Thursday, February 22, 2007

Merger Discussion

Quick post to highlight a blog that clearly sees the bigger picture.

Public Knowledge on Merger

Wednesday, February 21, 2007

More Merger News

More details are coming out about the proposed merger of XM and Sirius, particularly what it means to Howard fans who are currently subscribers. (Mel Karmazin promised no rate hikes and you can keep your existing radios.) The best summary of the latest info is by Mutt on SFN:


So the merger is pretty much a done deal and it's good news for Howard's fans. So lets move on to the future and back to the issue of whether or not Howard will come to the iPhone in particular and to the iPod in general. Here's a chart that Sirius put together to explain the case they're going to make to the FCC for the merger:

While the merger is certainly good news for the satellite industry, the chart Sirius uses to justify the merger also makes it very clear that satellite has a long way to go before it becomes a dominant form of media, like cable television for example. Even if the combined company doubles it's subscribers in the next couple years (something that may not be too difficult to do) it will still be a considerably smaller potential market than podcasting for iPods or traditional radio.

Sirius needed this merger. But this merger is not enough to save satellite radio in the long run. Hardware needs to improve, and this merger should help that, but even more importantly, Sirius must improve it's internet access. And that means making itself availible for the iPhone and iPod.

Right now, a satellite car radio is much better than a regular car radio. Traditional radio is hoping that HD radio will help, but I predict it will be a huge dud. The bigger danger, long term, is that it is increasingly likely that cars will start to be equipped with internet access. More and more cities are going to start being blanketed with WiFi (or WiMax). An internet equipped car might be better than a satellite radio car. Sirius needs to anticipate this development and make sure that people still have a reason to subscribe. That reason, of course, is by having exclusive content (Howard Stern) and make it easily availible.

Likewise, the new Apple TV is going to connect the internet to the television set, and this is a huge growth opportunity. Wouldn't it be great to be able to listen to Howard's show over your TV set in the morning?

Even with major hardware improvements, it is still likely that listening to satellite on portable iPod type devices is going to be a disappointment over using an iPod and time shifting. Apple's new iPhone is also likely to be a superior portable live listening device with additional phone features.

As I've pointed out before, Howard has been a big promoter of iPods all these years. I don't believe this is an accident. I think its part of a larger plan. Howard first had to save Sirius, which he did by bringing on millions of new subscribers. Then he had to destroy XM, which he effectively did by out selling subscriptions and forcing the merger.

But soon it's going to be time for Howard to cash on some of the free promotion he's been giving to the iPod and iPhone. Sirius and Howard need to experiment with some limited podcasting on Apples iTunes. And it needs to provide a widget so that you can listen to Howard's broadcast live off the internet with the iPhone.

When will that happen? Shortly after the FCC approves the merger.

Monday, February 19, 2007

Sirius XM Merger Announced!

I love to be right and I've been right for months in announcing that Sirius and XM were about to merge. The official announcement came today. Here's one link:


As I have reported earlier, XM was under a lot of pressure to merge before the growing Sirius audience (thanks to Howard) completely eclipsed it and gave them little bargaining power. And Sirius was under pressure to merge before Howard's contract become close to running out. (Howard retiring or possibly switching would be a huge problem). Still, time was on Sirius' side and XM cashed out while it could still make a good deal. It's management agreed to be taken over by Howard's pal Mel, but in exchange they got a face saving 50/50 deal.

One indication that the deal was about to happen was the recent bonus paid off to Howard. While technically Howard didn't have any veto power over a merger, keeping him happy was very important given how important he was in saving Sirius, and given how Sirius certainly wants to keep him on the air even after his contract runs out. A merger would make it less likely Howard could ask for top dollar at the end of his contract (assuming XM could have survived that long) so technically a merger wasn't in Howard's best interests. But Mel knows where his bread is buttered and made an early move to reward Howard before the merger announcement.

The other element that pushed for a merger sooner rather than later is the upcoming iPhone. The impending release of the iPhone was a gun to XM's head. Why? Well, I stated in my January 14th post, the iPhone is a Howard Stern delivery device. Since I wrote that piece, what was once assumed to be a dead issue, satellite integration of with the iPod, has filtered it's way back into the blog sphere discussion:



Of course, no one gives me credit for being the first one to bring up the issue and both of those articles miss the point completely. They suggest that the merger of XM and Sirius might make it more likely that the iPod will carry satellite radio broadcasts, but in fact, the merger makes it less likely. At least in the short run.

