T Dog Media Blog Think Tank: Could XM and Sirius merge mean more consolidation?

On Monday, the nation’s two satellite radio providers announced a merger. XM and its only other competitor, Sirius, will get together in a deal that will mean that will be only one satellite radio provider.

XM was founded in 1988 as American Mobile Satellite Corp. and incorporated in 1992. Sirius was founded in 1990 as CD Radio. Both companies beat out others to get the two satellite licenses the FCC made available in 1997.

When both services launched early this decade, listeners paid money for access to commercial-free music, sports, news, and exclusive talk. Then they started shelling out more money for premium talent, giving them exclusive channels. The companies paid oodles to Howard Stern, Martha Stewart, Oprah Winfrey, Eminem, and Snoop Dogg to create exclusive content; while the companies continued to lose money and subscriber growth has stalled. Both services have yet to show a profit – in fact, their losses have only accelerated.

And now, the companies want to merge – but instead of seeing themselves as competition – they see the bigger picture –the larger scope of all music competition: terrestrial (traditional) radio, iPods, MP3 players, Internet radio, CDs, and music you can listen to through your cell phone.

But is this a good idea? While some consumers believe they might wind up being the biggest losers (especially if prices go up), could there be a possibility that all of broadcasting might lose?

A few months ago, the FCC outright rejected the possibility of any merger between the two satellite radio companies. On Monday, FCC Commissioner Kevin Martin stated that the merger faces a “high hurdle” if it ever was going to go through. The merger also faces scrutiny and approval from other various governmental agencies. Not only that, the merger would also have to face approval from Canada’s CRTC (the country’s version of the FCC) since XM and Sirius also operate in Canada (though the companies are structured differently.)

But let’s visualize for a minute if the merger went through and it creates a satellite radio monopoly. Terrestrial radio companies, like Clear Channel will argue that they want to buy more stations. Since the 1996 Telecommunications Act, which allowed media companies to buy more stations, Clear Channel has merged with several radio companies, creating the nation’s largest radio chain, with more than a 1,000 stations, with the company owning as many as eight stations in a single market.

Then television station owners might seek to have the ownership caps thrown out. They might argue, “If the satellite companies can merge, why can’t we own more stations?” And so on, and so on. Then those companies would like to se the cross-ownership rules end, meaning companies can own a newspaper, radio station and TV station in the same market. The current law prohibits such a combo, unless grandfathered in. And so on. And so on.

Perhaps the most interesting aspect of this is the National Association of Broadcasters’ position on the XM-Sirius marriage. The powerful lobby group has been against satellite radio from day one, because they feared that that the new technology would erode radios’ audience share. In a press release, they pointed out that the service would be a monopoly and is a reward for making Howard Stern its poster child. The NAB believes that terrestrial radio and satellite radio should be on the same playing field.

So since when the NAB care so much about satellite radio customers? They don’t. All they care about is basically, if they are free to merge, why can’t any of the companies we represent? Since the 1996 act, we have seen decreases in local programming on television and radio, the creation of mega-companies such as Clear Channel and Sinclair, where the bottom line has become more prevalent, and elimination of jobs.

And what about mentioning Howard Stern as the poster child of satellite radio? Please. We’ve seen a rise in tasteless programming on broadcast television, not to mention on radio, even without Stern. We’ve seen news departments eliminated, more tabloid-like newscasts (where a story on Britney’s head shaved is just as important as a county budget battle), more and more commercials, and the proliferation of garbage talk-radio shows, where attacking someone – especially on race and gender - is the norm. The general public sought and found alternatives – causing an erosion of television ratings and radio shares – some of the industry’s own making. And the NAB wants those FCC rules on station ownership to be either loosened more or thrown out altogether. Never mind it was loosing these rules in the first that made the programming less diverse and blander.

In an era where aspiring artists and indie bands are putting their material on YouTube and MySpace, the NAB still thinks the artist community owes them something. One would think it would be a matter of time before these idiots go after them as well. The NAB could care less about the consumer or the local communities. More mergers for media companies = the more profits for them.

The NAB has a lot of nerve saying that the satellite industry is asking for a government bailout when they themselves are looking for one. What a bunch of hypocrites.

So where do we stand on all this? It’s best to say that this is going to be a long, tedious process. The opportunists are already out there pouncing. It’s up to XM and Sirius to prove that this can work. So go for it. Satellite radio is an emerging technology, and should not be held to the same standards as terrestrial radio. After all, a combined XM-Sirius is still better than the slop terrestrial radio continues to serve us every day.