HOW RADIO LISTENERS WILL FARE IN A MERGER OF SIRIUS AND XM Lee Gomes – Wall Street Journal Business doesn't always look too kindly on a duopoly. True, there are the occasional twinned rivals that manage to sit happily atop an industry for decades -- Coke and Pepsi, say. But there are also many examples, like VHS and Beta, of pairs of competitors that battle it out in markets where, in the end, people want not a choice, but a single unambiguous winner.
Depending on antitrust regulators in Washington, the market for satellite radio may soon undergo a 2-for-1 deal of its own. In this case, the winner would involve a marriage of two incumbents, XM and Sirius, who have asked the Federal Communications Commission to be allowed to merge. A decision isn't expected for several months.
The request from the companies is, if nothing else, brash. XM and Sirius received permission to set up their satellite networks back in 1997, fully aware of an FCC rule specifically prohibiting the very sort of merger and resulting monopoly now being sought.
Well, that was then, say the companies and supporters of the merger; the technological landscape today is different. Back then, the only alternative to satellite radio was AM/FM radio. Today, competition abounds, not only from iPods and podcasts, and musical cellphones, but from a reinvented broadcast-radio format known as HD Radio.
But technology has been changing ever since Edison kept tweaking the filaments in his light bulbs. By the time of the founding of Sirius and XM in the early 1990s, many of the landmarks of today's personal digital-music landscape were already in place. The MP3 music-compression system was developed in Germany in the 1980s. Sony had sold millions of the CD Walkman (an earlier name of the parent company of Sirius was CD Radio Inc.). Discussions about what would become HD Radio were being held as early as 1991.
In technology, change is the only constant, even if it can't be known what form the change will take. If you can't stand the microwaves, get out of the kitchen.
The two companies promise that a united XM-Sirius won't work to the detriment of consumers. "We are committed to not raising prices and, in fact, are committed to lowering prices," said Mel Karmazin, the Sirius executive who would head the combined company. The companies also say that consumers will have more channels to choose from once a merger is cleared.
Many consumer groups oppose the proposal, saying that in addition to the anticompetitive nature of any monopoly, this will be yet another instance of media consolidation. A few groups say it ought to be allowed, on the condition that the two agree in writing to certain restrictions, such as pricing and programming.
Consumers themselves should be forgiven for being suspicious. The current merger request is the best evidence that a new "times have changed" rationale might be put forward three or five years hence, when the company wants to do something it was forced to promise never to do.
Perhaps the natural economics of the satellite-radio market are such that there is only room for a single, profitable company -- the argument for a merger. The billions of dollars that XM and Sirius have lost over the years would suggest as much.
But both companies have been profligate spenders, shelling out big bucks not only for talent, as Sirius did with Howard Stern, but also for "customer acquisition." Those dollars went to car companies and electronics retailers to get them to push the network-specific equipment of each of the two companies. It's likely that the companies spent more than they could afford, even absent podcasts and streaming Web radio.
Still, there is a reason to root for a merger, and it involves the group most actively opposing it: the broadcast lobby. When XM and Sirius made their announcement, a spokesman for broadcasters said the satellite-radio companies were looking for a "government bailout."
But this argument is from the possessors of one of Washington's most potent lobbying forces. If any group is skilled in the ways of governmental largess, it's broadcasters.
If you fret about diminished choices with a joined Sirius and XM, think for a second about commercial radio in the U.S. Its ownership is highly concentrated, its programming is most commonly described as "soulless" and it is missing most of the public-interest programming we used to take for granted.
A radio station, after all, is but a state-approved monopoly on the public's airwaves. Remember when radio stations turned out news programs? (Broadcasters say listeners can fill any vacuum with a host of other sources.)
Compared with commercial radio, a merged XM and Sirius would look like Florence in the Renaissance.
It is said that one test of how much competition will exist after a merger is the extent to which a competitor squawks; the more complaining, the more there will be a thriving market. Judging by the decibels from the broadcasters, satellite and broadcast radio would soon be at each others' throats.
What's not to like about that? |