Sirius, XM Radio and relevant markets

Sirius and XM Radio, the two leading satellite radio providers in America, have agreed to merge. Satellite radio is one of those products that is perfect for the American market.

Sirius and XM Radio, the two leading satellite radio providers in America, have agreed to merge. Satellite radio is one of those products that is perfect for the American market. We spend a lot of time in our cars, and everyone has experienced the common problem of radio "fading out" for god knows what reason. Satellite radio is fairly indispensible on those long cross-country driving trips when the only stations you find feature evangelists explaining how angry god is with everybody.

I've tried both services, and both have their merits, though I lean a bit towards the Sirius side (though that may just be my contrarian nature, as support for XM radio came integrated with my Honda Element). I allowed my service to lapse a long time ago because, as I noted in a previous blog, I was happy enough playing my own CDs. However, if I could suddenly get both XM and Sirius radio stations on my existing hardware, I might consider re-subscribing, which I'm sure would make executives at both companies happy assuming others share my feelings on the matter.

My biggest fear, however, is that the FCC will play the role of buzz-killer, blocking the merger based on the supposed harm it will do to "satellite radio competition." Said FCC chairman Kevin Martin:

The companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices," Martin said.

Mr. Martin is probably concerned that the relevant market for SATELLITE RADIO, composed currently of two players, will be reduced by one, which by a very simplistic definition of monopoly means the market for satellite radio would be monopolized. This is the same line of reasoning the government used, after strong lobbying from Comcast and Rupert Murdoch, to block the merger of DirectTV and EchoStar, on grounds it would create one nationwide provider of satellite television.

Never mind that satellite TV competes in most markets with cable, and soon, the phone company, and in future, possibly even powerline, mobile phone networks and WiMAX. The relevant market is SATELLITE TELEVISION. The two leading companies in SATELLITE TELEVISION are going to merge, so people outside that industry (and not privy to real-world market data that might cause companies to want to merge in the first place) dictate that such a thing must not happen.

I'm sure that line of reasoning will weigh on Sirius and XM Radio. There IS lots of competition to satellite radio. You have old-fashioned terrestrial radio which is usually enough and always locally relevant, you have the new HD radio system which has audio quality lightyears ahead of satellite radio, and you have portable music devices, such as the iPod, which can contain the musical equivalent of podcasts, a mode of distribution which can be very appealing given that they are usually free. Sirius must have seen promise in that model, as they made devices that enabled recording of broadcasts for future plabyack. 

In future, I can see mobile and WiMax networks becoming a source of radio signals. Mobile networks do a fairly good job along American highways, which makes it a decent distribution candidate once higher-bandwidth data connections become the norm.

I haven't subscribed to satellite radio in years, and if they try to charge me "monopoly rents" (a funny term given all the competition they face) I won't resubscribe. Free options are readily abundant, and even if they tried to charge higher prices, it would attract investment in alternatives so as to hasten the arrival of even newer competitors.

We don't need government to protect us from a merged Sirius and XM Radio. I only hope that the FCC decides to see things that way.

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