XM and Sirius Merger

[arnoldevns]

Hmmm. How did mergers and consolidation help the standards of terrestrial radio?

Keep in mind that the people running satellite USED to work in terrestrial. They were behind a lot of the consolidation that happened there. You're about to have deja vu, all over again.

Well, you hit the nail on the head there. Mel Karmazin is no dummy. He's going to find a way start making a profit with this company.
I posted my thoughts on the DFW radio board about it, but I'll repeat it here:

They have both burned through a ton of money launching satellites, building an infrastructure and paying for programming. It is time to find an economic model that allows them to make a profit. The problem they have is that they could fire ALL of their jocks (except for folks like Stern) and make only a tiny dent in the red ink. Merging the two operations into one building would help a bit. Putting advertising back on all the channels would help more. I would kind of hate that, but if it was kept to about 5 minutes an hour I don't think it would really hurt their subscriber rates.

One problem they're going to have is that the two radios are not interchangable right now. It's not possible to use your XM to hear Sirius programming, and vice versa. Even introducing new radios that will allow such a thing (essentially with two radios inside it) won't help much since they'll be more expensive and won't get much market penetration for a while.

Ultimately I think they're going to have to figure out a way to make the programming on the two services nearly identical. This will cut down on the number of overall channels they're programming. (between the two it's about 300 or so) That will then allow them to quit having to market separate programming on each service.

A la carte is fine if they've figured out what it will do for them. I am suspicious that it won't boost subscriber numbers much. I fear all it will really do is cut down on the revenue of the company among their current subscribers. That would be a disaster.

I still wouldn't bet against Mel.

 

[TheBigA]

The problem they have is that they could fire ALL of their jocks (except for folks like Stern) and make only a tiny dent in the red ink. Merging the two operations into one building would help a bit.

Unfortunately, XM is in DC and Sirius is in NY. And Mel isn't moving to DC.

I've gone through the finances of both companies, and the glaring items that stand out are (1) The amount of revenue that goes to auto and electronics manufacturers; (2) The amount of revenue that goes to record labels; and (3) The huge amounts of money that go to a handful of talents, like Oprah, Howard, and a few others. Add to the the huge amounts of rent, the interest on the debt, and fact that the satellites will need to be replaced soon. These expenses aren't going away. They need to at least double their revenues somehow. And in this economy, I don't know how they can do that.

Sirus is trading in the $2 range now, mainly due to the pending merger. But when the realities of the finances become public, the stock will drop below that of Citadel. And that loss will handcuff Mel in terms of investing in his own infrastructure, which he will have to do.

I still wouldn't bet against Mel.

And the funny part is, I agree with you. The bad news is he is the kind of guy who will throw anything and anyone under the truck for his own survival. I don't know if anyone who posts here works at either company, but I know a lot of them, and I fear for each and every one of them. I've always admired Logan and he did the smart thing...once again.

 

[TheFonz]

Keep in mind that the people running satellite USED to work in terrestrial.

And keep in mind that terrestrial radio USED to be good.

 

[dxer720]

It will be interesting to see what happens with the ala carte choices. Then we'll really see what people will pay for. What happens if these set-aside minority channels become unpopular & cease to generate revinue. Will they be dropped or subsidized by some, possibly government, organizations. I'm afraid it won't be truly ala carte. You won't be able to pick just the channels you want. It may be like cable or satellite TV, where you pick your packages that will contain channels you may not want. Probably those minority channels I mentioned earlier.

 

[TheBigA]

Keep in mind that the people running satellite USED to work in terrestrial.

And keep in mind that terrestrial radio USED to be good.

One of the guys who consolidated terrestrial just found a way to consolidate satellite. So my point is that all of the problems anyone has with terrestrial are about to move to satellite.

 

[CHRles]

Oh please. You guys need to stop pretending as if you care about how the mergers of satellite radio will hurt its subscribers.
The truth is that BECAUSE it's a subscription based service, satellite radio is forced to step it up and KEEP customers happy whereas terrstrial radio was less motivated to do so over time since all of the Rock stations or all of the AC stations were owned by one company. You dont like the Classic and Modern Rock stations on FM in your market? Tough b/c they're both owned by the same company. With satellite radio if subscribers are unhappy they cancel their subscriptions and thats it.
There's an incentive to stay fresh and consistently bring your A game to the table with satellite radio, and b/c the product is better it will force terrestrial radio to (hopefully) sound better if it wants to stay competitive.
HD Radio so far is definitely NOT delivering much added value.

 

[Rockin Rob]

XM/Sirius Merger: Help my clarify...

After both companies officially merge, will or won't we be able to pick up programming from BOTH platforms with our EXISTING receivers? In essence, willl I soon be able to get The Sirius NFL Channel (now on 124) on my INNO?

 

[TheBigA]

There's an incentive to stay fresh and consistently bring your A game to the table with satellite radio, and b/c the product is better it will force terrestrial radio to (hopefully) sound better if it wants to stay competitive.

