Justice Dept. Approves XM + Sirius Merger

[Jitway]

The US Justice Department has approved the merger between XM and Sirius satellite radio services, stating that it could not find any evidence that the combination would substantially reduce competition.

 

In what has seemed like an eternity, the first steps towards a single satellite radio entity began Monday as the DOJ approved the $13 billion deal.

 

XM and Sirius first announced their "merger of equals" last February, with Sirius' Mel Karmazin assuming the role of CEO, and XM's chairman Gary Parsons taking the chairman's position.

 

The two companies had hoped at the time to finish the merger by the end of 2007. However, both the Justice Department and the FCC took their time in studying the merger -- even causing the two sides to extend the agreement through May 1 (it was set to expire in February).

 

Broadcast industry groups such as the National Association of Broadcasters had voiced their opposition to the deal, saying it was anti-competitive. In its defense the two companies argued that since satellite radio's creation, the entertainment industry had changed.

 

Satellite radio was now competing with devices such as music players and other entertainment devices, they claimed. From the DOJ Antitrust Division's statement, it appears as if regulators agreed, adding other factors played into their decision.

 

The reasons for the approval included "a lack of competition between the parties in important segments even without the merger; the competitive alternative services available to consumers; technological change that is expected to make those alternatives increasingly attractive over time; and efficiencies likely to flow from the transaction that could benefit consumers," according to the statement.

 

With the DOJ's approval, the two companies now wait on the FCC, which must also approve the deal in order for the two companies to merge. That approval is a bit more difficult since it requires an actual rule change.

 

In the original agreement that created the two licenses, a provision was placed that forbid one company from owning all licenses. In order for this to be approved, that would have to be changed.

 

However, it is likely that the FCC will consider the DOJ's antitrust concerns -- which apparently do not exist -- and would approve the deal as well. It is not immediately clear how soon after approval from both sides would customers see any benefit.

 

Neither XM or Sirius had commented publicly on the approval as of press time.

 

 

It is about time. Being a satellite Radio subscriber to XM this is great news for me. I know that some stations will be dropped off both servers to make room for the merger but it means a hell of a lot more stations. Plus there will be a price increase but not that much for what you get. I love satellite radio. No damn commercials and all radio. I especially love all the Metal Stations. Plus sports games out the ass that you can't watch or listen to anywhere else for the price.

 

 

Source HERE

Edited March 24, 2008 by Jitway

[Jitway]

Bit of a update on this happening.

 

Lack of Interoperable Radio Key to XM + Sirius Merger Approval

 

 

As it turns out, if XM and Sirius actually were to deliver on an earlier promise to make an interoperable radio, that fact might precipitate a reduction in consumer choice. That's the conclusion today from the Dept. of Justice.

 

In an unusually sideways argument from the US Justice Dept. this afternoon, the fact that both XM and Sirius satellite radio services have been unable to create an interoperable radio device for the foreseeable future, has been put forth as evidence that a merger between the two entities -- which the DoJ approved this afternoon -- would not reduce competition between them.

 

"XM and Sirius made some efforts to develop an interoperable radio capable of receiving both sets of satellite signals," reads this afternoon's DoJ statement. "Depending on how such a radio would be configured, it could enable consumers to switch between providers without incurring the costs of new equipment. The Division's investigation revealed, however, that no such interoperable radio is on the market and that such a radio likely would not be introduced in the near term."

 

An interoperable radio, the Dept. concluded, would typically be an after-market device that consumers would be reticent to purchase.

 

To prove its point, the DoJ cited the case of the automotive distribution channel. Both Sirius and XM have ongoing contracts with major automobile manufacturers -- XM with GM, Honda, Toyota, and Nissan; Sirius with Ford, Chrysler, and BMW. For a driver of a vehicle with either service installed to obtain an in-car, interoperable radio option would be a bit of a hassle -- as much so as switching one service for the other.

 

But certainly the in-car satellite radio is not the deciding factor for which automobile a consumer wants to purchase and drive, the DoJ concluded. So there's no real competition between the two services in the automotive field now, it went on, on the theory that drivers listen to whatever radio happens to be in the car of their choice. And since both XM and Sirius have sole-source contracts set until at least 2012, that sort of semi-non-competitiveness will be the case well into the next decade.

 

"There was no evidence that competition between XM or Sirius beyond the terms of these contracts would affect customers' choices of which car to buy," the DoJ's statement reads. "As a result, there is not likely to be significant competition between XM and Sirius for satellite radio equipment and service sold through the car manufacturer channel for many years."

 

Thus viewpoint depends, in the DoJ's opinion, on where you choose not to stand. If you think there may be competition between XM and Sirius in the automotive field, then that will continue to be the state of affairs for at least the next four years. If you think there isn't, then the fact that people buy cars based on their engines and not their radios, supports that interpretation as well.

 

But while the DoJ openly stated "the evidence does not demonstrate that the proposed merger of XM and Sirius is likely to substantially lessen competition," later, the Department conceded in the very same statement that "XM and Sirius would no longer compete with one another in the retail channel following the merger."

 

So just how minor is the retail channel for the two entities, by comparison to the direct automotive channel? It's minor enough, the DoJ said, by virtue of statistics showing sales declines over the last three years.

 

"Retail channel sales have dropped significantly since 2005, and the parties contended that the decline was accelerating," the statement reads. "However, retail outlets still account for a large portion of the firms' sales, and the Division was unable to determine with any certainty that this channel would not continue to be important in the future."

 

Thus if you choose to think retail sales are important, then yes, in that case, you may see a decline in the number of satellite radio competitors by an estimated 50%. But that doesn't mean there are no other sources for music in the world. For that bit of research, the DoJ branched out a bit.

 

"The parties contended that they compete with a variety of other sources of audio entertainment, including traditional AM/FM radio, HD Radio, MP3 players (e.g., iPods), and audio offerings delivered through wireless telephones," reads today's statement.

 

This afternoon, National Association of Broadcasters Executive Vice President Dennis Wharton dismissed the DoJ's early interpretation of its opinion on the matter as somewhat ludicrous.

 

"We are astonished that the Justice Department would propose granting a monopoly to two companies that systematically broke FCC rules for more than a decade," Wharton stated. "To hinge approval of this monopoly on XM and Sirius's refusal to deliver on a promise of interoperable radios is nothing short of breathtaking."

 

 

Like I buy a car on Satellite Radio choice. Give me a break. I am just glad they are merging finally and later there will be a radio that supports both at the same time.

 

 

Source HERE

[Bambi]

That would suck, I have Sirius and I'm not paying another $200 for a whole new setup and subscription.