XM plus Sirius = Satellite Radio Monopoly

It's one thing when a government agency deregulates or otherwise loosens restrictions in an industry; it's another when that industry is made-up of just two companies.

The NY Times on Wednesday night said the Federal Communications Commission was on the verge of approving a merger between XM and Sirius Satellite Radio, a move that will essentially create a monopoly in satellite radio.

The combination of Sirius and XM will create one satellite radio company with about 17 million subscribers and programming running the gamut from Howard Stern to Oprah Winfrey, Major League Baseball to Martha Stewart, NASCAR to IndyCar.

And there's more on the way: HD Radio is the latest gadget for your car, truck or living room. A bit more on that later; we'll have a full post about it soon right here.

Among the conditions that both companies had already accepted were à la carte programming that would give consumers flexibility in which channels they pay for, permission for any electronics company to develop devices that would receive the new, single-company service and a price freeze for three years.

Over at my website, SteveParker.com, we get more e-mails about satellite radio than any other single topic, with most all of them complaints. And the reasons for that are many of the same that satellite radio has not grown or prospered as much as many expected since XM started broadcasting (spacecasting?) on September 25, 2001; Sirius went on-the-air (on-the-space?) on July 1, 2002.

XM beating Sirius as the first spacecaster is something which has worked to that company's great favor. In the car business, perhaps more than any other, being first out of the gate doesn't guarantee success, but from September, 2001, to July, 2002, there was only one satellite radio company you could actually hear and which was getting all the publicity in car magazines and websites, TV and even traditional radio, newspapers ... you name it, if someone was seriously searching for news about sat radio, they eventually found themselves on XM's website for almost 8 months.

Even more important than XM's earlier launch was one of its owners. In 1988, a consortium of eight companies grouped together to buy a sat radio license, which were going to be made available by the FCC. Hughes Electronics, then-owned by General Motors, was one of those eight.

Hughes made the satellites for XM's system, and GM was the first car-maker to announce sat radio would be available across their entire product line. GM has bundled their OnStar service with XM, the two systems using the same exterior antennae for both. GM cars and trucks with OnStar are already pre-wired for XM and in most cases, the radio in that new car or truck is ready and able to receive XM. All someone has to do is activate the service. Ask someone at the dealership to do that for you. It's not difficult, but based on my mail, it's a little too tough for a lot of people.

Being first in sat radio was similar to what happened when Toyota launched their Lexus luxury channel and Nissan followed with their Infiniti line. Lexus beat Infiniti into the market, and though people who were involved with launching Infiniti have told me that Nissan could have pushed-up the introduction date so Infiniti could go head-to-head with Lexus, they decided to wait. Instead of car magazine covers screaming "Lexus vs. Infiniti Shootout!" (I used to write headlines like that, and get paid for it), they said, "Lexus".

And that remains a big reason, all these years later, that when most people think "Japanese luxury car" the first word which comes to mind is "Lexus." I believe XM is still first in customers' minds when the subject of sat radio comes up, except for someone who already has Sirius, or the car they bought can be outfitted only with Sirius. (Honda's Acura luxury channel is another story; their lack of a V8 engine has hurt them greatly in the battle between the Honda, Toyota and Nissan luxury lines).

Why hasn't sat radio caught-on in a bigger way? It comes down to car dealerships. I think that everything about sat radio, from the sound quality to the choices of music, news and talk offered is first rate. The biggest problem with sat radio (apart from it about to become a monopoly) is at the dealership level. (Saturn's 2010 VUE plug-in hybrid concept will have OnStar and XM if and when it comes to market; I don't know who that guy is).

What I've found through the messages at my website, dealers have little if any enthusiasm for selling sat radio, be it XM or Sirius.

In these times, when dealerships can make more money on their used car sales than on new cars or trucks, sat radio is just another item which might scare away potential customers. If the price of, say, a GM-built truck is nearly the same as what the Ford dealer down the street is charging for a similarly-equipped pickup, adding XM to the bottom line isn't going to help the GM salesperson make that sale.

And salespeople on the showroom floor as well as the F&I (finance and insurance) person, whose goal is weighing you down with as many options as possible, don't push XM or Sirius because their spiff, or commission, isn't enough for them to force the issue. The sat radio ball is dropped at the dealership level.

Some makes and models have run promotions offering free sat radio installation (even though in GM vehicles, it's already a part of the radio) and free activation, but the buyer still has to shell-out cash every year to keep the service on. One way or another, if someone wants sat radio, it's going to cost them.

