Is it Feb. 19 already? Today marks the one-year anniversary of the public announcement from XM Satellite Radio (Nasdaq: XMSR ) and Sirius Satellite Radio (Nasdaq: SIRI ) that they planned to get hitched. Even if the merger had been rumor-mill fodder for a couple of years before that, few figured that the two satellite-radio providers would chance a shot at being legally united. So congratulations to XM and Sirius for making it this far. Happy anniversary and best wishes for ...
What's that? XM and Sirius still aren't married? That's unreal.
Then again, we all knew this would be a thorny walk down the aisle, since regulators can be pretty vicious. Will the two satellite-radio stars be allowed to proceed after the proposed union of the two satellite-television providers -- DirecTV (NYSE: DTV ) and DISH Network (Nasdaq: DISH ) , named EchoStar at the time -- was shot down several years ago?
The argument in favor of letting this particular deal going through is that both companies have already committed to making the pairing a better deal for the consumer. The impact that less competition has on pricing flexibility is usually a sticking point with iffy mergers like this one, yet XM and Sirius removed that concern quickly when it announced lower-priced tiers that would go into effect within a year of the deal's completion.
That single move is enough to leave some wondering whether it's the regulators who are being anti-consumer, by stalling the deal that would set the scaled-back pricing tiers in motion. In its current form, XM and Sirius come in a single $12.95-a-month flavor, take it or leave it. Discounts are available for additional receivers within the same household, but you still need that original $12.95 plan.
Waiting rigid at the altar
There used to be a bit more wiggle room there. Back when XM was charging just $9.99 a month, it offered premium audio channels such as Playboy (NYSE: PLA ) and access to the Opie & Anthony Show, yet that ended when XM decided to match Sirius at the higher price point and make all of its content available at the same price.
That single move is enough to leave some wondering whether XM and Sirius aren't living together anyway, since they've been offering pretty similar services at identical price points for two years now. Even some of the things that made one service stand out -- such as Sirius' lifetime-subscription plans -- have been gradually phased out.
In other words, XM and Sirius are looking a lot like one another. I know that may sound like heresy to those who chose one brand over the other based on particular morning-show personalities or niche-specific, commercial-free music channels, but how else do you explain that XM and Sirius have been weak sellers at the retail level but monsters in the auto showroom, where most car buyers are given a single choice for factory-installed satellite-radio service?
Living in denial or dying on the radio dial
There was a time when critics of the deal felt that regulators shouldn't rush into a decision. This is a defining moment in broadcasting history, and one that terrestrial radio fears if it makes XM and Sirius financially stronger with the ability to offer a more consumer-friendly product.
However, unless you've living under a rock -- or at a Top 40 rock station -- you're living in denial if you think that the battle for eardrums has come down to satellite radio versus conventional radio. Have you seen the latest wave of car commercials where in-dash systems have iPod jacks and store your entire CD collection on beefy hard drives? The battle is no longer terrestrial versus satellite. The real war is push versus pull, as providers of pre-programmed content are battling the many choices consumers have these days to create their own playlists.
It's just silly at this point to focus on a narrow niche like satellite radio as being monopolistic, when it's just one of the many aural alternatives in the growing marketplace. Even a skeptical analyst like Goldman Sachs' Mark Wienkes concedes that a deal will happen but remains bearish on both stocks in the long term. Why? Well, Wienkes believes that even with the realized synergies that will accompany the merger, the industry's changing ways will make it difficult for XM and Sirius to produce the kind of profitability that optimists expect.
So, what are we doing here quibbling over this merger between forkfuls of anniversary cake? Let's get this deal approved, or nixed if need be. The inn operator can't be left holding the honeymoon suite open forever, you know.
Here are some other recent XM stories on its long courtship with Sirius:
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