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Thursday, September 13, 2007

What's Good for the Radio Goose....

Since February's announcement that Sirius satellite radio was interested in acquiring XM, we've seen many twists and turns in Mel Karmazin's effort to convince the FCC and others that a merger is in the best interests of consumers. In Mel's usual style, he has done an expert job of laying out the rationale and presenting it in an intelligent, non-offensive manner.

However, as we near the end of 2007, we seem to be very close to a decision on this event and as I mentioned in an earlier blog, my money now is on the merger getting approved.

The National Association of Broadcasters has done a respectable job of countering satellite radio's rationale in favor of a merger, but the time has come for the NAB to face the "Rule of Consolidation".

The fact is that the NAB has lobbied for consolidation of the radio industry since the early 90's and got permission for radio companies to begin buying up each other in a 1996 act of Congress.

The argument was that not only is consolidation good for the business - it's good for the consumer.

Now, eleven years later, many in our business - even on Wall Street - believe that this wave of consolidation has had negative repercussions on the financial well-being of the radio business.

Again, in the last two years, the major radio companies have been stamping their feet for further consolidation. It seems that owning 8 radio stations in the biggest radio markets wasn't enough. There are those who want to own 10 or more stations in the same market.

Yet when it comes to satellite radio consolidating, the radio industry says "no".

The radio industry is concerned about this proposed merger for many reasons...but none of them are truly onerous.

If the radio industry manages their business properly...

  • A merged satellite radio company will not significantly impact its listenership
  • A merged satellite radio company will not impact radio's revenues and profits
This deal has been examined every which way and in the end, there are no grounds to prevent it.

Bridge Ratings has been studying consumers' reaction to the proposed merger since it was announced in February. Over time and 5 studies, current satellite radio subscribers have become less concerned about the impact of such a merger. Potential satellite radio subscribers are confused, but most will delay their decision to subscribe until a decision is made. This is one reason why year-to-year satellite radio subscriber rates have fallen so precipitously in the last year.

The only negative impact the merger has had on the satellite radio companies is that the news of a potential merger has derailed the sector's growth. That's only temporary.

Satellite radio is a niche business and a merger will not automatically make it a broad-based appeal business.

If consolidation was good for the radio goose why isn't it good for the satellite gander?


Anonymous said...

There's quite a difference in one company owning several stations in a market, and in one company owning all the stations of that type in the country, which is the equivalent of what will happen if one company owns all the satellite radio stations in the country. Where would consumers be if there was only one cell phone company, one tv satellite dish provider, one nationwide bank, one car rental company, one insurance provider. Look where we are with essentially only one software provider, Microsoft. They charge what they want, and change operating systems and everything connected to them every couple of years to make everything you currently have obsolete and make you buy more of their product. One provider of anything is never good.

Anonymous said...

Again mister anonymous has missed the boat like the NAB has all along. Even with a merger there will not be only one source to get your music fix. There will always be terrestrial radio, mp3 players, ipods and soon Wi-Fi to access your digital entertainment. Your monopoly theory hasn't worked and won't. With over 250 million with access to terrestrial radio and only 12 million with satellite, I would hardly call that a monopoly. If you dont like satellites prices, then you are free to use one of the many other alternatives to aquire your digital entertainment. Its time you stepped up to the plate and see what everyone else in the world can see.