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The Merger Of Sirius And XM by Dave Goldstein
Just as it seems that satellite radio is becoming a contender in the radio industry, there are talks of a merger between the two satellite radio giants, XM and Sirius, because of the fact that both are losing money. Combined, XM and Sirius satellite radio companies lost 1.5 billion dollars in 2005 alone. Neither company has ever turned a true profit. Much of the money lost was to attract talent and exclusive programming such as Sirius radio's acquisition of legendary radio "shock jock" personality Howard Stern and XM's deal with Major League Baseball for full-game broadcasting rights. Even so, these acquisitions have thus far failed to draw enough listeners to put each of them into the black.
Though the talks of a merger were hurriedly dismissed early on, both companies are more forthright with their intentions now. As it stands, high-level merger talks are becoming more serious and the companies have already outlined some of the major facets of a possible merger. Both companies will retain 50% of the rights to the new company with XM gaining 4.6 shares of stock to every 1 share that Sirius receives. Both respective CEOs will retain their positions and their titles as such, sharing the load of the new mammoth satellite radio company.
However, it wasn't long before many critics began crying foul about the potential merger. For instance, a merger would mean a monopoly of the satellite radio market, with no other competitors able to effectively enter without being beaten by the combined forces of the two industry pioneers. Even though it is an industry that was not in place before the two companies came along, a merger would almost assuredly bring about anti-trust suits galore. Furthermore, if the merger did take place and they were able to stem off such legal proceedings or win the ones that did come about, many critics point to other, potentially more damaging mergers that would cry foul if they were met with government intervention. If ClearChannel, the terrestrial radio goliath were able to gobble up ever radio station that they wanted, a monopoly would occur there. And what would happen if ABC, CBS, and NBC were allowed to merge? While these scenarios are, as of right now, speculation, similar consequences could, and most likely would happen if the merger would be allowed to take place.
But what about the consumer? Would the average satellite radio subscriber benefit from the joined forces of the two satellite radio companies? Perhaps, but perhaps not. On one hand, the combined resources would enable a broader reach and increased programming for the price of just one subscription, however being that the company had a monopoly on their services, they would be able to charge just about anything they wanted. However, to be fair, the market would still decide on whether or not the new company would gouge prices, as satellite radio is currently in a heated war with the emerging digital radio format brought on by terrestrial radio backers.
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