XM, Howard Stern's Sirius Satellite Radio to Merge

Howard Stern's recent $83 million bonus acknowledged his powerful effect in recruiting Sirius subscribes, and now he may have millions more. While the "shock jock" has played a significant part in building the new medium of which he is a part, growth overall in the satellite radio business has not been up to investor hopes.

Just over a month ago, Wall Street was rife with speculation about a possible XM-Sirius merger, mentioned in an article here at Associated Content as well. Flattening subscriber growth and significant operating costs were investor concerns, both of which could be addressed by a merger. Now, the merger is in the works, with the heads of both organizations joining together as Chairman and CEO.

The planned merger is far from a done deal, though, as Businessweek notes that current U.S. rules say that one satellite radio company cannot purchase another. The magazine notes, however, that the rule could be waived by the government. Traditional radio services, though moving toward digital offerings themselves, have suffered from the boom in media offerings, and see satellite radio in particular as a problematic competitor, and are likely to oppose the merger.

Satellite radio has many advantages over "terrestrial", or ground-based radio broadcasters, also known as "traditional." With potentially several hundred channels, satellite providers can transmit a broad variety of programs, designed for a full spectrum of musical tastes, news preferences, comedy and old-time radio archive fans. Commercial programs are transmitted alongside commercial-free channels, and traditional over-the-air censorship, which has caused Howard Stern many headaches and expensive fines during his traditional radio tenure, is virtually nonexistent for satellite transmitted shows.

While there is much overlap between the XM and Sirius services, the struggle to differentiate has produced programs such as Howard Stern's on Sirius and Bob Dylan's on XM. Both companies have poured significant resources into subscriber acquisition, and their stock prices have been low-fliers. Analysts have suggested that, given the struggles of both companies, a combined satellite radio venture could be a better business model, and compete better against the heavily saturated media market, along with traditional radio, portable media, and more recently media delivered over wireless phone networks.

In addition to its well-known radio service, XM radio also supplies other data services from their digital satellites, including stock quotes via XM receivers, and advanced weather imaging delivered to transportation companies, private airplane pilots, and also some with combined GPS/XM weather receivers. XM and Sirius radio also transmit their signals via ground-based transmitters in some areas, providing reception without direct view of the sky required by satellite transmission, which could be expanded. The resources freed by the merger could enable further investment in these areas and others.

http://money.cnn.com/2007/02/19/news/companies/xm_sirius/?postversion=2007021914

http://money.cnn.com/2007/01/10/news/companies/sirius/index.htm?postversion=2007011017

http://www.xmwxweather.com/

http://www.businessweek.com/ap/financialnews/D8ND16O80.htm