared programming will not be available immediately and will not be as easy as customers hope. Unless the providers decide to share programming between their lineups, subscribers will have to purchase a new receiver that is not yet developed in order to get transmissions from both satellites. Another worry with the merger is that, without the need for competition, the companies will raise prices and reduce the quality of both current and new programming options offered.

There is still no clear estimate on whether or not the merger will make it through the antitrust hearings. XM and Sirius executives expect the regulatory hearing and shareholder approvals processes to last several months and, if successful, hope to complete the merger by the end of 2007.