I think in most formats, terrestrial DOES sound better, which is why satellite needed to merge. No incentive for the 240 million people who listen to terrestrial to spend an extra $13 a month.

Regarding competition, the Justice Department and the Sirius lawyers all said the competition is far more challenging than simply terrestrial radio. I think satellite needs to distinguish itself from free alternatives on the internet, especially as consumers get the ability to listen to the internet in cars.

 

[4dude]

XM IS BETTER THAN SIRIUS!!

IT REALLY SUICKS THEY HAVE PULL IN THIS!!

 

[RadioLoverIL]

There's so many different directions I could see them going in with this....

First, in regard to a la carte. As has been pointed out, this is going to be a risky endeavor for the company. The subscriber revenue could really drop if they get too many people going with a $6.99 a la carte package instead of the normal $12.95 per month. At the same time, a person has to consider what's the average going rate going to be to the consumer when it comes to buying an a la carte radio? Is it going to be a situation where, due to the price of an a la carte radio, it's going to take a subscriber several years before the savings on an a la carte package pays for itself and they're better off staying with the normal $12.95/month package?

I kind of wonder at some point there won't be commercials on the music channels. This could work one of 2 ways. Either A) they starting selling ad time, and they spin it to the subscribers that the commercials are being added in order to keep the subscription fees low, as if, by adding the commercials, they're doing the subscriber a favor. Or B) once the dual band radios come out, maybe one side of the spectrum (possibly the XM side since it has space for the most channels) is the pay service, similar to what XM & Sirius is now. The music would remain commercial free. And the other side of the spectrum (the Sirius side, as an example) would be more of a free ad-based service, where there would be commercial breaks on the music channels. If the average person knew that all they had to do is buy a satellite radio to have free access to 130 channels, even if all of those channels had commercial breaks, I think they'd jump on that in a heartbeat. Which in turn, with that many people on board, the company would certainly have an avenue to build up ad revenue.

I also should point out I think the merged company will see how things pan out for a bit. However, the ironic twist of it all, I wouldn't be at all surprised to see Mel unload the merged company within a few years to one of the terrestrial giants, such as a CBS/Infinity, Clear Channel, etc. if things do go as they're expecting.

All in all, we're about to see the exciting part of this process.....just to see what they've got in mind as a merged company.

 

[jegrant]

Re: XM/Sirius Merger: Help my clarify...

After both companies officially merge, will or won't we be able to pick up programming from BOTH platforms with our EXISTING receivers? In essence, willl I soon be able to get The Sirius NFL Channel (now on 124) on my INNO?

This can only happen if the merged company (MergeCo for short) adds the Sirius NFL channel 124 to the XM side of the platform. This would require using XM bandwidth. Current hardware is not at all interoperable, unless they are doing a heck of a job hiding the fact.
(BTW, my guess is that it's not terribly likely in the short term that you'll get NFL on XM hardware, because it would require MergeCo to renegotiate the NFL deal, and the NFL would probably want more money. There is some possibility of getting the NFL channel as one of the "Select Sirius" channels which will be added to XM (about 11 channels total) BUT it would likely not include any play by play, as this would require an expensive addon to the NFL deal.)
I'm not really sure what exactly they plan to put in the Select Sirius and Select XM packages (11 channels or so to be added to each service) but it would cost money to include sports, so that is probably out, and it would probably cost money to add major talent (Howard) so that is probably out (although I could see XM adding Howard as a premium service, but it would probably be like $4 extra just to get H100 & H101.)

 

[arnoldevns]

I still wouldn't bet against Mel.

And the funny part is, I agree with you. The bad news is he is the kind of guy who will throw anything and anyone under the truck for his own survival. I don't know if anyone who posts here works at either company, but I know a lot of them, and I fear for each and every one of them. I've always admired Logan and he did the smart thing...once again.

A confession: I worked for a station group that was run by Mel Karmazin in the 90s. He came to talk to everyone at the station once while I was there and I found him to be a facinating guy. You are absolutely correct that he'll throw anything or anyone under the bus to make it work. He spent millions on my station, but ultimately had to sell it off due to FCC rules which caused a lot of us (yes, me included) to lose our jobs. I would have done the same thing in his position.

Look at it this way, everyone at XM and Sirius will lose their jobs if these companies fail. If Mel Karmazin can keep that from happening he'll save more jobs than he cuts. I hope your friends aren't on the losing end of that, but I believe it's the reality of the situation.

 

[arnoldevns]

Re: XM/Sirius Merger: Help my clarify...

After both companies officially merge, will or won't we be able to pick up programming from BOTH platforms with our EXISTING receivers? In essence, willl I soon be able to get The Sirius NFL Channel (now on 124) on my INNO?

Not exactly. As stated earlier the radios are not compatible. I believe what's going to happen in the short term is that some Sirius channels will be added to the XM service and some XM channels will be added to the Sirius service. However, I think the NFL deal probably can't be added to XM due to the number of channels it would take and the fact that the NFL would probably want more money.

