The XM-Sirius Debate

Many arguments have been made on both sides about the proposed XM-Sirius merger. Some claim that the merger of the two companies will lead to a monopoly that will control satellite radio and prevent any competition from emerging. They believe that regardless of what agreements are made that the new company will simply raise their prices to unacceptable levels. The fact of the matter is that the only way XM and Sirius can truly survive is with a merger.

Recently United States Senators Kerry, McCaskill, and Cardin have voiced strong opposition over the proposed merger despite many conditions that have been placed on the merger (including XM's guarantee that none of their receivers will become obsolete by the merger and that they will be required to offer several packages of channels).

The Senators are looking at the argument wrong. It shouldn't be about a monopoly over satellite radio but rather a monopoly over radio. A merger of these two companies in no way gives them any more of a monopoly than the cable company already has over television. People don't have multiple choices for cable television but they do have satellite television and in some areas Verizon's Fios TV. XM and Sirius already have plenty of competition in the form of FM Radio and iTunes.

FM Radio offers their service for free and as their HD technology becomes less expensive and more advanced, consumers will have more stations and a higher sound quality than they already do. The major advantage that FM radio possesses is that it is free. A good segment of the population is never going to pay a monthly subscription fee to listen to music and talk radio. With the possible exception of XM-Sirius somehow deciding to offer their service for free and only requiring people to buy their receivers, FM will still be the primary choice of listeners simply because it is free and factory installed in cars.

iTunes can also be seen as a viable alternative to satellite radio. More and more people listen to their iTunes while driving and at home thus avoiding both XM-Sirius and FM. Some people just want a playlist of specific songs. They don't want to deal with commercials nor do they want to deal with paying a monthly subscription. ITunes has revolutionized music to the point where in the next five to ten years music albums as we know them nowadays might not exist. Artists may simply put out one or two songs at a time and no longer take the time to fill out an entire album.

Business should be allowed to exist so long as it does not become too exploitative. Given the climate of radio, it would be difficult for XM-Sirius to price gouge without hurting themselves in the long run. A satellite radio merger gives the consumer far more choices in music, news, sports, and entertainment. The ala carte package offering allows them to pick and choose what stations they want. The beauty of a subscription service is that if a business doesn't offer what a consumer wants they can simply vote with their wallets and choose to cancel their service.

Sources:
http://arstechnica.com/news.ars/post/20080702-senators-to-fcc-siriusxms-proposal-still-needs-work.html
http://www.xmradio.com/merger/index.xmc