Whether it's worth it or not is up to the customer. Odds are, they'll continue with their subscription; once you get used to it, sat radio's a lot of fun. But it will never replace the Big Three of local radio: news, sports and weather. (HD Radio is another option buyers have for their cars and trucks).

Now, after several years of competition between XM and Sirius, it's possible that by the time you read this there will be one sat radio company in this country, a monopoly created by the federal government. And you don't need me to tell you how strange that is.

So what do you think? Do you have sat radio in your car or one of the portable receivers? Did you get your sat radio from the dealership or buy it as an aftermarket item at a Best Buy or some place like it? What was your experience with the dealership when you wanted to activate the sat radio in your new car? If you don't have it, does the creation of one sat radio company make you think now is the time to buy? Have you waited until after the merger happened to buy ?

And finally, which service do you like better, XM or Sirius? And that's probably the last time anyone will ask you that question, because soon, there will be just one contender.

Oh, just one more thing ... We told you at the top that now there's even more for buyers to consider when choosing the sound system for their new car or truck: HD Radio is on-the-air and those who have it say they love it ... But that's for another story which I'll post for you here soon.

Comments

[Sander]

I started with XM a couple of years ago, mainly because my local Atlanta Air America station was sold. I was addicted to Al Franken's show in the PM and was suffering withdrawal. XM carries Air America on XM-167. They also carry other liberal talkers on the same channel. I would have chosen Sirius had they carried Air America. I no longer have to suffer through Boortz, Limbaugh, et. al. on the local AM Atlanta stations and have a good source of liberal talk-radio hosts to listen to every day. Randi Rhodes, The Young Turks, and Rachel Maddow make listening to talk radio fun again.

I've also enjoyed the specialty music stations, like the '50's, '60's, '70's, '80's, and '90's stations. I was a teen in the '50's and really enjoy reminiscing to Doo-Wop music, or the Beatles '60's albums. I even enjoy the '70's Disco era tunes when I'm in the mood. For this "old-timer," XM's specialty stations really bring back the memories. Like slow-dancing at high-school dances with the woman who became my wife of now nearly 48 years.

I am concerned, though, that this merger will stifle innovation and raise prices. Monopolies are never a good thing, in my view.

[middleoftheroad]

Once you have it you realize how neat it is to listen to CNN or other TV station (if thats what you're into). Like Hip Hop -you have 5 stations to pick from (un-edited). Into Politics, they have POTUS, Air America, NPR, Stations on the right etc. It has everything. From all Grateful Dead to stations that just play the Wiggles. If you dont want to pay 12 bucks a month thats fine. Don't Get It. But if they can bring it in for under 10 it will really catch on.

I also agree with the first post. If they merge, you will have a monopoly ,and if one goes out of business you will have a monopoly. I don't think you address this in your article Steve. I'm sure you wouldn't want a bailout for Sat Radio either.

[AFCOL]

I, for one, am happy to see the merger go through. I have Sirius in my car and in my home and love it. Expansion of channels is fine with me. My son had Sirius installed in his car two weeks ago and has nothing but positive things to say about the service. I am looking forward to seeing the equipment upgrades that come out. Beats two struggling companies simply going down the drain due to political posturing, leaving no-one with the option to procure such a service. If you want to stand on principle, that is your right. Turn on your radio. Or, go build your own satellite radio service and compete. As for me...I will exercise my right and utilize the service.

[RobinSeattle]

That was a very interesting and enlightening article, Steve. What you said needed to be expressed.

However, the federal government did not create this merger, business considerations did. The government is just a referee, not the players in the game themselves. If both companies were financially healthy, then the anti-merger folks would have a case, but the fact remains right now that both Sirius and XM are likely to go out of business in the near future if the merger does not happen. Moreover, any other firm who wants to get involved in that market can choose to do so, thereby applying competition to whatever the merged XM-Sirius outfit decides to call itself.

I think the public is well aware of the satellite radio option, but after not having to pay for radio all their lives, they are still skeevy about forking over for it when fule prices are skyrocketing plus the cable tv anti-satellite broadcasting ads have probably confused the technophobic or ignorant that maybe there will be reception problems with the satellite medium.

Then you have a whole array of other free radio services, be it Yahoo, Live365 (my personal favorite) or whatever. And, I'm sure, that sort of thing is coming to cellphones, if it isn't there already.

So let's please get away from this hard on HUFFPO seems to have for the merger. It is totally uncalled for and irrational.

