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XM, Sirius could pair to fend off other digital technologies Rumors are swirling again about a merger of satellite radio providers XM and Sirius. At an industry conference late last month, Sirius Satellite Radio CEO Mel Karmazin told investors and venture capitalists that "we'd love to buy" XM Satellite Radio. Price and regulatory issues could impede such a deal, he cautioned. Karmazin's candor about his desire to be the only player in satellite radio has fueled speculation for the past 18 months. The industry faces competition from wireless devices, digital media players such as Apple's iPod, and providers of online and cell phone content. Some industry analysts question whether there will be even one satellite radio company in five years. XM has about 6.5 million subscribers. Sirius has more than 4 million. New-vehicle buyers are the largest source of satellite radio subscribers. Subscriptions to each service cost $12.95 a month. Installation charges vary. Baseball brawl "Everybody in the audio space has more competition than ever before," says Laura Behrens, a principal research analyst at information technology company Gartner Inc. in Stamford, Conn. "It has happened faster than anybody envisioned. Who knew about podcasting two years ago?" As an example of burgeoning competition, XM spent $650 million for the rights to broadcast every Major League Baseball game from 2005 to 2016. It is spending millions more to advertise the service on national TV and stadium walls. But Major League Baseball Advanced Media plans to stream live audio broadcasts of all its games to mobile devices for $5.99 a month - less than half the cost of an XM subscription. Behrens says she believes there is room for both XM and Sirius, at least in the near term. New technologies that challenge satellite radio aren't yet mass-market trends, she says. XM and Sirius are working on a receiver that would pick up both companies' signals. That would prevent consumers from having to commit to a single service. XM also is developing technology that would allow users to bookmark songs for later downloads. Mike Goodman, a senior analyst at the Yankee Group consulting company in Boston, says digital audio players are a bigger threat to satellite radio than other emerging audio technologies. "There's an 800-pound gorilla in the room today," Goodman says. "Why worry about one coming down the road?" At the same time, online radio listeners have a virtually unlimited selection of stations. Many of them play commercial-free music. According to Arbitron and Edison Media Research, 95 percent of Americans listen to traditional terrestrial radio and 20 percent to online radio, but only 4 percent listen to satellite radio. Two of a kind "I don't think the satellite companies will have an advantage in the music space," says Natalie Swed Stone, U.S. director of national radio investment at OMD, a media buying company in New York. "There will be commercial-free or low-clutter music everywhere." As a result, Stone says, sports and talk channels that carry advertising will become more important to satellite radio. In the past two years, Sirius and XM have spent $1.7 billion to broadcast National Football League and Major League Baseball games, NASCAR races and programs hosted by Oprah Winfrey and Howard Stern. Removing competition would keep the two companies from bidding each other up for content and automaker distribution deals, analysts say. Stock prices offer perhaps the best argument for merging XM and Sirius. An investor who bought $100 worth of each company's stock on Jan. 1 now would have about $52 with XM and $69 with Sirius. Before they could merge, both companies would have to prove to government regulators that competition from other audio providers is keeping them from profitability. Since both companies say they expect to achieve a positive cash flow by next year, such a case could be hard to make. But David Frear, Sirius' CFO, says satellite radio "feels it has plenty of competition, with the $20 billion behemoth of terrestrial (radio) that we compete with every day." Gregory S. Williams [EMAIL PROTECTED] Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
