Justice Dept. Approves XM-Sirius Merger

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iMONITOR

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AP
Justice Dept. Approves XM-Sirius Merger
Monday March 24, 9:06 pm ET
By John Dunbar, Associated Press Writer Justice Department Approves XM-Sirius Satellite Radio Deal


WASHINGTON (AP) -- The Justice Department on Monday approved Sirius Satellite Radio Inc.'s proposed $5 billion buyout of rival XM Satellite Radio Holdings Inc., saying the deal was unlikely to lessen competition or harm consumers. The transaction was approved without conditions, despite opposition from consumer groups and an intense lobbying campaign by the land-based radio industry.


The combination still requires approval from the Federal Communications Commission, which prohibited a merger when it first granted satellite radio operating licenses in 1997.

The Justice Department, in a statement explaining its decision, said the combination of the companies won't hurt competition because the companies are not competing today. Customers must buy equipment that is exclusive to either XM or Sirius, and subscribers rarely switch providers.

"People just don't do that," Assistant Attorney General for the Antitrust Division Thomas Barnett said in a conference call with reporters.

The government also appeared to endorse a central argument the companies used in pushing for their merger: that ample competition is provided by other forms of audio entertainment, including "high-definition" radio, Internet-based radio stations and even devices like Apple Inc.'s iPod.

"The likely evolution of technology in the future, including the expected introduction in the next several years of mobile broadband Internet devices, made it even more unlikely that the transaction would harm consumers in the longer term," the Justice Department said.

The buyout received shareholder approval in November. The companies said the merger will save hundreds of millions of dollars in operating costs -- savings that will ultimately benefit their customers. The Justice Department supported that argument in its statement.

"Substantial cost savings likely to flow from the transaction also undermined any inference of competitive harm," it read.

The FCC had no comment on the decision Monday. In the past, FCC Chairman Kevin Martin has said any approval faced a "high hurdle."

Martin said last week that agency staff was "drafting various options" in preparation for a final recommendation. The five-member commission could vote against the deal, approve it or approve it with conditions. The agency could require the companies to freeze prices or make part of their satellite spectrum available for public-interest obligations.

Sen. Herb Kohl, D-Wis., chairman of the Senate Judiciary Committee's subcommittee on antitrust, said in a statement that the merger would create a satellite radio monopoly and asked the FCC to block it.

"We are particularly disturbed by this decision, given the Justice Department's record in recent years of failing to oppose numerous mergers which reduced competition in key industries, resulting in the Justice Department not bringing a single contested merger case in nearly four years," he said.

The National Association of Broadcasters blasted the decision, singling out the government's argument regarding the exclusivity of the equipment. When the satellite radio industry was created, the new licensees promised to create radios that would receive both services, but never delivered.

"To hinge approval of this monopoly on XM and Sirius' refusal to deliver on a promise of interoperable radios is nothing short of breathtaking," said NAB executive vice president Dennis Wharton.

The companies have pledged that the combined firm will offer listeners more pricing options and greater choice and flexibility in the channel lineups they receive. If the deal is approved, the companies have said they would offer pricing plans ranging from $6.99 per month, for 50 channels offered by one service, up to $16.99 a month, where subscribers would keep their existing service plus choose channels offered by the other service.

XM and Sirius released statements Monday noting support for the merger and touting the consumer benefits of the new programming packages, including one that will allow subscribers to pay for just the channels they want.

"These will be the first ever a la carte options in subscription media," a joint statement read. A la carte programming will only be available for subscribers using new radios "which are in development and will be brought to market following approval of the merger."

Despite the consumer-friendly promises, most consumer groups have opposed the proposed merger.

"If this is what our competition cops do, we might as well close shop and save taxpayers a few hundred million dollars because they're not doing their jobs," said Gene Kimmelman, vice president for federal and international affairs for Consumers Union, nonprofit publisher of Consumer Reports magazine.

Both companies continue to lose money, but in the past year have shown significant gains in both revenue and subscribers.

XM added 1.4 million subscribers in 2007 and reported a 22 percent increase in revenue and a net loss of $682 million for the year. Sirius added a record 4.2 million subscribers in 2007 and reported a 45 percent increase in revenue and a net loss of $565 million for the year.

Washington-based XM has more subscribers with 9.0 million, but Sirius has continued to cut into the company's lead. Through the end of 2007, New York City-based Sirius reported 8.3 million subscribers.

Shares of both companies rose following the news. XM Satellite shares were up 15 percent in afternoon trading while Sirius was up 8.6 percent.

http://www.tomshardware.com/2008/03/24/justice_dept_approves_xm_sirius_merger/
 

Grog

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GreatLakes said:
The Justice Department, in a statement explaining its decision, said the combination of the companies won't hurt competition because the companies are not competing today. Customers must buy equipment that is exclusive to either XM or Sirius, and subscribers rarely switch providers.

