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satellite radio xm-sirius merger

The good news: existing XM and Sirius satellite radios will continue to work if the companies' proposed merger is approved. The bad news: They'll be obsolete.

Date published: 2/24/2007

By MICHAEL ZITZ

The good news for satellite radio fans is that they won't have to throw out their existing units if the proposed XM-Sirius mer- ger is approved.

Because of "backward compatibility," they'll continue to work. But they'll be obsolete, able to receive only XM or Sirius satellite signals. If the merger is OK'd by the FCC and Department of Justice, new radios would have two chips that would receive signals from both satellites.

An expert at the Wharton School of Business of the University of Pennsylvania says talk that the merger of pay-satellite-radio companies could seriously hurt traditional over-the-air, free radio is overblown.

"I think it's ridiculous," Peter Fader, a Wharton marketing professor, said in a podcast. "In this case, maybe it would create a monopoly on satellite radio, but given the breadth of competitors that they have--terrestrial radio and Internet radio and just so many other ways of obtaining content--they're actually a very small player."

Fader says Sirius' decision to pay Howard Stern $500 million over five years to "legitimize" satellite radio was "disastrous."

"I think that it was a terrible move," says Fader, who added that he's "a big fan of Howard Stern."

"But from a business standpoint, I think it was a big mistake."

XM paid Oprah Winfrey "only" $55 million to put together a 24/7 Oprah channel featuring her cronies, but she is rarely heard. When she does come on XM, she's usually calling it in on her cell phone to shows she's set up for cronies.

Fader said both Sirius and XM are too focused on signing subscribers up and not focused enough on keeping them.

The Winfrey deal, he says, is an example of paying "an awful lot up front and not getting a lot to show for it."

Even if the merger is approved by the FCC and Department of Justice, satellite radio's biggest problem remains. Satellite radio subscribers pay $12.95 a month and terrestrial radio is free.

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Date published: 2/24/2007