XM-Sirius merger approved by DOJ
Justice Department finally gives thumbs up to satellite radio merger. But deal still faces another regulatory hurdle and questions from consumers.
NEW YORK (CNNMoney.com) -- The U.S. Justice Department approved the merger between satellite radio companies Sirius and XM Monday, more than a year after the two companies first announced their deal.
But for fans of Howard Stern, Opie & Anthony and other Sirius and XM on-air personalities, there are still many questions about how much a combined Sirius-XM service will cost and what programs they'll be able to hear. Plus, Sirius and XM face one more regulatory hurdle before the deal can officially be completed.
Justice Department says merger won't hurt consumers
Despite cries from some politicians and traditional broadcast companies calling the pending deal harmful to consumers, the Department of Justice determined that an XM-Sirius merger was not anti-competitive. The Justice Department argued that other media companies such as Clear Channel (CCU, Fortune 500), CBS (CBS, Fortune 500), or even Apple (AAPL, Fortune 500) with its iTunes software and iPod music player served as alternate options for music and media customers.
Many other considerations factored into the Justice Department's decision, including data that suggested the companies were not even competitive with one another.
"Our data confirms that there was very little switching between companies after a person subscribes to a particular service," said Assistant Attorney General Thomas Barnett during a conference call with reporters Monday afternoon.
Barnett suggested that since subscribers need to buy the receiver, which is not interoperable with other services, it is too expensive for most to switch. In addition, many satellite radio users don't have much choice of which service to subscribe to since they simply wind up with the service that is preinstalled in the new cars they buy.
Sirius has exclusive deals with Chrysler and Ford for example, while XM has agreements with GM, Honda and Toyota.
The Justice Department also said mobile phones with Internet connections will soon be able to offer similar services to satellite radio and will offer more competition in the market.
The Department of Justice did not place any conditions on the merger.
"Since we determined that there was no competition between the companies, we did not need to set any conditions as such," said Barnett.
But the Federal Communications Commission must also approve the deal. The FCC has yet to make a decision on the merger and it could decide to place conditions on the deal. A spokesperson for the FCC was not immediately available for comment.
What this means for consumers
Since Sirius and XM are still awaiting approval from the FCC, it is unclear exactly what a merger would mean for consumers. Both companies charge their customers a $12.95 per month subscription fee for their most basic packages.
Some have feared that if Sirius and XM are allowed to merge, the two companies would raise the monthly price.
However, the companies said last year that they would be willing to offer a so-called "a la carte" price plan where consumers could pick certain packages ranging from $6.99 a month to $16.99 a month. The two companies have also maintained that a combined service offering the best of both companies' offerings will cost less than the $25.90 a month that a consumer would currently have to pay to subscribe to both Sirius and XM.
"The combination of our companies will lead to more choices and better pricing for our subscribers, and result in a stronger competitor in the rapidly evolving audio entertainment market," said XM in a message to subscribers on its Web site after the DOJ announced it had approved the deal.
The merger would combine the nation's only two satellite radio companies and create a company with more than 17 million subscribers. It would bring together Sirius' most well-known content, including shock jock Stern and National Football League games with XM's Major League Baseball as well as programming from Oprah Winfrey.
Currently, subscribers for either Sirius or XM can only receive broadcasts from one of the two services with their satellite radios. In its statement Monday, XM reiterated that radios owned by its current subscribers would not need to be replaced in order to continue receiving programming.
But one analyst said it will be awhile before people will be able to receive the full programming from both companies over one device.
"Content for both companies will not be immediately available." said Pacific Crest Securities analyst David Niederman. "But in the future, there will be a greater wealth of content to choose from."
Deal not done yet
Unfortunately for investors and consumers though, neither company can give much more information about what exactly the combined firm's programming offerings will look like until the FCC issues its ruling. It's still not even clear what the name of the combined services will be.
But the Justice Department's ruling should put more pressure on the FCC to finally make its own decision, which would put an end to the more than year-long wait about the status of the deal since it was announced on Presidents' Day of last year.
The Department of Justice had been reviewing the merger since last March 22 and the more than year-long wait sent both shares for a roller coaster ride. The delay also angered many subscribers of both companies, who have been wondering what would happen to their monthly plans in the event of a merger.
"The process took longer than we typically take," said Barnett. "My goal is to always get to a resolution as quickly as possible, but there was a lot of information and data we had to collect."