"People just don't do that," Assistant Attorney General for the Antitrust Division Thomas Barnett said in a conference call with reporters.


More BS from the government :roll:
 

brutalpilot514

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That wouldn't be a bad deal at all. The one thing I don't have on my Sirius that I would like to have is MLB and the Big Ten sports that XM has most of. Sirius has the other sports that I'm interested in, namely college football and basketball (being able to listen to the tourney has come in real handy since i've spent alot of time on the road during the first round), NFL, and NASCAR. I'm not complaining and it's not like it's going to change much. I'll pay a few extra bucks a month to get it all. Not sure what the conventional broadcast is complaining about since it's not even in their realm. I guess they're scared of losing more customers to satellite radio or something who knows.
 

LEH

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Well I agree, I don't go back and forth between Sirius and XM. I shopped before I subscribed and went with the service that provided the music I wanted, which was XM.


So they are in competition for NEW customers.

I hope the merger does not come through as I am afraid I'll lose the channels I like. Like USAir did when they bought Piedmont Airlines. Oh we won't close the Dayton hub (NOT).
 

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From what I saw on CNN last night, the merger will go through unless the FCC says no. Somehow, I doubt the FCC is going to do that.
 

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FAILURE OF GOVERNMENT!

This fails every "monopoly test" out there!

Sat radio and free radio are not substitutable.
Entry to this market is not possible (whos going to launch sattalites to compete with this company?)
They are price-givers, not price-takers.


When things like MLB, NFL, etc go Sat radio only and much music becomes "exclusive content", then you will know that this is a monopoly. When the price doubles because "you get double the content now!" you will know it is a monopoly.

Think about it this way, it is the worst of clear channel, but you dont get to hear any of it unless you pay! Maybe thats a good thing, but when content dissapears, you will miss it.
 

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DanTSX said:
Entry to this market is not possible (whos going to launch sattalites to compete with this company?)
Sirius and XM managed to figure out a way to get satellites up. A competitor should be able to as well.

The FCC does need to either come up with another sub-band for satellite radio or make the combined company give up one. That is a fixable problem.
 

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Don_Burke said:
Sirius and XM managed to figure out a way to get satellites up. A competitor should be able to as well.

The FCC does need to either come up with another sub-band for satellite radio or make the combined company give up one. That is a fixable problem.
I never said that it was the FCCs job to ensure another brand is in place (in their eyes IBOC does anyways:roll: )

Access to the orbits that Sirius and XM sats are in is very restricted and limited. They are effectivly protected by the cost of #1 building the sats, #2 getting them to the loopy Sat radio orbit, and #3 cutting through FAA/Governemnt garbage to launch in the first place. In that last one alone, there is so much that XM/Sirus can do to prevent another sat service from flying due to preassure and lobbying from corporation to government.

"free to air" satalite radio on Ku band is not an option either.


There is no "need" for this merger. It is purely to extract profit. Neither company will cease to exist if they dont merge (unless it is by their own mismanagement, which both are particularly good at mismanaging)
 

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DanTSX said:
I never said that it was the FCCs job to ensure another brand is in place
Neither did I. The FCC does have a responsibility to ensure that no company has a monopoly on the airwaves. They have not been doing so well on that, but it is still their responsibility.
DanTSX said:
Access to the orbits that Sirius and XM sats are in is very restricted and limited.
In the case of XM, this is true. In the case of Sirius, not so much.
DanTSX said:
They are effectivly protected by the cost of #1 building the sats, #2 getting them to the loopy Sat radio orbit, and #3 cutting through FAA/Governemnt garbage to launch in the first place. In that last one alone, there is so much that XM/Sirus can do to prevent another sat service from flying due to preassure and lobbying from corporation to government.
All of these are things all satelite services routinely deal with.
DanTSX said:
There is no "need" for this merger. It is purely to extract profit.
Welcome to capitalism. If I wanted to live in a socialist country, would move to one.

It is not the function of government to determine who "needs" to merge. It is the government's job to prevent artificial restraint of trade, which allowing all of the available sat radio frequencies to be held by a single company would certainly be.
DanTSX said:
Neither company will cease to exist if they dont merge (unless it is by their own mismanagement, which both are particularly good at mismanaging)
The existance of either or both companies is not an issue. If one company went under and the other bought all of the assets, my stand on this would not change.
 

