XMus Has Arrived

These look like some happy dudes.

It wasn't all a dream after all! The satellite radio companies, XM and Sirius, dazzled us with talks of an alleged merger just a mere month ago, although our hopes were unfortunately squashed after we learned that the FCC would block it. We read news reports on why the merger would never happen, in addition to the FCC's barring of such an action, because of antitrust laws that would be violated in the process. But in all honesty, America wouldn't want to give two companies more power than they already have anyway. Our country doesn't try to make itself the richest and best nation in the world or anything, so of course they would forbid the merging of the only two companies in an entire industry. Duh.

Alright, all sarcasm aside, the CEO's of Sirius (Mel Karmazin) and XM (Hugh Panero) announced today that the two companies would be merging in the months to follow. Confirming all the talk of "will they or won't they," the two men agreed that they would be going up against the law to merge in the interest of saving money for both of the companies and to bring the best entertainment to the masses. The announcement prompted our dear friend at the FCC, Kevin Martin, to get a lick in, stating that there would be no deal if the companies did not prove - with sufficient evidence, mind you - that the deal would be in the benefit of the consumer, and that the monopolized conglomerate would not take advantage by raising subscription prices. But while this merger seems to be a blessing for the alleged XMus, there are loads of complications that are to follow.

The companies are up against the hardest and tightest regulatory board in the United States (FDA aside): the FCC. The name even brings chills when you hear or read it. The commission has been notoriously hard on all of the media that it governs, and since the FCC has not had a hand in the programming of both satellite radio stations, they are sure to exercise their power now that they have the ability. The companies are merging without necessarily giving a reason - only to save money on both sides - and it leaves them looking suspicious. The FCC is making them both outline a specific business plan that would be convincing enough for them to change their regulations. But how are the companies going to prove that they will not go against what the FCC is making them promise in advance? XMus can easily get around a mere contract or promise to the FCC by raising the prices of the subscription rates penny by penny, or even inflating the price of receivers each year. In the long-term, the companies can get around legislation and they know it. That's not really an issue for them.

One of the more significant concerns comes in the immediate future. For all of the subscribers of one satellite service and not the other, it is impossible to make your receiver capable of receiving the other services' broadcast. In this way, it's a one-way street for both companies: Sirius receivers can only pick up Sirius signals and vice versa with XM. If the companies are planning on cross-pollinating their signals by making a whole new receiver, the expense of merging may not seem worth it after all. The company would have to recall every receiver that they have already sold (most are built into cars, remember?) and put out a new one that can accept both signals. Users would most likely be irritated with the extra energy required to get both of the companies' programming, and start to reevaluate the need for such a service. Also, the cost of recall would significantly put a dent in the profits gained from the merger. Is it worth it in this regard? Let us further discuss.

What about the fact that this merger will create a monopoly? As I explained in the first post at the bottom of this page, a monopoly gives a company too much power. Although XMus can get around that legislation, the subscriber will be the one who inevitably suffers. The companies will be able to get better programming, which is a plus for the consumer, but the prices will inevitably increase. There's no question. Be it 10, 5 or even 1 year from now, the company will want to turn out more of a profit - and additionally appease stockholders - and increase the cost of something to do with their product. Sure, the subscriber will benefit by getting both MLB games and Howard Stern on their receiver, but the cost will inevitably outweigh the benefit. And since people are already becoming less interested in satellite radio, their future-telling skills may deter them from ever having faith in the company.

So what do you think my opinion is of the merger, in relation to whether it's good or bad? If you've been paying attention, you will be able to tell that I am extremely opposed to the merger. The coalescing programming would be the major benefit, in addition to not having to make a choice and weigh one company over the other, but in the end, the companies are only out to please themselves. The point of the merger is to turn more of a profit, and by simply merging without increasing any subscription costs, they are not going to accomplish much. They will dig into your pocket every way they know how, whether it's pulling you in with a cheap initial rate and then jacking up the prices, or creating bigger 'n better receivers that look cooler yet cost less to produce (only more to buy). Are corporations money-hungry vacuums that just want to suck everything out of your pocket? Yes. Will they do anything to get more money? No doubt. And finally, would they be so soulless to increase the costs on you after you put so much faith into the fact that they wouldn't? You betcha.