Friday, June 13, 2008

Sirius + XM merger still under fire from broadcasters, legislators

A senior Republican US Senator has accused Sirius Satellite Radio CEO Mel Karmazin of misleading Congress and the Justice Dept. about the XM + Sirius merger deal. But this round of opposition has a familiar flavor to it.

Sen. Sam Brownback (R - Kansas), ranking member of the Joint Economic Committee, has long opposed the XM + Sirius merger, saying in April that the Department of Justice had "made a mistake" last March when it found nothing anti-competitive about the combination of the two satellite radio companies.

According to the New York Post, Sen. Brownback has asked that a letter to the FCC from trade organization C3SR (Consumer Coalition for Competition in Satellite Radio) -- a group funded by the National Association of Broadcasters -- be released to the public. Believed to be included within the redacted portions of the letter is content that would contradict Sirius' testimony to the US Department of Justice about the interoperability -- or lack thereof -- of satellite radio receivers from both companies.

It has been frequently noted that the merger of XM and Sirius -- which together are satellite radio, but which constitute only a small fraction of the overall radio market -- has been in deliberation by Congress longer than both the Exxon-Mobil merger and the Chevron-Texaco merger. Despite both being smaller than the typical oil company, the potential impact of their union would undoubtedly represent a huge blow to the National Association of Broadcasters, a group which includes terrestrial radio and broadcast television companies.

The satellite radio model offers subscribers access to far more content -- and subsequently far more space for advertisements -- than terrestrial radio can. Furthermore, partnerships with automobile manufacturers, rental car companies, satellite TV companies, and airlines have allowed receivers to be integrated into new platforms.

Terrestrial radio is stuck in a position where it cannot substantially raise its ad fees for fear of losing sponsors, nor can it allocate any more airtime to ads for fear of losing listeners.

Since 2003, broadcasters have pushed "HD radio," a digital multicast radio signal that allows for more terrestrial stations per square mile. However, consumer awareness of the technology after five years is at a paltry 24 percent, according to Arbitron and Edison Media data released in April of this year. This is after a $200 million advertising campaign that the HD Digital Radio Alliance ran in 2006.

So in the interest of keeping XM and Sirius in competition with each other rather than with conventional and HD radio, the powerful NAB has been lobbying members of Congress in both parties to oppose the merger. Now that the DOJ has placed its approval upon the merger, it is no surprise that the 3CSR/NAB has been trying to convince the FCC to oppose it.

By saying Sirius has been "less than candid" in its testimony and questioning its truthfulness, the opposition is hoping yet again to stanch the progress of the merger.

In 2004, when Mel Karmazin sat on the board of Viacom, Sen. Brownback confronted him over content on the Howard Stern radio show that he deemed indecent by not only Viacom's standards, but also by the FCC's. This correspondence took place after a listener complaint resulted in the show's producers being slapped with a $495,000 FCC fine.

In 2006, Brownback was outspoken on his support for the Broadcast Decency Bill. Upon its passage, he was quoted as saying, "I am glad the Senate took action and increased fines for broadcasters who show indecent material. Radio and television waves are public property, and the companies who profit from using the public airwaves should face meaningful fines for broadcasting indecent material." The bill increased fines for decency infractions.

After both Karmazin and "The Howard Stern Show" left the public airspace and moved to the subscription-based Sirius satellite radio, Brownback still did not relent in his criticism, saying "explicit programming will continue to play a prominent role in the business model" of the merged satellite company and that he is against allowing the combination of companies "peddling obscene and indecent material."

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