WASHINGTON – While the Sirius-XM merger process officially ended on Friday, the debate continues on whether satellite radio is any closer to becoming mainstream.
After 17 months of deliberation and intense lobbying by broadcasters to halt the merger, the Federal Communications Commission approved the deal in a 3-2 vote after Sirius and XM agreed to pay $19.7 million in fines.
It was Republican commissioner Deborah Taylor Tate’s vote that removed the final hurdle to the merger’s completion. The companies voluntarily agreed to pay a combined $19.7 million in fines to settle FCC rule violations to gain her support. This includes locating towers in un-approved locations and selling radios which exceeded power.
The final merger agreement does not require the combined company to include a chip in its radios that would allow customers to receive digital signals from land-based radio stations, which would have aided the land-based radio industry.
The combined company has also been ordered to keep prices steady for three years and must set aside eight per cent of its channels for non-commercial and public transmissions. The FCC requires the merged company to allow any manufacturer to make a device able to pick up satellite radio, and thus open up the after-sales market.
"I think it’s going to be, in the end, a good thing for consumers and be in the public interest," Federal Communications Commission chairman Kevin Martin told The Associated Press. "Consumers will enjoy a variety of programming at reduced prices and more diversified programming choices."
Subscribers in the U.S. have been told by the newly merged company that they will not have to buy new radios to receive a mix of programming from both services. But if they want to pursue a special pay-per-channel a la carte option, they will need new sets.
Upon learning of the merger, NAB executive vice-president Dennis Wharton replied that "Today’s vote certainly comes as a disappointment to NAB. We continue to believe that consumers are best served by competition rather than monopolies."
Sirius maintains its $3.3 billion buyout of rival XM Satellite Radio Holdings Inc. means millions of subscribers will be able to receive programming from both services, while executives say it will create huge cost savings for the industry. Subscription radio made its North American debut in the United States more than four years ago and by December 2005, two competing services – Sirius Canada and XM Canada hit the air.
Sirius Canada Inc. is owned by Sirius Satellite, Toronto-based Standard Radio and the CBC which has a 40% stake claims to have more than 750,000 paying subscribers. While XM is run by Canadian Satellite Radio Holdings, also of Toronto, in partnership with XM Satellite Canada has 440,000 subscribers. Their U.S. parents have 8.3 million and about nine million subscribers, respectively.
It remains unclear just how the merger will affect the two Canadian partners, which operate under a separate regulatory structure. Neither Sirius Canada nor XM Canada has officially responded to the merger announcement. Both Canadian satellite companies have maintained that regardless of the outcome of the merger, both will continue to act as separate companies and its subscribers won’t experience interruption to their programming and their radios will not become obsolete.
Friends of Canadian Broadcasting opposed the merger, warning it would halt the flow of Canadian content by half to satellite consumers across the country. It adds that a merger would likely force the satellite broadcaster’s Canadian counterparts to join forces, potentially cutting the number of Canadian channels offered over satellite radio.
The CRTC approved broadcasting licences for both Sirius and XM in Canada in 2005, ordering each company to supply one Canadian station for every nine American stations available. Today, there are around 20 Canadian stations available on XM and Sirius combined.
"It’s going to be really interesting to see how this all shakes out. Definitely it’s going to be the Canadian tail getting wagged by the American dog," says Ian Morrison, spokesperson for Friends.
Ironically while the CRTC in 2004 did approve the CHUM/Astral Media bid to run an "all-Canadian" land-based pay-radio service, it also approved the Sirius and XM applications which effectively killed any hope of the Canadian satellite service from every being launched.
Most analysts believe such a merger could not be avoided as profit continues to elude satellite radio companies on both sides of the border. XM Canada has racked up nearly $250-million in losses since its launch, while the financial numbers for privately held rival Sirius Canada are not made public.
Far more troublesome is that while the two companies remained in limbo for 17 months struggling to complete the merger, their competitors have never stopped improving their services. New multi-function smart phones such as Apple’s iPhone and Research In Motion’s upcoming BlackBerry Bold run on the fastest cellphone networks available and provide unmatched mobile Internet connections that could easily offer services similar to those found on satellite radio.
Internet radio sites such as Last.fm and Virgin Radio have already created iPhone applications that allow users to listen to music over the mobile Web through their phone. As data charges continue to fall these services should only become more popular.
The news only gets worse when you factor in that satellite radio gets most of its new business from domestic car sales, which have hit all-time lows in the last few months. As more consumers line up for a new iPod or a music phone the signals definitely look ominous for satellite radio.