[texastrixie]

When we recenlty bought a new small car for gas mileage, one of the models we were offered had the sat radio set-up already in it. Luckily the car did not have cruise control, a must-have for my husband. The replacement model the dealership came up with lacked the sat set-up and saved us $500 because of that. I cannot understand, in this age of regular radio, CDs and the IPOD, why anyone would waste the money for sat radio. Maybe sports freaks who have to be able to hear any game, any time, but for the rest of us - why?
This service isn't cheap, and part of the fun of driving somewhere is listening to music available along the way. We love big band and music from the 40's to the 70's, plus country. However, we've listened to polka stations, soul music, spanish language, and even talk radio (something we'd never do at home). Searching through what's available on a road trip is a treasure hunt, and if no treasure presents itself we listen to books on tape. The increase in price that this monopoly will eventually engender makes sat radio even less enticing. Personally, I'd love to see this "innovation" die.

[dadw5boys]

Sirius IS OK BUT NOT FOR LONG DRIVES!!

MANY FRIENDS SAY THEY ALMOST FALL ASLEEP WHILE DRIVING NOW JUST MUSIC AND NO COMMERICALS.

[suec03]

Then put on a news talk channel from time to time. Satellite works well on long drives: no having to take your attention off the road every time you drive out of range of the FM station you were listening to and have to look for another station.

[satxguy1967]

I chose Sirius because it had the NFL (listening to my Pats games on Sirius is much cheaper than getting NFL Sunday Ticket and being stuck with DirecTV), and they also had a New Age music channel that my wife could listen to in her car. We bought a portable unit that she could use during the week, and I could bring into the house on Sunday. That has worked pretty well for 7 years now.

I'm really looking forward to getting more details on the XM-Sirius merger, because now I might be able to get MLB and the NFL in one service, plus I'm hoping it will still maintain the New Age music channel. If this a la carte thing is actually real, we might be able to get away with just paying for the sports and that one music channel and have a smaller yearly bill.

I'll probably also upgrade our equipment, which is getting pretty old. I might even buy a unit for my car, if I can get one that can be installed so that it looks like it came with the car. My wife's unit looks pretty awful, with a power cable dangling down and plugged into the cigarette lighter. I'll probably end up waiting until I buy a new car in five to ten years for me and just upgrade my wife's unit to something that gets the new combined service.

[BlackbirdHighway]

I have Sirius, because I'm more of a football fan than a baseball fan, and I think sirius has more rock channels.

Right now Sirius and XM are both pretty great, and FM is absolutely horrible. Sirius and XM have to compete, so if one starts to play too many comercials or charge too much, you can switch to the other. After the merger, they only have to compete with FM. Which means they just have to suck slightly less than FM. I expect less interesting programming (only slightly better than FM), much more commercials (only slightly better than FM), and higher subscription costs.

Sure, the companies will offer a lower cost subscription with very limited channel selection, and say that they are actually lowering the price, then they will jack up the price for the channels that people actually want.

I expect that within about a year of the merger, I will drop my subscription.I won't go back to FM, I could never do that. I'll just listen to lots of CDs and iPod. I'll miss the live programming, but I won't pay to be saturated with commercials.

Someday, someone will come up with a car radio that receives streaming music via the internet. There are soem great internet radio stations out there, I just love woxy.com out of Cincinnatti.

[Sionic]

Best thing to ever happen to sat radio. I can't wait so they have the bandwidth to start streaming video to my car. I love my Sirius.

[suec03]

I selected Sirius over XM because at that time only Sirius carried NPR and PRI. Then XM used its superior market share to lure away Air America into an exclusive deal, so Air America disappeared from Sirius. Then when XM created a public radio channel using in part PRI programming, PRI disappeared from Sirius. Then Sirius got so focussed on competing with XM by making sports a priority, Sirius demanded that CSPAN agree to be preempted by sports. CSPAN declined and left Sirius. I considered switching to XM, but I would have to buy new XM equipment, and XM still doesn't carry NPR (gotta have my Diane Rehm show in the car!). Sort of like laying out the bucks for DishTV only to see DirectTV sign exclusivity agreements with your favorite stations and they disappear from DishTV after you have made the investment.

Satellite radio competition would require compatible equipment, like switching phone companies. Satellite radio should involve SRSP's (satellite radio service providers) separate from the content providers, like the internet. If the problem is the limited channel capacity of the satellites, then the analogy should be television cable companies, which have franchise agreements and contract with content providers.

[Uosdwis]

I think most people who don't want sat radio object to the cost. Me, I'll give them a short probation period, to see what the screw around with. If it instantly disables the SkyFi2 I own, I'm not inclined to buy yet another radio, and may drop it altogether. As for HD radio, fine if you live in a metro, doesn't help the truckers on the interstates.