XM plus Sirius doesn't equal monopoly?
Posted
Mar 24 2008, 05:04 PM
by
Kim Peterson
So combining the only two satellite radio providers in the U.S. won't create a monopoly. Huh? That's what the Justice Department said today after giving its blessing to the merger of XM Satellite Radio and Sirius Satellite Radio.
Both stocks soared today on the news. XM shares closed up 15% to $13.79, and Sirius shares closed up nearly 9% to $3.15.
The first thing I thought after seeing the news was that the price of satellite radio will go up. But the DOJ sees it differently. The merged company won't be able to raise prices, accordng to the DOJ, because doing so would send customers into the arms of traditional radio, HD radio, iPods and the audio content available on cell phones.
OK, I could maybe buy that. The iPod might look an awful lot better to people if their satellite radio bill increases. But the next part of the DOJ's news release is downright silly. XM and Sirius are going to save a "substantial" amount of money by merging, the DOJ said, and those savings could be passed on to consumers in the form of lower prices. Uh-huh. OK. Sure.
Yet in the same paragraph, the DOJ said it wasn't possible to estimate how much money would be saved because XM and Sirius wouldn't provide enough evidence. So the DOJ all-but-announces a satellite radio price cut even though it had no financial basis to do so.
Finally, the DOJ said that future technologies will provide enough competition to satellite radio to keep prices down. Wireless networks being developed can stream Internet radio to cell phones and other devices. But it's hard to predict which of these networks will be successful or when they'll become available, the DOJ said.
At any rate, the merger got the green light (it goes to the FCC next) and we'll see if the DOJ's claims turn out to be true. I could see hardware incompatibilities causing some problems, but the DOJ doesn't mention that. Call me a cynic, but I wouldn't be surprised if satellite radio gets a little more expensive.
Here's what others are saying about the news:
DailyTech: "Now that the merger has been approved, it’s up to XM and Sirius to prove to consumers that the merger will be a benefit to everyone, not just the satellite radio providers."
Blogging Stocks: "It sounds to me like this could be just another non value-creating merger to add to the pantheon of deals that have over-promised and under-delivered."
Jon Markman: "But the merger plan actually amounts to the death of a dream for investors who came to believe that shares of Sirius -- propelled skyward for a short time by the hiring of snarky talk show host Howard Stern -- would make them rich beyond compare."
Ars Technica: "Given the hardware incompatibilities between the two services, it may be a while before subscribers benefit from the combined entity. New receivers capable of getting programming from both providers should hit the market fairly quickly; retrofitting current gear to take advantage of programming from both XM and Sirius will be more challenging."
Gizmodo: "And if they do raise prices and start sucking, people have plenty of other options to abandon them for. On the other hand, they were both already on life support, so this jolt might not be enough to fully re-animte them. "
