What's The Deal With The XM-Sirius Merger?
SCOTT SIMON, host:
This is Weekend Edition from NPR News. I'm Scott Simon. Coming up, the FBI turns 100, and we'll hear from a former G-man who turned 101. But first, last night the Federal Communications Commission gave the world's only satellite radio companies permission to do something they said they'd never do, and that's merge.
XM Satellite Radio Holdings and Sirius Satellite Radio have been in heated competition since 2002, but neither company has been able to sign up enough subscribers to meet operating expenses, much less turn a profit. By the way, we want to inform you that NPR has two channels on Sirius Satellite Radio, and it opposed the merger of XM and Sirius on the grounds it would create a monopoly. So now, the financially stronger Sirius will be allowed to buy XM for almost $4 billion. NPR's Neda Ulaby has been following the story. Thanks for being with us.
NEDA ULABY: Thank you, Scott.
SIMON: And why did the FCC approve it?
ULABY: Well, this has been accumulation of 17 months of behind-the-scenes negotiation. The two companies have been ready to wed since February 2007. But since then, there have been tons of people proposing conditions, and those have ranged from public interest figures to investors to powerful broadcasters to the FCC commissioners themselves. Earlier this week, the companies agreed to shell out over $19 million to settle rules violations, and that seems to have been the last big hurdle.
SIMON: Why was the FCC concerned with helping satellite radio? Because it's irresistible to add, a lot of the selling point of satellite radio was, you know, we're not - our content isn't regulated by the FCC.
ULABY: It's true, but both companies have limped along financially for years, and this is a second chance. As far as XM and Sirius are concerned, all of this - the settlements and the merger - will pay for themselves. The merger was opposed by the two Democratic commissioners. And both XM and Sirius have had to agree to a number of fines and conditions proposed by both the Democratic and Republican commissioners. Those include freezing prices for three years; selling channels in smaller, cheaper packages; opening up their technological standards so that anyone can make and sell satellite radios; and allocating a certain percent of their channels, 8 percent, to educational and minority broadcasters.
SIMON: Does it mean that if you have an XM receiver, you'll be able to get Sirius broadcasting and vice versa?
ULABY: That is the million-dollar question for 18 million subscribers. The answer is not quite yet. One condition is that the new company has to sell radios that can receive both services. If you want a smaller, custom package, you have to buy a new radio, and those radios should be available within three months at the close of the merger, according to the agreement. Basically, because the current broadcasting technology is incompatible, they are going to start beaming each other's programming.
SIMON: And what about the monopoly question? What does this wind up creating that you can foresee over the next few years?
ULABY: This is going to be not much of a monopoly. Both companies have been hemorrhaging money for years and years and years. Satellite radio seemed like a really great idea in the late 1990s, when the companies were first licensed. But that was before the ubiquity of iPods and other MP3 players, and before the advent of Internet radio and the possibility of putting it in your car. This merger might give a boost to XM and Sirius in the short term but ultimately, I agree with those analysts who say you've got two weak companies combining into what may be one weak company.
SIMON: NPR's Neda Ulaby. Thanks very much.
ULABY: Thank you, Scott.
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