Details Behind The SIRIUS-XM Merger
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On February 19, 2007, it was announced that longtime competitors, Sirius Satellite Radio and XM Satellite Radio, would combine their services to create a single satellite radio network throughout the U.S. and Canada. The merger look good on paper-after all, a merger of the two largest companies in satellite radio would bring the new combined effort a total of 13 million subscribers. It was also announced that each company’s group of stockholders would retain 50% of the new joined company. Sirius’ Mel Karmazin continued to serve as CEO while Gary Parsons continued serving as XM chairman. The only real change to come about came mid-year, when Hugh Panero, the CEO of XM, stepped down in August.
What is the latest news on the merger? The merger is not yet finalized, as it is currently under review by the U.S. Department of Justice’s Antitrust Division, as well as the FCC. However, it seems that everything is done but the shouting. (After all, this is radio!) The merger was first announced to shareholders on February 19, 2007, and it was not entirely unpredicted, as many industry insiders felt the combining of forces was imminent. From the period of March 2007 and to the end of the year, many technical aspects of Sirius’ acquisition were handled, including the FCC’s giving public notice of application filing to the shareholder vote, conducted from late October to November. Over 96% of Sirius’ stockholders agreed to the acquisition, and now the pending approval is in the hands of the FCC, which is expected to make an announcement in the first quarter of 2008.
What are some of the benefits of the merger, which no doubt led to a successful acquisition campaign? Both companies could certainly benefit from the reduced cost of licensing broadcast content, as well as the decreased amount of staff required to operate the company. Programming could easily be spread out amongst both companies and if all non-duplicate channels are kept then even more programming can be added later. Now that both companies are one, a concentrated effort can be put out to develop new radio products. Because of the intrinsic advantages of digital radio, there are hardly any limitations as to what could be done in terms of product creation. Sirius is already set to start launching television programming in the near future and both companies have been working on discovering new technology.
How will the merger affect the technical aspects of Sirius and XM? Sirius and XM actually use different compression and conditional access systems. This makes their receivers practically incompatible with the other company’s service. It’s unlikely that the majority of subscribers would rush out to buy an additional receiver, since having an additional piece of electronic equipment installed in your car would seem like an overkill. On the contrary, both radio satellite services have stated that they will continue to operate as separate services, and receivers will continue to be sold as they are. The only difference is that a unified receiver equipped to receive programming from both companies could allow listeners the entire range of satellite channels.
While the Sirius and XM merger was not a big surprise to the industry, the effects of the deal remain to be seen, as well as the overall effects on radio as an art and media form.
Bob Maines is a satellite radio specialist with several years of experience selling and installing SIRIUS Radio.
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