XM Keeps Shaking the Wrong Hands

• Email
• Share
• Print

Whether or not XM Satellite Radio (Nasdaq: XMSR) is ultimately allowed to merge with Sirius (Nasdaq: SIRI), at least it's getting a lot of handshake practice before the ceremony. The company has settled with Sony BMG, the third of the four major record labels to come to terms with it.

The lawsuits hurled at XM's direction stem from its portable Inno player. Executives at the labels were incensed when the device hit the market two years ago, given its ability to record songs in their entirety that play on XM's dozens of commercial-free digital music channels.

Companies like Sirius typically agree to pay a set amount to record labels to account for any potential copyright trampling. XM foolishly decided to forgo the formality. It was a risky move, especially because satellite radio and the music labels are in what would otherwise be a symbiotic relationship where each one benefits the other. XM provides broader exposure than conventional ad-laden radio with limited play lists. In turn, the allure of commercial-free tunes is a big seller for XM and Sirius in the auto showroom.

At least XM is settling now. Universal, Warner Music (NYSE: WMG), and now Sony BMG -- a 50-50 venture between Sony (NYSE: SNE) and Germany's Bertelsmann A.G. -- have all come to terms with XM. Even if portable devices like XM's Inno and Sirius' Stiletto have become less important to the companies, with most of their growth coming from factory-installed car receivers, there's no point in stirring up disharmonious sentiment within the industry.

This is also the kind of concession that will look good on XM's resume as it continues to petition the Federal Communications Commission and the Department of Justice to approve its combination with Sirius. It's February now, meaning we are approaching the one-year anniversary of the deal's announcement.

Just keep smiling and shaking hands, XM. It won't be long before you run out of hands to shake and find that you're alone with Sirius, the way you've always wanted to be.