Are They Sirius?

By Timothy R. Butler | Posted at 4:10 AM

By now, most people have heard about XM and Sirius's so-called “merger of equals” that would, if successful, eliminate competition in the satellite radio industry. Although satellite radio remains enough of a non-essential item that the post-merger company will still have to “compete” for subscribers, it is hard to imagine that this will be good for consumers. Even a cursory analysis of the good and bad will show that it is in the consumer’s interest for the FCC to stick to its guns and prohibit the merger.

To be fair, there are definitely good things about the merger. Right now, when buying a car, a person is essentially stuck with whichever one of the two competing systems happened to win an exclusive contract with the vehicle manufacturer. While there have been exceptions to this (for example, Volkswagen up until the present model year offered a choice of XM and Sirius), generally people have been led to use whichever brand comes with their car. If one liked XM’s programming, but wanted to buy a Dodge, the only real option is an external tuner. That’s an unfortunate, messy problem that would be neatly dealt with if the merger goes through. But, then again, a simple unified receiver, promoted by car companies more interested in their customers than which satellite radio company would pay the biggest bucks in kickbacks for an exclusive deal would have done the same thing – and still could.

The other really obvious benefit to the merger would be combined programming. A person could quite likely find some programming exclusive to both systems that he or she would like to listen to. However, given that the programming is not available ala carte, generally people have had to weight which one had the favorite exclusive content rather than just buying a little from both companies. Oprah or Martha. Baseball or football. Oh, and for the shock jock fans: garbage or more garbage (please, no stern comments about that).

The first problem is only relevant inasmuch as good content is available, and the second takes us to the content itself. That is where the merger is likely to hurt, and if it does, it eliminates the so-called advantages of the merger. In the case of exclusive content, the high profile deals that have brought much of that content have been driven by the competition between the two providers. With only one provider it seems far less likely the same type of high profile deals will continue in the future. To some extent, this might be inevitable even if the merger failed: the two companies could end up one-upping each other all the way into bankruptcy if they do not stop at some point. Nevertheless, even lower profile deals seem likely to decrease with only one satellite radio player.

The argument that XM and Sirius are promoting is that they compete with a wide array of audio content distribution, not just each other. This is true; in my car, I can listen to normal terrestrial radio stations, a CD, my iPod and so on. Nevertheless, satellite radio is in a different class from these things. I suspect most satellite radio users probably use those other forms of distribution too, but at different times. There are some features of XM or Sirius that simply cannot be found elsewhere. For example, satellite radio has few competitors providing broadcasts of commercial free, popular music. Only one of the stations I listen to on XM has an equivalent commercial-free radio provider in St. Louis. My CD’s and iPod are great for commercial free music, but they do not help me discover new music while I am driving. Moreover, if one day my tastes are a bit unusual and I feel the need for some country music, all I need to do is switch stations to enjoy commercial free country music (not being a big fan of country, I certainly do not get that hankering enough to justify buying the music – but I have the option just to hear it with satellite radio). If on another day I feel like making my car a Starbucks on wheels, I can switch over to HEAR Radio and hear a lot of music I would probably rather not buy but is worth a listen all the same.

And the exclusive benefits of satellite radio are not limited to music, consider, for example, the old time radio station that plays radio programs from the “golden age of radio” or instant weather that cycles through nothing but traffic and weather 24×7. The latter is a perfect example: weather on satellite radio has no real competition other than the National Weather Service’s own NOAA Weather Radio, which few (if any) cars can receive. Hence, the only thing to drive the satellite radio to have more coverage areas and better coverage of weather across the nation is competition from the other satellite radio service. Post-merger, all the iPods in the world are not going to force XM-Sirius’s hand to improve those stations.

In other words, the engaged couple is only telling a partial truth: yes, there is new competition, and yes, people will weigh whether satellite radio is better than broadcast radio and iPods for their individual needs. But, all of these sources are unlikely to drive satellite radio to push itself to be as good as it can be, because some things are simply better fitted to satellite. The comparison the companies are pushing is not like cable versus satellite television, but more akin to cable versus buying DVD’s. Yes, there is some overlap, but not enough that either one can push the other in the same way direct competition can. I have mentioned a few of the areas where this is already true, but if the merger goes through, many more potential advantages to satellite radio simply will never see the light of day.

Timothy R. Butler is editor-in-chief of Open for Business.

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