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Friday, April 11, 2008

SIRIUS AND XM SHOULD MERGE

Wisconsin Attorney General J.B. Van Hollen wants the FCC to block the proposed merger between Sirius Satellite Radio and XM Satellite Radio Holdings, calling it "bad for consumers and bad for competition." All ready the two companies have been given the go-ahead to merge by the US Justice Department, but still need further approval by the FCC to get it done.

What irks me is Van Hollen's assertion that the merging of these two companies will somehow be bad. He cites issues of lack of competition and fears that one satellite radio company holding all the cards can demand whatever it is they [the company] wants and the consumer will have to pay. This is simply not the case.

The fact is that satellite radio is a very small segment of the overall radio market. Even after the merger is complete, the two companies combined will only have 5% of the total share. That's a mere drip in the pan by comparison. Taking the number in fully, you'd have to concede that contrary to Van Hollen's argument, there's a ton of competition to be had. With regular radio still controlling 95% of the radio market, the satellite radio business is going to have to do quite a lot to convince the listening public why it is better for them to pay for something they can essentially get now for free. If the singular satellite radio company gets beside itself and tries to gouge the consumer, the consumers are simply going to walk away.

In addition to that, having two different receivers in the industry just doesn't make a whole lot of sense. By comparison, what if you wanted to listen to two separate local radio stations? Only, you couldn't because your radio receiver was not capable of receiving both signals. You'd either have to have a different radio receiver for each of the two stations you wanted to listen to, or make a choice as to which one you preferred more. How does this present value to the consumer? Yet, this is essentially what we have now with satellite radio. Together, both companies can make the entire satellite radio spectrum available to the listener. And, in my opinion, that's better for everyone.

I think Van Hollen has it flat wrong. Sirius and XM should merge.

Read Jim's January blog on this topic, "Waiting for the Government to Get Sirius."

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