 

[Slant]

There is no reason that Mel cant elminate a ton of XM music channels immediatly. Especially the ones that are simialar to Sirius. I would imagine all of the decades channels at XM will be toast and in its place will be the Sirius decades channels via ISDN from NY to DC (XM's Uplink). Also, XM and Sirius have similar niche channels that could be consolidated. All that will need to be done is new branding for all of the channels. When Mel said he would save 400 million in the first year, he wasnt kidding. I imagine, most of the XM programming staff will be gone with the exception of the MLB, PGA, Oprah (all done by harpo anyway), NASCAR, etc.

Also, there is no reason traffic and weather survive either unless Mel likes the automated set up XM has for weather and if XM's T&W department runs cheaper.

And one more thing, XM has a lot of VPs running around. More so than Sirius. Look for a blood bath at that level. The question is, will Mel create enough of a blood bath at XM's DC location to allow him to lease space out of that building to someone else?

 

[RadioLoverIL]

There is no reason that Mel cant elminate a ton of XM music channels immediatly. Especially the ones that are simialar to Sirius. I would imagine all of the decades channels at XM will be toast and in its place will be the Sirius decades channels via ISDN from NY to DC (XM's Uplink). Also, XM and Sirius have similar niche channels that could be consolidated. All that will need to be done is new branding for all of the channels. When Mel said he would save 400 million in the first year, he wasnt kidding. I imagine, most of the XM programming staff will be gone with the exception of the MLB, PGA, Oprah (all done by harpo anyway), NASCAR, etc.

Also, there is no reason traffic and weather survive either unless Mel likes the automated set up XM has for weather and if XM's T&W department runs cheaper.

And one more thing, XM has a lot of VPs running around. More so than Sirius. Look for a blood bath at that level. The question is, will Mel create enough of a blood bath at XM's DC location to allow him to lease space out of that building to someone else?

One of the reasons I think they'll keep from simulcasting the channels is you run the risk of losing a good percentage of people who are subscribing to both services. And if the merged company can keep those people doing that for as long as they can, they probably will. For instance, I have both XM & Sirius. Now, if my musical offerings are the same on both, guess what? The merged company can kiss $13/month from me goodbye, because there's no sense in me having 2 subscriptions if the majority of the programming is the same. Not sure they'd want too many people to do that.

However, should they find with separate programming that dual-subscribers are cancelling one of their accounts in droves, then at that point, then I could see them going to the simulcasting model.

As a side note, I'm actually wondering to make room for channels, if they won't mesh some of the channels within each service. Like, on the XM side take and mesh Top Tracks & Big Tracks into 1 channel....mesh America & Willie's Place into 1, and mesh some of the alternative channels together. The Heart & The Blend could combine to 1, etc. Or what's not to say they don't take and re-do the decades channels some. Make it 1940s-mid 50s; mid-50s through the 60s; 70s through the early to mid-80s.....and so forth. They'd end up saving a channel or 2 in the decades area. And, of course, do similar things on the Sirius side.

Just some things to ponder.

 

[Slant]

the amount of dual subscribers to both platforms is less than 5%. I would imagine the amount of income generated by dual subscriptions is far less than the amount saved by consolidating channels.

 

[RadioStarOne]

Once again no Phlash, No Cash!

 

[arnoldevns]

There is no reason that Mel cant elminate a ton of XM music channels immediatly. Especially the ones that are simialar to Sirius. I would imagine all of the decades channels at XM will be toast and in its place will be the Sirius decades channels via ISDN from NY to DC (XM's Uplink). Also, XM and Sirius have similar niche channels that could be consolidated. All that will need to be done is new branding for all of the channels. When Mel said he would save 400 million in the first year, he wasnt kidding. I imagine, most of the XM programming staff will be gone with the exception of the MLB, PGA, Oprah (all done by harpo anyway), NASCAR, etc.

Also, there is no reason traffic and weather survive either unless Mel likes the automated set up XM has for weather and if XM's T&W department runs cheaper.

And one more thing, XM has a lot of VPs running around. More so than Sirius. Look for a blood bath at that level. The question is, will Mel create enough of a blood bath at XM's DC location to allow him to lease space out of that building to someone else?

I'm not sure about eliminating a bunch of music channels. Like I said, he could fire all the jocks on both services and make only a tiny dent in the red ink. I also think he'd run too big a risk of alienating the audience if he got rid of some of their favorite stations right away. Eventually some of this will happen, but it's going to take time.

I think your next guesses are much more on target: get rid of the XM managers, ditch one of the traffic/weather services, move as much as you can into one building and lease out the rest to someone else.

 

[Mike Sheridan]

Please don't combine Hart and Blend. I like Hart, I don't like Blend.

 

[Mike Sheridan]

As for the a la carte idea most times it doesn't work for me since they are often clever enough to bundle channels I want with channels I don't want. I fear the less expensive options will take away more in choices than it will save me money.