XM/Sirius merger: Bad for business?

Justice Dept. rules that new satellite monopoly will not crowd out small competitors.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)

xm_satellite_radio_dish.03.jpg

(FORTUNE Small Business) -- On Monday, the Justice Department approved the $4.6 billon merger of Sirius Radio (SIRI) and XM Satellite Radio Holdings (XMSR), the nation's only satellite radio providers.

When FSB first profiled XM back in 2004, the company had recently signed its millionth customer and was zooming past its older competitor, Sirius. But neither company has managed to turn a profit so far.

Sirius and XM believe that the synergy from the merger, which was announced in February 2007, will help their bottom lines and also benefit listeners, who will no longer have to choose between the two companies' exclusive programming.

The Federal Communication Commission must still approve the merger before it is finalized. Approval would mean overturning a 1997 FCC ruling that prohibited Sirius and XM from joining forces, a decision made to ensure "sufficient continuing competition."

The Justice Department ruled that the new company will not unfairly dominate the market because listeners have access to numerous other audio media, including MP3s, Internet radio, and high-definition radio.

Critics of the Justice Department's decision, including the National Association of Broadcasters, believe that the resulting satellite radio monopoly would unfairly compete with traditional analog radio.

However, independent radio station operator Joe Schwartz expressed little concern about the merger.

"[It] would have a small impact on us if any," said Schwartz, whose company, Cherry Creek Radio, operates stations throughout the western United States.

Schwartz dismisses the satellite radio industry as a threat because its combined subscription base - a little over 17 million - is a relatively small percentage of the U.S. radio audience.

Nor is Schwartz convinced that the merger will do much to help XM and Sirius make money.

"It's a subscription-based revenue model, and I can't see a way for them to make it work," said Schwartz, whose 65 stations are sustained by advertising.

"I think it's two money-losing companies merging to form one money-losing company." To top of page

To write a note to the editor about this article, click here.

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
Awesome car options for first-time buyers There are lots of good options for millennials shopping for their first car. These models might not be the most popular, but they're worth considering. More
6 surprising things for sale on Taobao Consumers can buy just about anything and get it shipped to their door from Alibaba's Taobao, China's most popular online shopping platform. More
Most notorious recalls ever It's not just automakers that issue massive recalls. From lawn darts to Pokemon balls, plenty of other consumer products have been deemed dangerous, or worse, deadly. More

Sponsors