Almost Set in Stone

The concrete may still be somewhat wet but in reality the satellite radio merger is just about set in stone.

This week, antitrust staff at the Justice Department closed its inquiry into the proposed combination of XM and Sirius, effectively giving the companies a key regulatory endorsement of their pending transaction. They still need to convince the Federal Communications Commission that the deal is a good thing. And it's doubtful the FCC will contradict the Justice Department decision, minus a few meaningless conditions.

Apparently, those who suggested the satellite radio business competes in the broader digital audio market have successfully made their case. I understand what merger proponents are saying about competitors to XM and Sirius, such as iPods and MP3 players, internet streaming of music content and a broadening of traditional AM/FM airwaves to include HD Radio.

Case in point: Our family recently purchased a new car. That required the trade-in of a vehicle that contained satellite radio. The new car does not have satellite radio. And my wife and I have made the decision that we don't want to go through the hassle of purchasing - and then having someone install - a satellite radio receiver in the new vehicle. minus a killer deal that would make a satellite radio purchase a cheap and painless endeavor.

The new car is covered on the digital music front thanks to a direct connection for an iPod attached to the in-car stereo equipment.

While merger proponents (and the companies themselves) have convinced most regulators about their competitive role in the broader digital audio market, the deal remains unsettling to me, especially on the content side.

My concern: Would a combined entity lose some incentive to innovate in terms of content?

As competitors, Sirius and XM fiercely battled each other in terms of introducing audio streams that mirrored similar services delivered by the other company. For example, Sirius Punk came out shortly after XM unveiled Fungus, its punk channel. While both streams deliver similar programming, they are hardly copycat offerings.

Given that a combined satellite radio entity would have more capacity, there should be room to create more niche programming, differentiating content from stream to stream. However, I just don't see that happening with this merger.

Nonetheless, the merger effort has only just started. Billing systems and customer service operations must be consolidated, duplicating jobs could be eliminated (hopefully this is not a painful process if it happens at all), new equipment may hit the store shelves, and customers must be informed of the changes. Once the concrete is dry, it's up to the single company to ensure that it's a customer-friendly merger process.