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Don_Burke said:
Neither did I. The FCC does have a responsibility to ensure that no company has a monopoly on the airwaves. They have not been doing so well on that, but it is still their responsibility. In the case of XM, this is true. In the case of Sirius, not so much.All of these are things all satelite services routinely deal with.Welcome to capitalism. If I wanted to live in a socialist country, would move to one.

It is not the function of government to determine who "needs" to merge. It is the government's job to prevent artificial restraint of trade, which allowing all of the available sat radio frequencies to be held by a single company would certainly be.The existance of either or both companies is not an issue. If one company went under and the other bought all of the assets, my stand on this would not change.
I'd agree with you on the basis of everything being true in a textbook economy. Unfortunatly wall street has been making the rules up as they go along lately to do create their own example of capitalism. If capitalism is to be let run rampant with greed, rather than sustained growth and productivity in mind, then you end up with one or a few companies owning or controlling everything, which is essentially socialism with a corporate board. Also, capitalism is not an elite bunch of executives gutting a company of its wealth and assets, selling whatever is left off, and then allowing it to fail while they nuke the pensions and jobs of the employees. Apparently there are ways to make lots of money besides classic capitalism, and many execs have found it, and it is not capitalism, it is more like cannibalism.

My opinions on the issue are probably more rooted on the recent wall street problems and larger corporations selling out, or attempting to sell out (3com?) Personally, I would benefit from the merger as I have had Sirius for ages, but got XM with my new car. It would be great to share the service and fees I'm sure.
 

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DanTSX said:
I'd agree with you on the basis of everything being true in a textbook economy. Unfortunatly wall street has been making the rules up as they go along lately to do create their own example of capitalism. If capitalism is to be let run rampant with greed, rather than sustained growth and productivity in mind, then you end up with one or a few companies owning or controlling everything, which is essentially socialism with a corporate board. Also, capitalism is not an elite bunch of executives gutting a company of its wealth and assets, selling whatever is left off, and then allowing it to fail while they nuke the pensions and jobs of the employees. Apparently there are ways to make lots of money besides classic capitalism, and many execs have found it, and it is not capitalism, it is more like cannibalism.
Most of the economy does follow the textbook. The examples we can both come up with represent a very small portion of the businesses. The answer is to hammer the guilty (which is not happening at a level to my satisfaction and apparently not to yours either) and let the working businesses do business.
DanTSX said:
My opinions on the issue are probably more rooted on the recent wall street problems and larger corporations selling out, or attempting to sell out (3com?) Personally, I would benefit from the merger as I have had Sirius for ages, but got XM with my new car. It would be great to share the service and fees I'm sure.
I would expect them to combine production, feed both services with the same stuff, and eventually abandon one of the sub-bands.

There would need to be a phase-out period to allow customers to get a reasonable service life out of their receivers. That is the sort of thing I would expect the government to dictate.
 

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Don_Burke said:
Most of the economy does follow the textbook. The examples we can both come up with represent a very small portion of the businesses. The answer is to hammer the guilty (which is not happening at a level to my satisfaction and apparently not to yours either) and let the working businesses do business.I would expect them to combine production, feed both services with the same stuff, and eventually abandon one of the sub-bands.

There would need to be a phase-out period to allow customers to get a reasonable service life out of their receivers. That is the sort of thing I would expect the government to dictate.

I expect that the combined service will follow other cable and sattalite TV services with "packages" They already do this to an extent, but a basic package, international package, sports package, and further sub-categories will be introduced (Nascar). Which to me takes the fun out of Sat radio. Right now, I can be listening to some Afro-pop from Kenya, and then switch over to minimalist house or Japanese jazz, before seeing if anything rare is being played on the Led Zep station. You would think a 3 year old kid programmed my presets willy- nilly if you didnt know me and my goofball taste.

I figure that I'd have to pony up for a theoretical "international" package if I ever wanted to hear Afro-pop or BBC world service again.
 

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Don_Burke said:
...I would expect them to combine production, feed both services with the same stuff, and eventually abandon one of the sub-bands.
This may be an option, but when they have channels that duplicate (to some degree or another) the same 'format', how long will they keep the dual output up? Not for long. Then which of 'formats' will survive?

As I said, I had an opportunity to listen to both XM and Sirius services and went with XM because they had 'formats' that better suited my listening tastes. Siruius has something similar, but no where near as good as XM's.

I know these are business decisions, but in my recollection, when businesses merge, it is the resources of the buying company that remain and those of the merged company are dropped (either immediately or not too long after the merger).

Those of us who like XM radio's performance need to be lobbying the FCC to not allow the merger.

If Sirus or XM go under due to economic forces, that is another matter. But as long as both are viable entities, keep them that way.
 
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