If Terrestrial Radio Broadcasters Don't Compete With Satellite Radio... Why Are They So Concerned With The Merger?

from the you've-got-some-explaining-to-do dept

Thu, Mar 1st 2007 1:02am — Mike Masnick

We've talked about the debate concerning whether or not XM and Sirius should be allowed to merge a few times. Those who are worried about it creating a monopoly seem to ignore the fact that the market isn't for "satellite radio" but for audio entertainment -- which goes well beyond satellite radio to things like terrestrial radio, HD radio, iPods, podcasts and much, much more. It seems like a no brainer. However, there's almost no way to make sense of the testimony of David Rehr, President of the NAB, to the House Judiciary Committee on why the merger should not be allowed. He starts out by saying that the merger would create a monopoly. However, if that's true, then it's not clear why he's an interested party at all. He's there representing the terrestrial radio broadcasters -- and the more that he complains about this merger, the more that it sounds like those broadcasters absolutely do view the satellite radio companies as direct competition. In fact, the terrestrial broadcasters have publicly admitted that they face strong competition from satellite radio. If those broadcasters are so worried that the satellite radio firms would "abuse" their so-called monopoly position to raise rates, then wouldn't that represent a huge opportunity for terrestrial radio to win back listeners?

In the meantime, we're still wondering how the NAB can say with a straight face that satellite radio doesn't compete with terrestrial radio, while at the same time demanding a relaxation of media ownership rules and using satellite radio as an example of why old media ownership rules no longer apply. That NAB page says: "The FCC should relax unreasonable ownership restrictions on the media. Broadcasters believe that these decades-old rules should be updated to reflect the dramatic changes in the media marketplace, including the growth of cable TV, satellite TV and radio, and the Internet." So, apparently, satellite radio is competition when it comes to media ownership... but not competition when it comes to mergers?

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16 Comments

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ScruffyDan, 1 Mar 2007 @ 3:11am

FritoLay
XM and Sirius need to get the same lawyers that the Fritos Company and H.W. Lay & Company used when arguing why they should merge to form Frito-Lay. They successfully argued that while the merger would give them a monopoly in the potato chip market, that was not the market they were in. They were in the snack foods market, and in that market they were not a monopoly.
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PNess, 1 Mar 2007 @ 5:42am

As indicated on Orbitcast

ITS IN THEIR SEC FILINGS.

almost EVERY radio company has said in their official SEC filings that SatRadio is a direct competitor as is Ipods, MP3, internet, ect....

So they are screwed....unless they want to say they "lied" on their SEC filings or purger themselves infront of congress/committee.
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bleearg, 1 Mar 2007 @ 5:53am

Don't compete, eh?
If terrestrial radio doesn't compete, then exactly what was the reasoning behind CBS/Viacom's "FreeFM" moniker?
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Leroy, 1 Mar 2007 @ 6:13am

sticking to my guns
I'm sticking to my guns, my prediction that the merger will not take place. The same scenario can be found in television and the discussed buyout of directv by dish network.

I predict one of the major auto manufacturers will buy XM or sirius and manage it properly. Maybe Ford, maybe Honda, maybe toyota.

I think the regulators will see XM more in the role of a common carrier than a broadcaster and will look towards the future of satellite radio and the loss of competition as it would effect that medium not only next year but 20 years from now. If they merge, there will be no marketplace.

But if, say Ford buys XM and Toyota buys Sirius, then they can grow the industry and push the technology and turn them into a true marketing tool. Imagine if Ford owns XM that gives them the ability to manage all those channels and not a single Toyota or GM advert to be found on any of them!

"L"
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James, 1 Mar 2007 @ 7:00am

Tough call
As they (XM and Sirius) grow they are more and more, very strong competitors for FM (which Clear Channel and others have completely ruined), and they should be allowed to merge.

My concern is merely that content might suffer. Prices will not; they can't price themselves out of the market.

And I disagree with Leroy, the carmakers have enough issues w/o buying a company in a fledgling market that is still not cash-flow positive. What does Ford (or Toyota even) know about running a media company? Sure, Toyota could say no Ford ads on Sirius or XM but one of the main draws of sattelite radio is COMMERCIAL FREE music.
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Anonymous Coward, 1 Mar 2007 @ 7:08am

IMO the NAB is playing most everyone for a fool.

They want the FCC to say that they are in direct competition. Then they will ask "if we are in direct competition how can we not be held to the same decency standards? If we are in direct competition why do we pay so much more for our lic?....."
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bleearg, 1 Mar 2007 @ 7:29am

Re: Tough call
Exactly. I'm not sure why a car company would want to purchase a company in an industry that's obviously having problems. Not to mention the fact that each of these satellite companies have deals with auto makers which are to there to create incentive to purchase both the vehicle AND satellite radio. Why would Ford want to purchase XM and continue the deal between XM and GM? Ford has absolutely no incentive to make GM cars more attractive by having XM satellite radio.
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James, 1 Mar 2007 @ 8:32am

Re:
I disagree. Being in competition w/the NAB does not change the model which is a subscriber one. This is the same way cable channels can (and do) have more adult-type fair over your regular NBC affillate, because you have to subscribe (Showtime? HBO anyone?), you can't just pick it up over the air w/o some additional cost and effort.

