Is the courtship finally over? Are the two hearts behind XM Satellite Radio (Nasdaq: XMSR ) and Sirius (Nasdaq: SIRI ) about to beat as one?
"XM-Sirius Radio Merger May Live," reads a headline in this morning's Wall Street Journal, suggesting that approval could now be just days away.
"A final reckoning is expected imminently, when lawyers at the Justice Department finalize a recommendation to their bosses," claims the article.
It's about time, of course. This dance has been going on since February. It would be embarrassing for the regulators to let a resolution creep into 2008, especially after XM and Sirius have jumped through every flaming hoop that the FCC and the FTC have put before them.
Market watchers that once figured the deal would be shot down are warming to the possibility. At least one analyst -- SG Cohen's Thomas Watts -- pegs the probability of the deal going through at a hearty 70%.
Playing Monopoly on a Life board
The inspirational clincher appears to be a recent questionnaire by the FCC, requesting additional information from XM and Sirius. At least one of the queries pits satellite radio's offerings to what is available through terrestrial radio, cable television, Internet radio, and digital media players.
In other words, if XM and Sirius can prove that the satrad experience can be somewhat duplicated by folks firing up their Apple (Nasdaq: AAPL ) iPods or streaming Live365.com Web stations through their TiVo (Nasdaq: TIVO ) boxes, it's unlikely to be viewed as a monopoly.
That's been the sticking point all along. If the only two satellite radio providers combine, they would have complete control over setting prices, potentially jacking up prices and limiting programming.
That particular notion seems to be losing weight, especially once you consider the irony behind the deal's biggest backers and critics.
Automakers like Honda (NYSE: HMC ) , Toyota (NYSE: TM ) , and Ford (NYSE: F ) have voiced their support of the merger. That speaks volumes since they have more to lose than anybody if a combined company results in a tightfisted monopoly. Automakers can presently leverage one provider against the other before inking exclusive deals. Apparently, they see the new tiered-pricing plans as the clincher, since it will broaden the user base as roughly half of new car buyers who buy autos with factory-installed receivers don't bother to pay for the service after their free trials run out.
Then you have terrestrial radio operators as the merger's biggest critics. If XM and Sirius would form a true monopoly, why is a competitive audio format the biggest bankroller in derailing the union? If the regulatory fear is that a merger would limit programming and hike subscription fees, wouldn't that be great news for the AM and FM stations?
Yes, slowly but surely, the writing on the wall is getting clearer. And wouldn't you know it, that scribbling is actually a wedding invitation!
Slam dunks get blocked from time to time
It's not a sure thing, of course. Despite the favorable sentiment, we're still talking about a proposed pairing that was initially prohibited by the original language of the industry's birth certificate.
The key all along has been about the open-mindedness of the Justice Department to grasp the concept that the marketplace has changed drastically since XM and Sirius were born.
Commercial-free music is everywhere these days. It's on your iPod, iPhone, even your video game console. Proprietary programming is a little trickier to duplicate, though podcasting has blown the playing field wide open when it comes to choices in content consumption. Now that most new cars are coming with iPod jacks, the car dashboard has become an aural smorgasbord of possibilities.
The kicker is that the market is still evolving. It will get even more competitive in the future, to the point where even XM and Sirius proponents will have to wonder if a combined company will be enough to produce a single positive cash flow broadcaster.
But why rain on that parade now? First things first. Let's see the companies get hitched first. Then we'll deal with the realities waiting at the other end of the honeymoon.
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