6.21.2008

Corporate Media & the XM-Sirius Satellite Merger

by Rick Rockwell

If you’ve ever wondered why the proposed merger between XM and Sirius, the satellite radio firms, is such a big deal, the picture became a bit clearer this week.

Wall Street, Congress, and the commissioners of the Federal Communications Commission (FCC) all had something to say about the merger.

But if you really want to understand it, go to a car dealership.

During the past few weeks, that’s what this author has been doing, for reasons unconnected to the merger. But the byproduct of these trips is a better understanding of the stakes: who controls your car radio. Unlike over-the-air/commercial radio, which is poor enough in the hands of the corporate media, at least there are multiple corporations competing for your attention as you drive. Of course, the group-think of corporate media has reduced radio’s quality enough that a potential monopoly service (with all the problems inherent in monopolies) and one that you must pay for each month is considered a competitor to terrestrial radio. GM and other car companies bankrolled satellite radio, so not only do they push it on consumers at every turn in dealerships (this makes sense for a return on their investment) but they also have a vested interest in seeing the service survive. And in the face of mismanagement by those who run satellite radio (they spent too much on radio talent who failed to woo new subscribers in any large way), the merger is a way to keep their investment alive. The more satellite radios the car companies can install, the higher potential they have at recouping what looks like a major loss. But the end result will be one master radio programming center. Consider that the bosses who run satellite radio think Howard Stern is a genius, and you’ll know immediately what the IQ level of the programming will eventually be once the monopoly slashes programming to cover satellite radio’s huge debts.

What the folks at Sirius and XM aren’t telling you is that new competitors would like into the game. A group called Primosphere, which lost in the initial satellite bidding has asked the government to consolidate the satellite radio holdings if a merger is approved, and allow them to pick up the use of some of the satellite radio infrastructure now used by XM and Sirius. Of course, Sirius has publicly opposed that proposition. And why not? If they can keep the field to themselves, their poor management will just get bailed out by Congress and the FCC through approval of the merger. If the FCC would approve Primosphere as a new player in satellite radio before it blesses the merger, that might allay some consumer concerns.

Consumer groups such as the Consumer Federation of America and Consumers Union oppose the merger because the monopoly will eventually do what all monopolies do: raise prices and decrease customer service. When FCC Chair Kevin Martin announced this week he’s supporting the merger and hopes the commission follows his lead, he worked out an intricate plan to get XM and Sirius to agree to price caps, and a la carte service, among other provisions. (Including an allocation of four percent of programming for women and minority issues, a percentage that some in Congress rightly see as far too low.) However, the compromise Martin worked out will only hold for the next few years. The satellite radio bosses will wait those conditions out for the potential monetary rewards afterward.

Of course, this all may be a moot point. This week Goldman Sachs in its review of satellite radio performance noted that the stocks for both firms were over-valued and that the merger likely would not solve all of the problems mismanagement foisted on this once promising service. The investment bankers seem to buy into the notion that many folks under 40 are willing to program their iPods as a way around the tyranny of both the terrestrial and satellite radio programmers.

And while it feels wrong to agree with the investment bankers, maybe that’s what is the best hope for all of radio, satellite and otherwise. We have to kill it to save it. Here’s to folks programming their own individualized iPod stations or to downloading the myriad number of podcasts available as a way around the corporate programming bosses. The revolution is in your hands. Spin that iPod dial.

But even with that solution, that’s still no excuse for the government to give special favors to the corporate radio bosses. And that’s what the merger will be.

For more background, please also see:

(The graphic of a satellite is from the National Aeronautics and Space Administration — NASA; as the graphic is from the government, it is in the public domain.)










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