Satellite Radio Competitors Spur Each Other, Report Says
XM’s and Sirius’ history shows that the companies are in a unique, direct competition, but not with broadcast radio, the Carmel Group said in a new report paid for by the NAB. Carmel’s research said when one of the operators has made a strategic move, the other has soon followed, described as a “ping pong” effect. Whether satellite radio is a distinct market or part of a much larger audio market is a key question for the Department of Justice and the FCC to resolve as they examine the satellite merger.
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“On average, both XM and Sirius responded to competitive programming and product announcements within a mere 3.3 months,” Carmel said. “Most were made within weeks and, at most, months, of one another.” For example, in December 2002, XM signed an agreement to offer satellite radio nationwide in Avis rental cars. A month later, Sirius announced an agreement with Hertz. In April 2003, XM offered a “family discount.” Sirius followed with a similar offer 41 days later.
The Carmel Group also listed programming unique to each operator, saying much will be lost if the services merge. “The nature of this exclusivity -- which Sirius and XM fight over vigorously, presumably for the benefit of existing and would-be subscribers -- would be lost if the government permits this merger,” the report said.
Meanwhile, during a Q3 conference call, XM Chairman Gary Parsons told analysts Thursday that the dispute over the FCC’s consideration of media-ownership rules shouldn’t slow commission consideration of the merger. Media ownership has “bubbled up recently but it really isn’t directly related to our assessment,” Parsons said. “I think the FCC will assess ours on its own merit and on its own timeline.”
Media ownership is a much broader matter than the merger, Parsons said. Radio owners have a tough argument to make because they have been “on both sides of the same debate” arguing that “they have competition from a wide array of sources and only belatedly they have had to try to determine how they don’t compete with us or we don’t compete with them,” he said.
XM has provided “literally millions of documents in response to DoJ’s request” and the company “remains optimistic” that the merger will be approved, Parsons said. XM and Sirius will hold shareholders meetings Nov. 13 to vote on the merger, Parsons said. “It is really important to move the merger process along,” he said.