Tuesday, February 20, 2007
XM and Sirius Deal
XM and Sirius Deal
I think this could be the best thing that has ever happened to these two, very similar, companies.
Both have been locked in a bitter rivalry that has cost each company millions of dollars to sign stars such as Opra and Howard stern. The bitter battle between the two unprofitable satellite radio companies is finally over and the expected merger will hopefully spark some much needed savings.
Both companies have spent billions of dollars to win new customers. And both are still unprofitable. Now that the two have merged, the new company will face several tasks including: finding a new name for the merged companies, creating a schedule of radio content, deciphering the need for satellite radio and the most important, convincing the FCC to allow the merger.
The merger is somewhat crippled by an FCC provision that specifically mentions the two companies will not be allowed to combine. The merger would create one company controlling 100% of the satellite radiowaves. Traditionally the consumer has best benefitted from a marketplace with two competitors. The new company must prove that the merger is in the customers best interest.
The new company hopes to show that this isn’t about Sirius and XM radio but rather satellite radio vs regular radio, TV and other traditional methods of communication. The consumer may be the ultimate benefactor in the merger because of decreased prices of the hardware needed to receive broadcasts.
A deal like this has been expected for months, most notably by investor Jim Cramer who appears each night on Mad Money on CNBC. The new company should have an easier time convincing users to buy commercial free radio broadcasts at $13 per month.