Winning approval for a proposed merger of the nation’s two satellite-radio companies turns on whether regulators buy their argument that iPods, Internet radio and other new technologies have expanded so dramatically that a monopoly won’t harm consumers’ choices or purses.
It may be a difficult argument to win, but XM Satellite Holdings Inc. and Sirius Satellite Radio Inc.’s officers say it is worth the gamble and have assembled an expensive and experienced team of lobbyists to aid them in the fight.
Alone, the companies have suffered heavy losses and spent heavily on recruiting personalities such as Howard Stern and Oprah Winfrey and on marketing to compete against each other.
Now, New York-based Sirius and Washington-based XM are lining up some of the best-known and highest-paid lawyers and lobbyists, while competitors and consumer groups vow to fight back. The biggest potential roadblock for the merger is a 1997 Federal Communications Commission declaration that a single owner may not control the subscriber-only satellite-radio business.
But the advance of technologies such as iPods and other MP3 players, music-playing cell phones and land-based radio stations with digital broadcasts offer so much music, news and talk that the competitive climate is radically different, and Sirius Chief Executive Mel Karmazin said in a conference call Tuesday that the FCC should waive the 1997 rule.
“Consumers today have a significantly broader range of audio entertainment options from which to choose,” Karmazin said.
All those new devices, however, are not directly analogous to satellite radio, and Karmazin’s plea is a tough sell, said Chad Bartley, an analyst for Pacific Crest Securities. XM and Sirius provide “the only paid-radio service out there,” he said, and regulators may be loath to turn them into a monopoly. He rated the chances for merger approval at “less than 50-50.”
The National Association of Broadcasters and consumer groups such as the Consumer Federation of America and Common Cause plan to oppose the merger. They want ensure that consumers are not stuck with outdated equipment and contracts that are not honored.