--------------------------------------------------------------
IMO the NAB is playing most everyone for a fool.

They want the FCC to say that they are in direct competition. Then they will ask "if we are in direct competition how can we not be held to the same decency standards? If we are in direct competition why do we pay so much more for our lic?....."
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PNess, 1 Mar 2007 @ 8:44am

Huh?
They want the FCC to say that they are in direct competition. Then they will ask "if we are in direct competition how can we not be held to the same decency standards? If we are in direct competition why do we pay so much more for our lic?....."

Different you are using FREE airwaves with no charge and no controlls to broadcast regular radio. decency standars are different when you are not a pay service just like cable vs regular channels.

I think its a plan to get ownership % limits reduced since they can turn the tables and say that they also are in competition against more then just radio so the 30% limit of ownership in media in any given market should be increased
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Concerned, 1 Mar 2007 @ 9:46am

Re: Huh?
Please, before you start complaining about ownership caps and the motivation of broadcasters, take the time to understand the issue. There is no "30% cap for local markets." You're thinking of the national televion cap, which is set by Congress at 39%, and is not at issue in the current proceeding. Other complaints are fine, but before you start concocting conspiracy theories, you might want to understand the facts.
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Rainy Day, 1 Mar 2007 @ 10:15am

Sat Radio Merger
There are a few facts that have been ignored here.

First, related to a car company buying one or both of the Sat Radio companies: XM only has a contract with GM, and I don't think anyone has a contract with Sirius. The FCC has ruled, as part of the licensing agreement, that any company that signs a contract with one of the service providers, must sign with the other one as well. So the competitor service can demand any terms they want. GM has a contract with XM because that deal was done before the FCC made their ruling, and was grandfathered in.

Second, the FCC got caught with their pants down when the gave away the broadcast frequencies to the Sat Radio companies. Normally, broadcast frequences require a license fee. There was talk at the time that the frequencies should be auctioned, but the FCC chose to give them away (giving up what was valued at millions of dollars of revenue) so the FCC could mandate things like competitive services. The FCC has held all the cards in this game, and has misplayed many of them. Part of the competitive requirement is that by the 3rd generation of receivers the systems must be compatable, like FM and AM are both compatable with all radios today. That doesn't mean they must use the same chip sets, just that radios must be able to receive both. We are currently about half way through generation 2. The idea of forcing a competative balance was supposed to be in the consumer's best interest. So if the FCC now says a merger is OK, then they must admit that the competitive thing was wrong, and they got screwed out of license fees.

As a result, this merger is much less about the SEC approval and much more about FCC approval. It is possible that the FCC could pull the broadcast licence if the two merge as a result of breach of contract related to competitiveness.

I still think that some high priced lawyers can make comelling arguements for the merger, but I hope it doesn't happen.
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Sirius Listerner, 1 Mar 2007 @ 11:22am

Sat Merger
Adding my 2cents out there.....
follow this link
http://www.sirius.com/servlet/ContentServer?pagename=Sirius/CachedPage&c=Page&cid=10431862 80865

Sirius has contracts with BMW, AUDI, BENTLY, FORD, DOGE, CHRYSLER - list goes on..
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Sirius Fan, 1 Mar 2007 @ 12:52pm

That was an excellent article..... I agree 100%.
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Mark, 4 Apr 2007 @ 5:04pm

NAB president David Rehr has stated that satellite radio is competition. From his speech:

The Future of Broadcasting
The National Press Club - October 4, 2006
Remarks of David Rehr, President and CEO, National Association of Broadcasters

"But even with all of these expanded business opportunities, we must address new competitors.

Who are the newer competitors? ... On the radio side, we have SATELLITE RADIO, Internet radio, iPODs, other MP3 players, cell phones and others. How will we compete?"

http://www.nab.org/AM/Template.cfm?Section=News_room&TEMPLATE=/CM/ContentDisplay.cf m&CONTENTID=6937

The link to this transcript was on the NAB homepage until recently. I suspect removing it had to do with Sirius' comments to the Carmel Group:

"The NAB and its members say one thing when they try to block the Sirius-XM merger but something entirely different when (NAB Chief Executive) David Rehr speaks to the NATIONAL PRESS CLUB, Clear Channel speaks to its investors, or the HD radio alliance boasts about its advantages on its website," the companies said in a joint statement.
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gerg, 30 Oct 2007 @ 2:02am

m0pi0l4b0xg@yahoo.co.uk
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Kevin, 27 Feb 2008 @ 6:58am

XM and Sirius Merger
I think the merger between XM radio and Sirius radio will be a good thing because it will offer more in the way of satellite radio programming.
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