Analyst says XM and Sirius merger looks "less likely"

According to Pacific Crest Washington analyst Erik Olbeter (yeah, you know, Erik Olbeter), the seemingly ill-fated, extremely drawn out XM and Sirius merger now seems, "Less likely." It shouldn't come as any surprise if you've been following this story, which is now entering its 13th month of heel-dragging and unfulfilled promises. With last week's announcement that the deadline would be extended an additional two months, Olbeter feels that, "Prospects for the merger have become increasingly cloudy." He goes on to suggest that, "The FCC and Department of Justice are having a hard time justifying the deal," though he believes that both are, "inclined to approve the merger." Still, not a terrific outlook by any means, and certainly a contributor to the increasing feeling that this thing might never really happen.

[Via Orbitcast]

[CUBSWILLWIN @ Mar 6th 2008 8:00AM]

what will happen next on Silicon Valley stories :P

[SteveS @ Mar 6th 2008 8:08AM]

Why do I have the sudden urge to listen to Coldplay and Nickelback when I don't even like them?

[Flashpoint @ Mar 6th 2008 8:17AM]

Branjolina?

[ben @ Mar 6th 2008 8:18AM]

all i know is that howard stern wants this to happen, so thats that :-)

[Brodie @ Mar 6th 2008 8:54AM]

All I know is that just about every XM/Sirius subscriber I know wants this to happen too, myself included. It seems those that are opposed to it don't even own Sat radio, and have no intentions of buying it...

(Please... if you have Sat Radio and DON'T want this to go through, could you start a thread or something... I'd love to know the reasons why).

[Zorin @ Mar 6th 2008 9:24AM]

It's called competition.

If there are two major satellite radio providers, each one will try to outdo the other. Prices will remain fair and they will both continue to improve.

If there is only one, there is less reason to innovate. Prices may go up since there is no competition to worry about. The technology and service will stagnate.

This is the way business works. Competition is good for the consumer. I am definitely hoping the merger does NOT go through.

[Jamus @ Mar 6th 2008 9:34AM]

I don't own one either, but I want to and have been wanting to since last year when this was first merger info was released. It interests me, but not enough to jump in knowing something this big is in question. I might be completely missing it, but simply cannot see how a merger would be good for me on the consumer end of things.

Take the only two direct competitors in the field, merge the two together, and what do you get? No competition. The two companies need each other to keep each other competitive. And no, I do not think they can claim other competition from land stations, iPods, etc... Those are things that might take time away from me listening sat radio, but I do not have to pay a monthly fee to use them. Apples & Oranges.

[LC @ Mar 6th 2008 9:49AM]

"If there are two major satellite radio providers, each one will try to outdo the other. Prices will remain fair and they will both continue to improve."

Actually, competing with each other has made things worse for both companies as they have been forced to sign huge contracts in order to have exlusive content. This has caused both companies to be running in the red.

Without a merger, one of these companies will fail and we will be stuck with only one anyway. without being able to absorb the assets of the failed company, the remaining one will be forced to raise prices.

[OnlyShawn @ Mar 6th 2008 10:20AM]

the two companies know much better than you, I, or the FCC does what is most profitable. And don't go crying 'monopoly'...monopoly power, while often screamed about, is markedly less possible than you'd think: sowell's 'Basic Economics' would be a good place to start, should you want to learn about that.

That the FCC and DoJ should even be *allowed* to have a say in this is deplorable. This is a luxury good, a completely optional thing. If these two companies get together, and start charging 'too much', people are free to drop the service. If they *really* start charging too much, the barriers to entry are obviously not infinite (as we got two satellite radio companies *somehow* by now), and smart capital could find a way to launch a competing service. Competition (between the two companies), or even the threat of competition (from a new satellite company post-merger), is what keeps prices down.

[BoozeRob @ Mar 6th 2008 11:01AM]

@ Jamus...

How can you say terrestrial radio, iPods, cd's, etc. aren't direct competition? If I’m listening to one I can’t listen to the other. If Sat prices go up then I could just stop paying and listen to regular radio or my iPod. Right now it seems downright stupid that I have to listen to Sirius for NFL and XM for MLB... how is that good for the consumer?

[kballs @ Mar 6th 2008 3:00PM]

Yeah, like there isn't competition to sat radio.

The same people who are glad to see BluRay win over HD-DVD (hence now there is a "monopoly" on high-def physical format movies) are yelling that we need to keep 2 sat radio providers. With all the competition coming up from iTunes, high-def IPTV, downloads, etc. both BlueRay and HD-DVD were going to do poorly, but with one winner they have a chance. Same goes for sat radio, except the 2 providers actually have a good relationship and want to merge (not make war). Imagine if one of the providers just died like HD-DVD, then consumers with gear for that provider would lose big time (even worse than HD-DVD buyers, at least those players still work with the discs you have, a sat radio with no signal is just a brick in your dashboard). There is even a chance that eventually they would both die in that scenario (both weakened by competing with eachother and the survivor not being able to absorb the customers of the other).

