Talk persists about merging XM, Sirius

[a kennedy]

LOS ANGELES (Hollywood Reporter) - Pull up the six-month performance of companies making up the Hollywood Reporter/Bloomberg 50 Entertainment Stock Index and a tiny pattern emerges: Dead last is XM Satellite Radio, and third from last is Sirius Satellite Radio.

It wasn't supposed to be like this. When Howard Stern said in October 2004 that he would join Sirius, shares rose 50 percent over the next six weeks. When Mel Karmazin became CEO that November, his compensation package gave him options on 30 million shares. Still, he considered shares so cheap he told Wall Street, "You should assume that within the next day I will be personally buying more stock in Sirius."

But Sirius shares have sunk from $4.72 that day to $3.75 on Monday, and XM shares dropped from $34.65 to $11.01 in the same time frame.

The rapidly declining share prices have some investors calling for a quick fix -- namely, that the two companies merge. CNBC commentator Jim Cramer wrote on his site TheStreet.com: "Mel, as CEO of Sirius Satellite Radio, it's time to make your move on a merger. Right now."

http://today.reuters.com/news/articlenews.aspx?type=entertainmentNews&storyid=2006-08-16T060642Z_01_N16448085_RTRUKOC_0_US-SATELLITE.xml&src=rss&rpc=22

[Wickerman]

1. I think it would be a good move from a consumer standpoint

both have some good programming, but it ain't that great on either side. If you combined the two it might be worth the bucks per month. Of course, without competition they might try to jack the price but I think they would soon find they have already found their pricepoint.

[negativenihil]

4. i must disagree with you

I've been an XM subscriber since this past March when my parents gave me an XM unit for my birthday.

In any case, i must disagree with your point that the programming "ain't that great on either side". XM imo really seems geared for the type or person who really loves music - where as Sirius is really geared for people who like *radio* (there's a huge difference). XM's music library is both wide and deep - they are not afriad to go off the beaten path, and often do so.

In terms of sheer number of music channels, XM beats Sirius (you can comapre the channel listings for both on thier respected web sites).

Honestly though i feel that if you're looking to sat radio in search of something other than music, you're barking up the wrong tree. Sure both providers have news and talk channels - but i erally dont bother with them much apart from tuning into air america for a bit on my ride home (go randi!), or a little crude humor from opie and anthony in the morning.

[Wickerman]

11. my personal experience is with Sirius

and yeah, it wasn't great for the music fan. And as someone said downthread, it can sound like crap. The bandwidth they use can make it sound like MP3's ripped on a horribly fragmented hard drive. My techie brother in law says the same can occur on XM, which he has subscribed to.

I've had a couple of friends who were quite jazzed about XM in the beginning, but they complain that XM has "thinned the herd", so to speak and reduced selection, quality and content. YMMV. When you lose market share and stock value it makes sense that corners get cut - I suppose it depends on which niches you listen to determine if that impacts your experience. If you combine the subscriber base he have more dollars to spend on programming and variety, it would stand to reason. Of course, bean counters in charge of music is never a positive so I doubt we can trust corporate media to create a good product without competition. The larger question is, will there be enough juice to support competing formats?

[Nimrod2005]

2. Do you hold shares in both companies, or just one of them? which one?

I have SIRI...

[Toots]

3. In 2007 Sirius will be in the black then watch the shares fly.

They will in all liklihood buy out XM and reap the rewards...

[Dogmudgeon]

5. Subscription radio! Such a deal!

Remember Internet subscriptions? They were popular before the Internet "bubble" burst. Where I was employed, I got subscriptions to half a dozen websites that only offered Visual Basic source code and a few crappy articles on using the Windows API -- at about $5 a month each.

All are free of charge now. The ones that survived, that is.

Radio, as a medium, now just sucks, long and loud. Terrestrial radio is dominated by religious and "urban" (i.e., hip-hop/rap) music; satellite has a better, more diverse mix, but the cost is prohibitive for people who aren't "well-leveraged". And our economy is now based on a model where everything is separated, individually marketed, and must be paid for, again and again and again.

Even Bill Gates wants to make WindowsXP and Office subscription services. But it figures -- we all have to pay high fees for Internet services in spite of having subsidized it for years with our taxes. And the moral entrepreneurs have introduced a New, Improved crime: "Theft of Bandwidth" ... "Use a Hyperlink, Go to Jail."

Like nearly all the economic-trend and goldbug websites, Mike Ruppert (From The Wilderness) used to put damn near everything behind a subscribers' profitwall. Now, he makes stuff free and public after a month or two. Some of it is public spiritedness, I'm certain, but Mike's no fool. He overshot the ideal balance, then he pulled back. What that most businesspeople had the same savvy. (Off-topic, the offices of From The Wilderness suffered a break-in and extensive vandalism lately.)

