Monday, March 24, 2008

Sirius and XM Radio are getting married

The Justice Department has approved a merger between Sirius Satellite Radio and rival XM Satellite Radio.

NEW YORK ( -- 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.

In its decision, the Department of Justice had to determine whether an XM-Sirius merger was anti-competitive, or if 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.

The Federal Communications Commission must also approve the deal before it can officially be completed. The FCC has yet to make a decision on the deal.

The merger would combine the nation's only two satellite radio companies and create a company with about 14 million subscribers. It would bring together Sirius' most well-known content, including Howard Stern and National Football League games with XM's Major League Baseball as well programming from Oprah Winfrey.

Shares of XM (XMSR) and Sirius (SIRI) both rose after the announcement.

Source [CNN]

On February 19, 2007, Sirius Satellite Radio and XM Satellite Radio announced a merger that would combine the two radio services and create a single satellite radio network in the United States. The merger would bring both companies a total of more than 17.3 million subscribers based on current subscriber numbers as of 2008.

Each share of XM stock will be replaced with 4.6 shares of Sirius. Each company's stockholders will retain approximately 50% of the joined company. Sirius CEO Mel Karmazin will retain his CEO title in the new company, and XM chairman Gary Parsons will retain his. XM CEO Hugh Panero stepped down from his company in August 2007.

Since both companies will operate as one, this may reduce the cost of licensing the broadcast material. It will also almost certainly reduce the staff required to run the company. Also, programming can be spread out among the companies' combined satellite constellations.

If all of the non-duplicate channels are kept, this will result in more programming being made available to subscribers of both services.

With only one company to develop products for, the new company can afford to spend more money to develop new products. So far, services have been developed which weren't even conceived of when satellite radio was launched. XM and Sirius now carry satellite weather and traffic, and Sirius is set to launch television programming in 2007. Likewise, it is expected that new technologies and products will continue to be developed and integrated in to the combined infrastructure of XM and Sirius.

Opposition arguments
As the only provider of satellite radio, the new company could raise the subscription price, and subscribers would have no choice but to pay it if they want satellite radio service. Sirius argues that the competition from terrestrial radio, Internet radio, and portable media players would act to moderate the cost. Sirius CEO Mel Karmazin has also offered to fix prices in order to satisfy regulators and consumers.

Currently, XM and Sirius use different compression and conditional access systems, currently making their receivers incompatible with each other's service, though both companies have guaranteed that existing receivers will be able to receive content from both services after a merger.

There are currently 7 satellites in orbit: 4 XM and 3 Sirius satellites. Each company also has a ground spare, of identical construction to its first generation of satellite. Also, Sirius will continue its plans to launch its newest satellite, Radiosat-5.

CEO Karmazin said in an interview that both the XM and Sirius brands will be offered as separate brands/services for the next 15 years. Any combined or unified services would be in addition to these separate services.

Source [Wikipedia]

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