Sirius and XM To Merge…Are Customers Screwed?

Sirius, XM Want To Make Music Together – Over a year after talk of a Sirius and XM merger first surfaced, the companies made it official on Monday. The two U.S. satellite radio providers announced a merger of equals on President’s Day. Under the terms of the agreement, XM shareholders will receive 4.6 shares of Sirius stock for each share of XM they own. XM and SIRIUS shareholders will each own approximately 50% of the combined company. Together, they have lost about $6bn over the past five years while building a subscription base of roughly 14m, compared with the estimated 200m people who listen to terrestrial radio stations.

Yes, they have a lot of money and will probably continue, even if they do merge. I’m an XM subscriber and while it has some convienence, it’s not revolutionary in the musical sense. With the amount of channels, I expected a larger catalog of music, especially in the Jazz arena. Maybe due to licensing agreements with record labels, they don’t have full access, probably just a  subset of artists, because it seems like I can hear the same song several times a day, and several days at that.

But both companies argue that the competition today comes not so much from traditional radio stations, but from new forms of digital audio distribution including portable digital music players such as Apple’s ubiquitous iPod and the launch of new HD (digital) radio stations broadcasting near-CD-quality content. "There were no iPods when satellite radio was first licensed," says Mel Karmazin, chief executive of Sirius. Today, he points out, iPods are just one of the devices that can be used to stream digital content though a car audio system, or through a home HiFi. "Our sense is that there are only 24 hours in the day and consumers have an enormous amount of choice," he added.

Competition in the sense of iPods and other formats? Satellite should service a different type of service. iPod’s and the like are for people who already own their music, and know their library. XM/Sirius is there for people to discover, engage and listen, especially to new material. So in that sense, there is no competition.