Will XMas Siriusly Come Early This Year For Satellite Radio?

(Picture via Orbitcast)

The two major satellite radio companies, XM Satellite Radio and Sirius Satellite Radio, have been in recent talks to merge into a single conglomerate corporation, creating a generic monopoly that would govern the entire market. But in having these talks over the past few months, both companies are now being faced with counteractive legislation from the Federal Communications Commission that squanders any suggestion of sole ownership over the two licensed businesses. FCC Chairman Kevin Martin recently announced that there was a ban on such corporate activities, and in furthering the troubles of the alleged merger, antitrust regulators would have to endorse the legalities of the situation, in addition to several other forms of blockades, as outlined by Ryan Saghir here. While the FCC seems steadfast in their ban, there is a glimmer of possibility that the legislation could be modified in accordance with the companies' plans, allowing them to merge and satellite radio to be controlled by a single body. The solution lies in rewriting the law, forcing the FCC to go back on its initial governance and admit wrongdoing. In the end, the companies would get what they want, but an ultimate result would be the spotlighting of the FCC's hypocrisy in regard to their regulations.

While the FCC may be unwilling to admit the impracticalities of their law, there holds some benefits in upholding their legislation. Unlike AM and FM radio stations, satellite radio is viewed as a moneymaking corporation, and since they charge listeners to have access to their product, the FCC is looking at the merger monetarily. In this way, FCC is protecting the satellite subscribers. If the companies do in fact merge, then they would hold a monopoly over their industry. As with any monopoly in the history of economics, the united company would have the ability to raise the prices of their product in addition to their subscription rates, thereby limiting the access to the product. Additionally, the company would be able to dictate everything in the market, and if subscribers decided that the indulgence of satellite radio is unnecessary and were unsatisfied with the product, the industry would crumble under their low subscription rates and the lack of a financial basis. In this way, the competition between the current satellite companies stands as a healthy situation in the eyes of the FCC, and in looking at it from this viewpoint, any listener and subscriber would have to agree.

But although the FCC may be protecting the industry and its consumers by upholding their legislation, there are mounds of proof that suggest that the merger would in fact be beneficial to the industry, with equal returns for the conglomerate and the consumer. The main advantage would be the alleviation of competition between the two companies, which has been a primary concern from each corporation since the burgeoning of the industry at the beginning of the new millennium. The amount spent on advertising by each side is exorbitant, dabbling in the mid-millions range, with each poster and commercial produced as an attempt to both take a jab at their competitor and accumulate subscribers. With a merger set in place, the overall corporation would be able to relax its efforts to capture the attention of the American public and inevitably add to their gigantic sum, which in turn would cut the number of ads in half (or to something marginally less substantial than the current amount).

As a result of lowering the effort in advertising, the companies would be able to produce better programming by pumping more money into what they already have, leading to the possible expansion of their programs and channels. The direct result of a merger would be a powerhouse of available programs, and instead of having to choose Sirius for Howard Stern or XM for Oprah, subscribers would be able to get it all without having to grapple with such a situation. With extra money in the bank from lowered advertising efforts, the conglomerate would also be able to better fund programs, expand their repertoire and ink deals with more prominent disc jockeys, all of which benefits the listeners by ameliorating the product's entertainment factor. Additionally, the company could somehow improve their technology in ways that seem trivial in a competitive world, like the development of a handheld satellite radio receiver or the ability to search through and listen to archived shows. The ability to develop this type of technology is currently available, but with each company focused on garnering more listeners and on their competitor, further technological improvement seems too unreachable in the current situation.

The ultimate result of the merger seems that it would be both a gift and a curse. With entertainment at its potential maximum, listeners would be able to listen to privileged programming and therefore receive the benefits of satellite radio that overshadow AM and FM radio (i.e. no commercials, the names of the playing song appears on your screen, big-name celebrities spinning their favorite records). At the same time, the corporation would be able to exist in a battle-free industry, which would inevitably improve their programming and fill their pockets. But with the good comes the bad: the company would hold executive power over the industry, and listeners would be completely dependent on a single entity that can increase the costs of subscription and allow the quality of production to deteriorate.

If the merger does inevitably happen, which it may after getting past all of the legal red tape, there should be rules imposed on the joint company to prevent the negative effects from occurring. The FCC should play an active role in governing the actions of the conglomerate, and could even make new legislation that would prevent the monarchial mishaps that could potentially happen. The corporation could even create sub-companies that offer different and subset services, so that there is room for small competition to break into the industry. But, of course, a merger would prevent the introduction of any new major competition, since the point of the merger is to squash any type of battlefield existence. The company would have to legally attest to the fact that they would not incrementally increase subscription rates, which is where the FCC should exercise control. If the end result is a success and satellite radio blossoms into a mass-market industry, the satellite radio industry could reign supreme over traditional wave frequency radio, and consequently, the success could permanently change the methods of how the American populous is entertained and forever change the world of business.