XM/SIRIUS MERGER: HOW WILL IT AFFECT CANADIANS? Digital Home The U.S. Department of Justice (DOJ) this week approved the proposed merger between the Sirius and XM Satellite radio services in the United States. The proposed merger still needs to be approved by the FCC, the US equivalent of the CRTC; however, most American observers believe the merger will be approved with few amendments.
For Digital Home’s Canadian readers, the question following the DOJ’s approval is how will a XM/Sirius merger in the United States impact the XM and Sirius Satellite radio offerings in Canada?
Despite several inquiries from Digital Home over the last year, XM Canada and Sirius Canada have refused to speculate on what might happen in Canada if the FCC approves the merger south of the border.
Following this weeks approval by the U.S. Department of Justice, Sirius Canada made no comment while XM Canada would only say that the ruling would have "no immediate impact on XM Canada’s service offering to subscribers."
XM said it would only "provide further comment when there are new developments from the U.S. Federal Communications Commission or the U.S. Department of Justice."
The reason for the uncertainty in Canada is that both XM Canada and Sirius Canada are independent Canadian owned companies who merely licence programming from the respective U.S. Company’s and augment it with Canadian content required by the CRTC. In the event of the merger, the licensing arrangements for both companies will change.
Since the agreements between the U.S. and Canadian companies are not in the public domain and neither company has commented on what would happen if a U.S. merger were approved, it's impossible to say with any certainty about what will happen if the FCC approves the merger.
For the record, Sirius Canada is a Canadian partnership between Standard Broadcasting, the Canadian Broadcasting Corporation and Sirius in the United States. The company is privately owned and does not publicly report subscriber counts of financial results. XM Radio Canada is the operating name of Canadian Satellite Radio Holdings Inc., a public corporation on the Toronto Stock exchange. The company is controlled by CEO John Bitove, who owns a majority of shares, while the next largest shareholder is XM Satellite Radio out of the U.S. which owns about a quarter of all shares.
Speculation: What might Canadians expect?
Although Sirius and XM refuse to comment on what Canadians can expect, Digital Home spoke to several industry insiders who told us what could happen along with what they think will happen.
The potential possibilities include: both companies will remain independent and continue to licence Sirius and XM channels for the next year until new agreements are reached; one company could be forced out of business immediately; or the companies could undertake some kind of merger of their own in Canada.
Our insiders told Digital Home they expected some kind of merger between the two Canadian companies and the merger would happen very quickly. The belief in a fast merger is based on an announcement made last summer by XM and Sirius regarding programming and the CRTC rules the companies must operate under in Canada.
Last July, the U.S. companies told government regulators what they planned to offer U.S. consumers after the merger. These plans were published in a summary of their post merger channel line-ups available on the company’s merger website.
In the summary, the combined company said it would offer former Sirius radio subscribers a new lineup of approximately 130 Sirius Channels plus a select XM package of 10 channels while former XM radio owners would be offered a similar number of XM channels plus a select Sirius package of 10 channels.
Our insiders tell Digital Home that Sirius and XM in the U.S. have now used up all of their bandwidth on their orbiting satellites so, in order to offer existing Sirius customers 10 more XM channels (or existing XM customers 10 more Sirius channels), each operator would need to drop 10 channels.
So which channels will they drop? Sirius and XM haven’ said but the answer says our insiders lie in the regulations put forth by the CRTC in Canada. To operate in Canada, both Sirius and XM Canada are required to have one Canadian channel for every nine American Channels.
Currently the combined companies would have over 20 Canadian channels, far more than a merged Canadian company would be required to have under CRTC rules. A merged Canadian satellite operator could likely get away with 10 or 12 Canadian channels under the CRTC rules so our insiders believe the merged U.S. organization will want to drop as many Canadian stations as fast as possible in order to free up bandwidth after the merger.
For this reason, our insiders expect a Sirius and XM Canada merger announcement within days of FCC approval.
So how big would the merged Canadian company be? Digital Home believes a merged Canadian Satellite Radio company would have would have approximately 750,000 paying subscribers in Canada consisting of 500,000 Sirius Canada subs and 250,000 XM Canada subs. (Although XM has recently stated that it has 400,000 subscribers, its believed that only about 250,000 are self paying subscribers)
Because Sirius Canada is a private company and does not publish any financial statements, its impossible to say what the combined revenues of the two companies might be, however, Digital Home estimates combined revenues at the company to be around $7.5 million per month or $90 million annually. This number is based on average monthly revenue of $10 per subscriber. |