Prices can still go up with multiple providers. Look at cable TV. Prices go up all the time and they have competition from DTV. Look at the wireless providers, they never lower prices, they just keep adding minutes that you may not even use. For sat radio, there is no guarantee that prices will go up with a merger (unless you want a combined package of all channels from both providers). They still need to attract new customers (with or without a merger) so raising prices is a good way to turn new customers away. The incentives are there. Plus doubling the channels likely means more diversity in programming long-term (right now they have to largely duplicate each other).

FYI, I don't have sat radio but I have been on the fence... I'd be more likely to buy in (equipment, etc.) if I didn't have to choose between this set of Sirius channels that I want and this other set of XM channels that I want (as well as not having to fear that I'm going to buy equipment for the dying company - I already got burned by HD-DVD thinking both would coexist for many years with dual-format players and dual-format discs).

[Flashpoint @ Mar 6th 2008 8:22AM]

LOL "Paris steals Mary Kate's Boyfriend"

If any of you saw the Paris Hilton sex tape's ending, you'd want sum too. She is a magnificent little vacuum.

[Maestro @ Mar 6th 2008 9:06AM]

She could suck a tennis ball through a tennis racket.

[n0m4d @ Mar 6th 2008 9:40AM]

This merger is about survival of the format. Without it there will eventually be only one company which will be great for advertisers and bad for the consumers that have equipment from a defunct provider. Cost? If it gets too expensive, just cancel the subscription and listen to regular or HD radio, Cable music stations, CD's or your iPod. Satellite radio has plenty of competition. Innovation? It's freggin radio that beams down from the sky what more innovation do you need? I am a consumer and I want content! Baseball and Football in the same system.

[Zorin @ Mar 6th 2008 9:44AM]

Who says one company will "win"? As far as I can see, both XM and Sirius are doing well and have a strong customer base. This is the way it SHOULD be. If we end up with only one company providing satellite radio, what's going to keep them on their feet?

I guess the sports thing doesn't apply to me, since I listen to music and like XM's selection, but I can see your point about that. Perhaps cross-licensing deals would be more effective than a merger in this case? The companies don't have to compete in EVERY possible situation; I don't see why they can't cross-license sports channels.

[LC @ Mar 6th 2008 9:58AM]

"Who says one company will "win"? As far as I can see, both XM and Sirius are doing well and have a strong customer base."

A strong customer base does not mean that the companies are doing well, if that customer base isn't covering the cost of the content.

Sirius, for example, paid 500 mil for 5 years of the Stern show. It was the right move at the time, as they needed to expand their 700k subscribers, just to stay alive.

Merging would combine assets, remove redundancies and consolidate a number of things to cut expenses. If the merger officially fails, watch for both companies to increase subscription prices.

[Mojo_Yugen @ Mar 6th 2008 10:12AM]

"As far as I can see, both XM and Sirius are doing well..."

If by "doing well" you mean losing money hand over fist then yea, they are doing GREAT!

There will only be one satellite radio company in the near future, either they will merge or one will fail.

[OnlyShawn @ Mar 6th 2008 10:23AM]

it is hilarious that someone could say "it looks like they're doing well"....based on what? What do you know about the finances of either company?

Please...agnosticism is the best policy here: if you don't know, remain uncertain. The people with the greatest incentive *to* know (the companies) seem to want to merge. Shouldn't that sway your opinion?

[pathogen @ Mar 6th 2008 11:49AM]

Well they knew from the start they would be bleeding red for awhile.

[Hax Or @ Mar 6th 2008 9:30AM]

Ya know, Sirius and XM equipment is not compatible with each other.

I'm surprised there isn't all the hoopla with different formats like the HD-DVD/Blu-Ray debacle.

I suppose if Warner had the power to pull all of their music from Sirius, Sirius would be sunk just like HD-DVD was.

Wow, I really despise record companies. Movie companies seem just as bad (see Apple TV's attempt at providing HD movies online).

[LC @ Mar 6th 2008 10:04AM]

Hax Or,

Couldn't the merged company broadcast over both Sirius and XM satellites to accomodate the different hardware? I mean the signal still originates on terra firma before hitting the "propriitary" satellites.

[G_Money @ Mar 6th 2008 9:45AM]

Zorin you are an idiot. Yes XM and Siri are competitors, but so is Terrestrial Radio, CD's, Ipods, MP3's etc. There is a lot of competition in the music field.