Because what both reporters failed to understand is the fact that the iPhone WILL BE SIRIUS ENABLED. It will be able to receive Sirius broadcasts. Apple has nothing to do with it. Sirius doesn't need Apple's permission.

The iPhone has a full featured web browser which allows it access to the entire internet including Sirius' web broadcast. (And XM's by the way.) Apple would have to actively prevent the iPhone from getting Sirius. If Steve Jobs tried to do that, prevent web users from accessing specific content, all hell would break loose. Especially given the fact that iPod and satellite radio are viewed as competitors. Sirius could easily sue them and win.

Moreover, it simply doesn't hurt Apple if their iPhones can receive Sirius web broadcasts. If anything, it will simply help iPhone sales.

Does that mean you should rush out and buy the iPhone so you can start listening to Howard? No. While Apple HAS to allow its phone to receive Sirius, Sirius doesn't have to make it possible. It's Sirius' choice whether to provide the software to make that happen. (Note they still haven't released a Mac version of the Howard Stern Media player. You can only listen to Sirius using Microsoft's player which is no longer being updated for the Mac and surely won't work on the iPhone.) The software will be easy to create, as worst it would require a special easy to program OS X widget.

So why wouldn't Sirius do that right away? Well, that gets back to the merger. It's going to require FCC approval, and one of Sirius' arguments in favor of it is that the iPod provides competition to satellite. That will be a little harder to argue if everyone is already using their iPhone's to listen to Howard. Of course, again, these are apples and oranges. The iPod does compete with Sirius, but the iPhone will not because listeners will simply have more choices. They can use iTunes and Sirius.

But my guess is that Mel would rather not muddy the waters with that issue right now. While long term the success of the iPhone could help Sirius gain subscribers, a merger now is far more important. However, I believe the threat of Sirius on the iPhone was one of the factors that pushed XM to merge now. Howard still has a lot of fans that haven't subscribed. Most of those fans are probably waiting until they buy a new car that comes with Sirius built in. But once they discover they also have the opinion of listening to Howard on the iPhone, the Sirius advantage in gaining new subscribers could have gotten stronger. XM simply doesn't have any programming compelling enough to compete against Howard.

Will the merger now on, Mel will probably wait before taking advantage of the iPhone as a Howard delivery device. Which means, unfortunately, we Howard fans will also have to wait a while longer before he is available on iTunes as a pod-cast. But Howard and Mel know that all these technologies are merging. That's why it was important to get the merger with XM done now. Once that has happened they can join forces with Apple. (Who, as I have pointed out before, certainly love Howard for getting out the message that the iPod is a great porn delivery device.)

Of course, traditional broadcast radio is not going to be happy with a merged XM and Sirius that will provide Howard with double his current subscribers. That's 14 million listeners and greater than his 12 million at the peak of his old broadcasting days. The broadcasters are already lining up to oppose a merger and guess how? By attacking Howard:


It's ironic that broadcasters will use Howard as an excuse to the FCC to prevent a merger. Especially since they spent the last year spreading false rumors that he was about to return to traditional broadcasting because had "failed" to bring over all his listeners. But naturally, NAB will grab at whatever they can to try to get publicity and Howard is it. NAB will rail that the merger will hurt competition, but the truth is, they don't want competition. They don't want more people to have access to Howard's broadcast.

This will give Howard plenty of fodder for his show. Once again, the FCC will try to crush him. But as I pointed out in my earlier posts, the FCC simply can't win. Even if for some reason they manage to kill a merger, now that Sirius and XM have agreed to work together, there is simply nothing stopping them from making deals to share programming. Technically, Sirius and XM could remain competitors with Howard (and sports) shared between them. But the arguments for a merger are probably too strong and no matter how much NAB yells, it's going to happen.

Once it does happen, I suspect it won't be too long before you see a deal between Sirius and Apple. The iPhone will carry it's broadcasts, and iTunes will be given new Howard content to sell and time shift. In the end, it will be the consumers, and Howard fans, that win.

Mary DeSade