NAB Says Merger Would Benefit Only XM, Sirius

The NAB said the FCC set up the satellite digital audio radio service (DARS) in 1997 as a “distinct, ‘continuous nationwide’ service” to be served by two competitors. XM and Sirius want to end that set-up in favor of a monopoly, the broadcasters said. The group cited a 2005 Advertising Age interview in which Sirius CEO Mel Karmazin said it “would be great if there was a monopoly” in satellite radio. “While Mr. Karmazin may be correct that a monopoly would be ‘great’ for the companies, this is not a valid reason for the Commission to reverse the explicit prohibition against a monopoly in satellite radio or ignore the harmful effects that the merger would have for American consumers,” the broadcasters said.

The FCC has long viewed the DARS order finding that there should be two operators as a central merger issue, the NAB said. “The proposed merger of XM and Sirius would violate the satellite DARS anti-merger rule, long-standing Commission policies against spectrum monopolies, and the pro-competitive vision enshrined in the Telecommunications Act of 1996,” the NAB said. “The proposed merger would create a monopoly in the national satellite DARS market, which would inevitably result in increased prices, fewer programming choices, less local programming for radio listeners, and other public interest harms.”

Others urging rejection included Common Cause, the Consumer Federation of America, Consumers Union and Free Press. The consumer groups disputed XM’s and Sirius’ claim that satellite radio is not a distinct market but part of a broader market that includes broadcast radio, iPods and CDs.

“It is readily apparent not only that satellite radio is a distinct market, but that the alternative put forward by XM-Sirius and their supporters are not close enough substitutes to discipline the market power that would result from the merger,” the groups said. “Taken singly or together, the alternatives do not come close to delivering a product that matches satellite.”

The consumer groups reminded the FCC that competitors in other sectors have made similar arguments but seen mergers rejected. For example, Staples and Office Depot accounted for less than 6 percent of total office supply sales at the time of their proposed merger but were found to have a unique market segment. “The broad definition of all aurally transmitted content, which XM-Sirius and their supporters claim as the relevant market, is akin to the effort of Coca Cola to purchase Dr. Pepper, which rested on a failed effort to… include all liquid refreshment (including water) in a ’share of stomach’ calculation of the total market,” the consumer groups said.

Public Knowledge, the Media Access Project (CD July 10 p2) and other groups endorsed the merger. Public Knowledge said the merger should be approved with conditions, including price caps and mandated multiple programming packages: “A merged company could provide more diverse programming at better prices. It is important, however, to require certain safeguards that will ensure that the benefits of the merger will be passed on to consumers.” Public Knowledge took a shot at NAB, calling its stance “hypocritical and anticompetitive. If satellite radio did not compete directly with terrestrial radio, it is doubtful that the NAB would take such pains to voice their concerns.”

Meese Backs Merger

Former Attorney General Edwin Meese, now with the Heritage Foundation, backed the merger, calling satellite radio part of a larger audio market. “A radio subscription isn’t like an electric bill; few consumers see it as a ‘must have.'” he said. “If radio broadcasters provide enough of what they want, subscribers will leave.”

Stifel Nicolaus said the proposed merger got a modest boost in that a few key consumer groups and suppliers filed in support. “We believe the support of Circuit City, Loral, Honda, and the American Trucking Association will be helpful to Sirius and XM as they struggle to make their case at both the FCC and the DOJ, which we continue to believe will make the basic antitrust call,” the firm said. “We note that a number of other car companies, retailers, and equipment makers did not file comments, raising questions about what they are, or will be, saying about the deal.”

Karmazin took heart from the comments, he said. “The support for our merger is as diverse as the programming we provide,” he said in a written statement. “The thousands of pro merger comments from organizations representing diverse populations and interests, individuals, businesses, and experts plainly demonstrate that the combination of SIRIUS and XM is in the public interest.” Reply comments are due July 24.

At least two Sirius music programmers filed comments supporting the merger. “Nothing less than the preservation of American musical culture is at stake,” said Steven Van Zandt, creator of Sirius’ Underground Garage Channel. “Since I create and currently broadcast successful programming in both satellite and traditional broadcast radio, I feel I am uniquely qualified to be objective about what I see clearly as a complementary relationships between the two media,” said Van Zandt, a member of Bruce Springsteen’s E Street Band and the actor who portrayed Silvio Dante on The Sopranos.

“Traditional radio will continue to serve the masses and their vast commercial needs, while satellite will fulfill the ever-growing number of profoundly important niches, which include nothing less than the entire musical history of American culture,” Van Zandt said. A merger would mean satellite radio’s subscription prices would “increase at a slower rate, if at all,” he said. The charges are “quite reasonable in my opinion, considering the vast amount of content delivered,” he said. Merging XM and Sirius also would allow “elimination of duplicative programming, making more room for original content,” Van Zandt said

Frank Sinatra Enterprises thinks the merger “will greatly benefit consumers” by making the Siriusly Sinatra channel -- now exclusive to Sirius -- available to more listeners, said executive Robert Finkelstein. Frank Sinatra Enterprises knows that opponents claim merging XM and Sirius would create a monopoly, harming consumers, Finkelstein said. But “given the broad selection of products and services used by consumers to listen to Frank Sinatra’s works, we have a hard time understanding this argument,” he said. “The music of Frank Sinatra and other big band, swing and traditional pop music is available on terrestrial radio, Internet radio and available for download to MP3 players.”