Xm/Siri have ALREADY released pricing post merger, guess what? It hasnt gone up.

A lot of people don't even care about satellite radio, the ones that do have either service WANT THIS TO HAPPEN.

SHARE HOLDERS want this to happen

Everyone wants this to happen excpet the deep pocket NAB which is obvioulsy corruyping the Feds decision on this. NAB has been funding politicians campaigns FOR YEARS. You dont think these same politicians are going to double cross them and approve the merger now do you?

Its obvious NAB/Terrestrial Radio is threatened and feel Satellite radio IS COMPITION, becuase if the didnt they wouldnt be spending hundreds of millions of dollars lobbying to stop the merger.

[OnlyShawn @ Mar 6th 2008 10:25AM]

thank you so much. When you see people crying 'monopoly', the first place to look is competitors who are losing their asses to a better leveraged, likely larger, company.

[Matt @ Mar 6th 2008 12:12PM]

i don't want the merger to go through. and i'm a XM sub

[Gary @ Mar 6th 2008 12:56PM]

I've got Sirius and could care less if I get access to the content from XM. I dont listen to sports and got it mainly for Howard Stern and because the music played on Terrestrial radio these days SUCKS!

[jetskiorl @ Mar 11th 2008 11:13AM]

Hey G_Money, everyone is just contributing their opinion...their "2 cents" worth ...no need to lower yourself and start calling anyone an idiot...while I do not agree with Zorin’s opinion...he is entitled to it...you should learn how to spell before casting that stone.

[MikeS @ Mar 6th 2008 9:50AM]

If regular radio (and HD radio) are not a direct competitor to Satellite why is the NAB the one fighting this so much? Satellite radio competes directly with regular radio. Just like Satellite TV competes directly with cable. These companies are bleeding money. There may be only one that survives anyway.

[Marc @ Mar 6th 2008 10:01AM]

You can't claim the "prices may go up" defense for holding back the merger, as the collective grouping of Sirius and XM have proposed LOWER prices post-merger than are currently offered. Not only that, but they've voluntarily asked the Justice Department to monitor prices and are open to legal restrictions on price increases!

Like Brodie said, I'd like to hear one person who owns Satellite radio that doesn't want this merger to go through.

[Frankenstein Black @ Mar 6th 2008 10:24AM]

Any Stern employee reading this post (most likely JD or some underling), I’m writing to echo Pappy Stern’s sentiment to a childhood Howard Stern. “I TOLL YOU NOT TO BE STUPID YOU MORON!” Stern proves every day that he is still that schmucky little kid that didn’t know squat about politics then and don’t know squat about politics now!

He continually whines about lobbyists negative impact on the merger, then two minutes later professes his support for Clinton? Hillary Clinton, who has and continue to benefit from lobbyist’s money, do you honestly think she will change how lobbyists operate? F, NO, Schmuck!

P.S. Pappy Stern for President. He knows how to keep schmucks in line and he most certainly knows the issues!

[chris fredette @ Mar 6th 2008 10:37AM]

FCC if you are listening...
Just require 20 ad supported stations be free. Then they have direction competition with ground stations and the hardware will get used by everyone. This will make the consumer very happy and increase the use of national stations instead of just local.

[Matt @ Mar 6th 2008 11:09AM]

I just want to be able to listen to Howard Stern and Oprah on the same receiver...

[US 30 @ Mar 6th 2008 12:09PM]

Some of you have asked why a satellite radio subscriber would oppose the merger. I can tell you that opinion on the XM fan boards is running strongly in opposition.

The argument goes something like this: We chose XM over Sirius because we like the programming much better. Mel Karmazin from Sirius is behind this merger, and when he decides which channels are redundant, he'll keep his Sirius programming and dump the XM programming we love so much.

I'm an XM subscriber and I'm neutral on the merger. It would be great to have baseball *and* football from the same service, but on the other hand the Chicken Littles may be right.

I don't buy their argument, though. I haven't heard Sirius programming and have no opinion on it, and I'm not convinced Mel Karmazin would alienate the larger subscriber base in his merged company.

[Barion @ Mar 9th 2008 4:47AM]

As someone who doesn't subscribe to either XM or Sirius, I welcome the merger. Why? Because neither service has everything I want and I have no desire to subscribe to both services. As it stands, neither one is good enough to me, but a combined XM/Sirius would be good enough, and thus I would buy the equipment and become a subscriber. I bet there are lots of others like me, unwilling to commit to either, but willing to commit to a merged entity. They're both affordable, and sure, I could get both, but why? I don't want to outfit my car with two different satellite radio decks. So if the merger fails, it's likely I'll never subscribe to satellite radio...and terrestrial radio wins.