Monday, December 03, 2007


Will the XM-Sirius merger go through or go the way of the EchoStar/Hughes DirecTV/DishNetwork proposal? In 2002 that $18.5 billion merger was rejected by the Justice Department on the grounds that it "would create a monopoly in many areas, particularly in rural places without access to cable television." What became of that was Rupert Murdoch's News Corp. bought controlling shares of DirecTV for a $6.6 billion steal a few months later. It's worth checking out the long list of News Corp media holdings.
This merger has been in the making for most of the year, publicly anyway (287 days and counting, one of the longest delayed mergers in history).
The shareholders of both companies have even voted to go through with the merger. However, there have been millions of dollars spent in fighting the merger via the National Association of Broadcasters and Clear Channel Communications ("the largest radio station group owner in the United States, both by number of stations and by revenue"). Even Jesse Jackson is against this merger, stating it "would eliminate the potential of any meaningful competition in the satellite radio market, which would, in turn, permanently block the potential for diversity of ownership and control by minorities in the only medium capable of nationwide broadcasting." Sounds like a stretch to me. There are such things as Natural Monopolies (not to be debated here & now) and the hurdles in competing in the satellite media industry seem far beyond the scope of minorities issues.
Even before the merger proposition was officially announced we were given reasons why it wouldn't be accepted. Now, it's taken so long for the FCC to hand down a decision that those who are anticipating a ruling seem resigned to it not happening. While XM and Sirius struggle to survive against such a far inferior product as terrestrial radio (damn I hate those lame commercials and that politically correct programming), and lobbyists earn their keep protecting their vested interests, we're left to speculate on what may become of these two companies. I may be naive but the benefits to a merger certainly sound appealing (who wouldn't love to pay a la carte for cable TV?). Let's face it, there have been much bigger corporations that have merged throughout history that seemed anti-competitive and monopolistic and took a lot less time for them to be approved by the Justice Department. Remember Warner Communications/Time Inc.? How about AT&T/BellSouth? Or even News Corp buying Dow Jones. Check out this list of Media Mergers over the past decade.
At any rate, even though speculation has driven the stock of both companies down over the past year it seems as though over the course of the last few months they're positioning themselves on the opposite side of the fence and betting that the merger will go through.
We shall see.
{I have no holdings in SIRI, XMSR, NWS, or CCU}

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