People are starting to rebel against the economic model of sticking a vacuum cleaner hose into your wallet and calling it the righteous moral order of the universe. Howard Stern was beside himself with rage when he realized his loyal fans weren't so loyal after all -- not when Stern was competing with their money. His on-air tantrums lasted just long enough to bring him a postbag full of angry mail. WinXP has become such a pain-in-the-ass to install and use that Microsoft now has an entire office of flack-catchers to deal with complaints. Comcast, which rules my hometown of Philly with an iron paw, has encountered similar rebellion from disobedient consumers, and is now running a heavy cycle of ads to convince us that they are the true Defenders of Liberty, and that Verizon is even worse.

From the 1970s onward, we've been deluged with the propaganda that taxes are odious, but that all other financial obligations are somehow good and pure and hono(u)rable. People are beginning to get fed up with an economic system that is intent on claiming -- morally as well as legally -- every last cent from "The Marketplace" of their income, savings, and (in some cases) investments.

In a few years, the price of energy will become so expensive that the economic system itself will be shaken. The fever dream of "Free Enterprise" will die as quickly as a half-starved junkie booting a dirty load of China White fentanyl instead of good ol' di-acetyl-morphine smack. What will the total-subscription-model enterprises do when they lose subscribers by the millions? When millions of Internet users say "$50 a month is too much for broadband -- I'll go back to dial-up"? Of course prices will fall -- broadband infrastructure is much cheaper than plain-old-telephone-service. But the radio will just stay silent -- or people will buy those little short-range transmitters to broadcast the MP3 player through the house, instead of what passes for "broadcast music".

The real money will go to buy increasingly expensive food, medicine for those of us who need it, and heating during the damn-it-got-colder winters. Given the choice between food/rent/heat, and Internet/Windows subscriptions, it's no contest for most of us. And I'll use Linux and an old-school UUCP party line if I have to. (No, I'll probably use Linux happily, by choice, pretty soon.)

XM and Sirius will fail, and fail hard, unless they start giving their service away. Let them sell on-air advertising, or require people to "subscribe" to a certain amount of Internet spam. Even a single dollar a year is too much in an era where employment itself is becoming a "scarce commodity".

I have nothing against Howard Stern, Mel Karmazin, or even the idea of subscription services. But our entrepreneurial "class" wants to get rich off of people who have no way to as much as break even, and who will soon have their backs to the wall. The idea that the pockets of Joe Average are infinitely deep, especially in an era of economic contraction, is not just laughable, it's a bad way of doing business.

It is an unsustainable economic model.

--p!

[negativenihil]

7. "Let them sell on-air advertising"

But you see - that's one of the main draws to XM for me. No commericals. The other big ones are lack of fcc censorship as well as a massive selection of channels.

XM adds advertisments to their standard channels and i'll drop the service.

(i am aware of the block of clear channel stations on XM that do have normal advertisements, but i dont bother with them - and XM added more commerical free stations so the end subscriber would still have the promised 100+ stations of commerical free music).

Anyway - do you pay for cable tv?

[Dogmudgeon]

13. "Do you pay for cable TV?"

Of course. I live in Comcast/Verizon territory. Each company has cadged multi-billion-dollar goodies from the last five governors, as well as Specter and Santorum. We all pay, one way or another. So, we get our phone service through Comcast, too. The whole package is over $100 a month -- and it's still cheaper than Verizon. Since there's TWO companies instead of one, the PA Supreme Court says it's Free Enterprise, which sitteth at the Right hand of Gawd.

The point you were making, I'm sure, was that if I pay for cable, I should pay for satellite radio, damn it. Except that I don't pay for satellite radio, since I don't use it. And I doubt that I would have cable service, either, except for broadband (Verizon is unable to provide DSL to my apartment complex). But more on this point a little later.

Philly radio is in the death-grip of "the Urban sound", and nearly all the remaining lower-power slots are religious or niche. We've got two headbanger stations, and WXPN, and that's that. And still, we're better off than most urban markets. Allentown, 65 miles away, has more religious than rap stations, but it actually has a wider range of popular broadcast music. What, then, of the idea that the airwaves belong to the People, and are licensed at their -- at OUR -- pleasure?

I use my little piece of the airwaves as well as I can; I "pipe" internet music through the apartment with one of those FM transmitters I wrote about.

