XM & Sirius To Merge
It appears that XM and Sirius – the only two satellite radio companies in the Untied States – are going to merge (NY Post via TOTM). The merger faces significant regulatory hurdles; it must be approved by both the FCC and DOJ.
Keith Sharfman has been blogging about this over at the Truth on the Market. Initially, he thought there would not be an antitrust issue (in the comments, I took issue with the assertion that there were low barriers to entry, if the market was defined as satellite radio, as I thought launching a satellite was costly). Later, he noted Jim Cramer’s comments that a XM-Sirius merger would result in higher prices which, if true, would result in “more of an antitrust issue here than we thought.”
Scott Goldberg at Digital Media Wire thinks that the merger will be approved because:
The merger will occur because killing it will effectively represent the end of the satellite radio business, which is unnecessary and counterproductive. It is a proven commodity, as the combined entity already has over 14 million subscribers. Broadening the definition of satellite radio by including it in the larger digital entertainment market is the only logical solution.
[I think he means "killing it" would be unnecessary and counterproductive, not that satellite radio - "a proven commodity" - is unnecessary and counterproductive.] He also writes that “the [FCC] must overlook the rule that one company cannot own both satellite licenses. The FCC has indicated that it could overturn the rule, but has not offered reasons that would compel it do so.” There is no citation for this assertion and it appears contrary to FCC Chairman Kevin’s Martin’s statements last month.
Sharon Cobb (quoting MSNBC, I think) reports that:
Sanford C. Bernstein analyst Craig Moffett said he gives the deal a “50-50″ chance of passing regulatory muster. Moffett said the deal could have a particularly tough time getting through the FCC, and is likely to opposed by the National Association of Broadcasters, a lobbying group that includes radio broadcasters. Moffett said it was “anyone’s guess” as to whether the FCC would change its rule barring a consolidation of the two satellite radio companies.
My own personal opinion is that a key issue for regulators will be market definition. If the market is defined as satellite radio, the merger is less likely to be approved. If the market is defined more broadly to include terrestrial radio and perhaps even other audio (iPods, music streamed over the internet, music delivered via cable, etc.), the merger is more likely to be approved.
Technorati Tags: antitrust, DOJ, FCC, XM, Sirius, satellite radio
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