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Well, in the never ending saga of the XM/Sirius merger, the FCC Chief, Kevin Martin, said he’s cool with the deal, especially after Sirius/XM proposed to freeze rate increases for three years. 

One of the commissoners, Michael Copps, said that he didn’t see how the merger would benefit consumers.

Well, I think that’s one of the reasons that explains why this deal has been held up.  Both companies, on their own, are not profitable (cash basis and GAAP), and there appears to be no reason to expect them to be profitable in the near future.

As a result, they will cease to exist. 

In my mind, that is worse for consumers…there will be no satellite radio at all if the merger doesn’t happen. 

Here are the other items that XM and Sirius have proposed (from Washington Post).

· Place price caps on programming and offer a la carte programming so that subscribers could pick programs they want and not have to subscribe to all channels or certain packages. Officials with XM and Sirius said they would offer radios configured for a la carte programming within three months of the merger.

· Open their technology standards to any radio-device manufacturer, paving the way for consumers to buy radio transmitters from retail stores. Currently, subscribers must buy directly from XM and Sirius, or through car manufacturers that have installed the devices in new cars.

· Provide interoperable radios. Current subscribers have radios that deliver programming from either XM or Sirius. Within one year of the merger, these listeners will receive radios that could access programming from both providers.

· Each set aside 4 percent of their radio spectrums, or 12 channels, for noncommercial services such as educational and public safety programming. They would lease another 12 channels for programming run by minorities and women, groups that are underrepresented in entertainment broadcasting.

Why is XM/Sirius Merger Still not Approved by the FCC?

The merger between the only satellite radio companies is still on hold, pending approval from the FCC.  What I don’t get is why the hold up?

Sure, on the one hand, there are two companies who own the satellite radio space.  Thus, on the surface, if the FCC agrees to the merger, then it would create an absolute monopoly, which is a no no.

But that presumes that there is no competition.  Not true. 

Satellite radio competes, in some cases, ineffectually, with terrestrial radio, MP3 players in cars, CDs, TV, internet, stereos and pretty much any other at-home or in-car entertainment system.

In general, it’s combining two companies in a space that doesn’t monopolize radio, or entertainment as a whole i.e., is a drop in the bucket among the litany of entertainment choices). 

So think of it like combining all the major movie theatres.  Theatres, like sat radio, mark a fraction of the distribution for movies.  People watch their movies on the internet, on their mobile devices, laptops, DVD players AND in theatres.  Like satellite radio, it’s an impact, but not a major one (not like having an oil monopoly.

So combining XM and Sirius does not create a monopoly in the broader sense.    

In light of the inability to close the buyout of Clear Channel by Thomas H Lee Partners and Bain Capital, I thought to finally talk about Clear Channel as a fascinating company and how much it reminds me Standard Oil, John D Rockefeller’s oil monopoly.

First things, first.  Standard Oil had a ridiculously enormous command over the oil market.  That’s why it was forced to break up into the BIGGEST names in oil you’ll have ever heard of.  I’ll list them, and note that some were merged with each other.

·        Exxon

·        Mobile (merged in 1999 from the union of Exxon)

·        Chevron (merged with Texaco in 2001)

·        Amoco (merged with British Petroleum in 1998)

Clear Channel isn’t quite the monopoly that Standard was (in some markets it didn’t own as many as 7 radio stations as in others ), but it’s got some of the same memorable names in the market place (btw – you could make the same case about GE, but GE is in such different industries that GE is more like a mutual fund).

·        Radio – where CCU had its origins; included in this are real estate holdings of radio towers: properties include the Steve Harvey Morning Show, Power 105.1 in NYC and Rush Limbaugh.

·        Live Nation (fka SFX) – one of the largest outdoor concert promoters.  Live Nation was spun out as a separate company and just did a deal w/ Jay-Z

·        Outdoor advertising (billboards) – through a purchase of Eller Media circa 1997

·        TV (local TV stations) which CCU announced it would sell in 2006 and completed in 2008

The Telecommunications Act of 1996 enhanced Clear Channel’s ability to acquire so many properties. 

 Nonetheless, radio is having a HARD time, since advertising is moving more and more online.  Clear Channel, Radio-One, Cumulus Media, all of them…revenues from radio have either not had meaning growth or are considerably down.  That’s why companies like Radio-One are figuring out their online strategy.

So the news of Clear Channel going private is probably one of the best decisions it can make given current trends – it can always reverse the decision and go public again, like a vasectomy J.