More on XM-Sirius

by on April 11, 2007 · 2 comments

The proposed XM-Sirius merger continues to generate intense debate here in Washington. Broadcasters are aggressively pushing regulators to spike the deal, calling the proposed merger a “monopoly.” As I pointed out in my earlier essay on this, I just can’t buy that argument. I just don’t understand how anyone can honestly believe that satellite radio, terrestrial radio and digital music are not in fierce competition for our ears.

I recently stumbled upon two good essays that make the same point. One is by my former PFF colleague Randy May, who is now the president of the Free State Foundation. In his article, “Thinking ‘Siriusly’ About Satellite Radio Competition,” Randy argues that “the notion that satellite radio constitutes a discrete market for purposes of assessing the merger’s competitive impact seems problematical–and to defy common sense.”

Tim Farrar of TMK Associates agrees. In a new paper entitled “The Competitive Landscape for Satellite Radio,” Farrar argues that “the potential alternatives to satellite radio are, in essence, those technologies which provide (either live or recorded) in-vehicle audio content (i.e. talk, music, sports and information services such as news, traffic and weather).” He continues:

The most obvious alternative to satellite radio is terrestrial AM or FM radio, which comes pre-installed in virtually all vehicles and is free-of-charge. Clearly the amount of programming varies, depending on where the consumer is located across the US, since a wide range of channels are provided in urban areas, but rather less variety is available in rural areas. Nevertheless, since we understand that a significant majority of usage for satellite radio is by commuters driving into urban areas (which incidentally is not what XM or Sirius’s original business plan projected), many consumers who are unwilling to pay a premium for satellite radio content obviously have an adequate choice of terrestrial radio channels. Alternatively, for those users who wish to listen to commercial-free music, it was reported in January 2005 that almost 50% of iPod users had purchased accessories which allow for in-car connections, while a January 2006 analyst report predicted 28M US cars would have iPod connections integrated into their audio systems by 2011. Given that there are 30M+ iPod users in the US alone, the number of consumers already able to listen to an MP3 player in their car (either through an integrated audio connection or an after-market accessory) may well exceed the current total of 14M subscribers to XM and Sirius.

Further:

It is entirely possible that the strength of terrestrial free-to-air radio, combined with readily available pre-recorded content on MP3 players and other increasingly capable storage devices, will prevent subscription-based radio from ever serving more than perhaps 20% of US vehicles, a view supported by the recent slowing of satellite radio subscriber additions. In that case it would be hard to describe a merged satellite radio operator as any sort of monopoly provider of in-car audio content, except in a very limited number of isolated rural areas with few terrestrial free-to-air radio stations.

Farrar also discusses the rise of new competitive threats from cellular providers who continue to roll out more and more content via systems like EV-DO and MediaFLO. And there are many other current or potential threats to satellite radio that I discuss in my old essay on the subject.

  • http://lippard.blogspot.com/ Jim Lippard

    I’m skeptical that Sirius and XM will ultimately be competitive with wireless Internet radio, terrestrial radio, and portable digital music/podcast players even if they do merge–but I agree there’s no monopoly threat.

  • http://lippard.blogspot.com/ Jim Lippard

    I’m skeptical that Sirius and XM will ultimately be competitive with wireless Internet radio, terrestrial radio, and portable digital music/podcast players even if they do merge–but I agree there’s no monopoly threat.

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