My contention about satellite (actually, subscription) radio, though, isn't that it shouldn't exist, but that subscription services are for the affluent, and the service will always be a niche item, at least in today's economic model. It will, therefore, have a limited market. In a contracting economy -- as our economy has been faring since December of 2000 -- the affluent hunker down, and the poor take it up the wazoo. Fate has been exceptionally kind to Sirius, XM, and "Howeird", but they've reached their saturation points, not on the basis of listener interest or program merit, but on economic terms.

My "advice" is that the satellite services offer significant amounts of free programming. It's gratifying to hear that they have already added some; with the right mix, they may just survive intact, but their current model is still too money-grubbing. If Stern wants his listeners to bend over and pay, then the digital format of the service will allow him to erect a profitwall as high as he wants it. However, good programming with a discreet level of advertising, such as WXPN does it, guarantees listenership and revenues. 'XPN does 4 fund raisers a year in which they exhort all the Yuppies to "pay their radio bill"; they send them some cheap swag and throw a couple of elite-subscribers-only parties each year, where they get someone like Pete Yorn or Neko Case to mix with the crowd and sign autographs. Similar business models, with differing mixes of community and business (and maybe someday taxpayer) support, could make these new media profitable -- but it is unlikely that they will ever satisfy the greed of the current generation of wheeler-dealers.

Of course, places like Democratic Underground stay afloat on user contributions. I'm not even sure they have to restrict non-contributors; most of us would donate anyway. I've been dirt poor for a couple years, but as soon as I got a few bucks, I sent them some. Not much, blast and damn it all, but more than I'd give Howard Stern. (No, I'm NOT a Howard-hater, either.)

Even Internet radio has gone to a half-pay-half-free model, and the net radio entrepreneurs have been some of the most hypercharged greedheads to have ever hit the marketplace. The folks who produce the Opera web browser once gratuitously sent all their users (like me) a terse note declaring "Opera is NOT free software and never will be!" ("love, Ayn Rand") ... but today, it's free.

Likewise, only a few of the groundlings -- US -- will pay radio subscriptions.

Neither do I fault anyone for subscribing. But as a business model in search of go-go profitability for a new generation of vipers, subscription radio is a loser, the cable and "expended telecommunications" businesses are going to hit a wall before they know it, and the entire economic equation is going to change within as little as a decade. The business community needs people who can think in terms of long-term, low-cost, predictably-profitable businesses, like the idea of "sustainable energy" or open-source software.

So by all means, DON'T chuck your satellite radio. The technology is fine. Enjoy today's subscription services. Just be alert for some major shifts in the economic weather. It will be a bumpy, if interesting, ride.

--p!

[robcon]

6. Stern's audience didn't go with him.

He went from 10+ million listeners to less than 2 million listeners when he went from free radio to pay radio.

It's hard to defend the pay radio business model - especially the stability of two companies.

[obreaslan]

10. Not neccessarily true....

Sirus went from 600K subscibers to 4.5 million in the last 18 months since Stern made the announcement. I would say that it would be a larger number than 2 million that made the leap, even if they weren't all subscribing for Stern.

[robcon]

14. My point is apples-to-apples.

Listener counts to listener counts, Stern lost 80% of his listeners. If your sunscriber numbers are correct, almost half of the subscribers listen to Stern - and that's a remarkable listener loyalty.

My point was that the free radio model, with 10+ million listeners, is probably a lot more economic than the pay model, with 2 million listeners and a lot bigger payout to Stern.

The economics might be straightened out by a merger, but I don't have the numbers to prove my point. Maybe there's no way to support a pay radio model.

[rawtribe]

8. Both systems

passed the quantity/ quality threshold as far as sound quality goes. I have Sirius in my car. The music channels sound awful. I only keep it for the talk programing on Talk Left and OutQ and both channels have commercials. A merger would be good if they used the bandwidth to improve the sound quality at least to the level of the iTunes music store. I'm not holding my breath.

[negativenihil]

9. Poor quality?

Are you by chance using the fm transmitter to listen? I'd highly recomend either directly wiring the unit to an aux port on your car radio, or using a cassette adaptor (which i am currently using - far better than the fm transmitter).

Anyway - i've got no complaints with the audio quality with XM.

Funny you mention iTMS - i know for a fact XM uses the same AAC codec to encode the music for the XM unit. I wouldn't be shocked if Sirius was doing the same, but i cannot speak about thier technology.

[rawtribe]

12. iTunes uses 128K AAC

XM's music channels use half that bitrate. Good analog FM will sound better then over compressed digital. XM does sound better then Sirius, but not by much. My radio is factory installed with Sirius. Listen to CD's for a few days go back to XM, the sound quality really is lacking.