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On February 19, 2007, Sirius Satellite Radio and XM Satellite Radio announced a merger that would combine the two radio services and create a single Satellite Radio network in the United States and Canada.^[1][2] The merger would bring both companies a total of more than 13 million subscribers based on current subscriber numbers as of 2007.

Pending approval of the deal, each share of XM stock will be replaced with 4.6 shares of Sirius. Each company's stockholders will retain approximately 50% of the joined company. Sirius CEO Mel Karmazin will retain his CEO title in the new company, and XM chairman Gary Parsons will retain his.^[3] XM CEO Hugh Panero will step down from his company in August 2007.^[4]

Contents 1 Merger status 2 Stated benefits 3 Opposition arguments 4 Remaining hurdles 5 Canadian counterparts 6 Technical 6.1 Receivers 6.2 Satellites 7 Programming 8 Financial 9 Milestones 10 Notes 11 See also 12 External links

Currently, the merger is under review by the Federal Communication Commission and a Senate antitrust task force.^{[citation needed]}

On February 19, 2007, the merger was officially announced to shareholders of the company.^[5] This came after many months of speculation by industry watchers. On February 20, an open conference call was organized between executives of both companies.^[6]

On March 20, 2007, the two companies filed a "Consolidated Application for Authority to Transfer Control" at the FCC.^[7]

On June 8, 2007, the FCC's Mass Media Bureau gave "Public Notice" that it had accepted the application for filing and started its informal six month merger review clock.^[8] The notice also set a pleading cycle requiring comments or petitions be filed by July 9, 2007, and responses or oppositions be filed by July 24, 2007. Since FCC review of major transactions takes approximately six months, a ruling should be issued by early next year.

On October 4, 2007, Sirius and XM satellite radio announced that both companies will conduct a shareholder vote. Sirius has scheduled a meeting for Tuesday November 13, 2007, for shareholders to vote on the proposed merger at 9:00 AM, New York City time, in the Auditorium at The Equitable Center, 787 Seventh Avenue, New York, New York 10019. XM will be conducting a similar shareholder vote in Washington D.C. on the same date as Sirius' vote. It is expected that shareholders will overwhelmingly approve the union of the two satellite radio providers.

On November 13, 2007, Shareholders of Sirius Satellite Radio Inc. approved the company's $5 billion acquisition of rival XM Satellite Radio Holdings Inc. 96 percent of Sirius Satellite Radio shareholder's votes cast approved the acquisition.^[9]

Cost 

Since both companies will operate as one, this may reduce the cost of licensing the broadcast material. It will also almost certainly reduce the staff required to run the company. Also, programming can be spread out among the companies' combined satellite constellations.

Variety 

If all of the non-duplicate channels are kept, this will result in more programming being made available to subscribers of both services.

New development 

With only one company to develop products for, the new company can afford to spend more money to develop new products.^[10] So far, services have been developed which weren't even conceived of when satellite radio was launched. XM and Sirius now carry satellite weather and traffic, and Sirius is set to launch television programming in 2007. Likewise, it is expected that new technologies and products will continue to be developed and integrated in to the combined infrastructure of XM and Sirius.

The main opposition to the merger is the National Association of Broadcasters and the Consumer Coalition for Competition in Satellite Radio (a group run by the NAB). NAB representatives have been present at both Congressional hearings, and have produced several advertisements regarding the merger. The NAB's contention is that the merged company will be a monopoly, and that their increased market power will harm consumers. Four primary concerns are proposed:

Cost 

As the only provider of satellite radio, the new company could raise the subscription price, and subscribers would have no choice but to pay it if they want satellite radio service.^[11] Sirius argues that the competition from terrestrial radio, Internet radio, and portable media players would act to moderate the cost. Sirius CEO Mel Karmazin has also offered to fix prices in order to satisfy regulators and consumers.

Innovation 

XM and Sirius are constantly developing new products. The original satellite receivers were larger and offered fewer features than modern receivers. The argument is that XM's competition with Sirius has prodded this progress.

Competition 

The proposed merger would reduce competition. ^[12]None of the economic studies offered by XM and Sirius prove that the relevant product market is any larger than satellite radio services under the Department of Justice (“DOJ”) and Federal Trade Commission’s long-established Horizontal Merger Guidelines. Therefore, because XM and Sirius are the only two competitors in the satellite radio industry, their combination would result in a merger to monopoly, clearly in violation of section 7 of the Clayton Act, which forbids mergers that may tend to lessen competition substantially.^[13]

Programming 

Sirius and XM have both used star power to attract consumers. Bob Dylan, Opie and Anthony,Howard Stern, Martha Stewart, and Oprah Winfrey are among the stars that have signed contracts with one of the two companies. Exclusive sports programming (The National Football League, Canadian Football League and NASCAR on Sirius and Major League Baseball and National Hockey League on XM) also drives consumers to one network or the other. Sirius and XM executives hope to lower the cost of this programming by merging; critics argue that the lowered cost will result in less total programming being made available. In particular, marquee sports and talk shows could be offered a la carte, similar to premium digital/satellite television tiers and out-of-market sports packages.

Business Model 

Star power may not justify its cost, as it may cost a lot more to pay the talent than what it brings in. A business model of just music with little or no DJ interface would be a simpler and far less costly approach. Talent costs would drop as would infrastructure cost.

The proposed merger faces scrutiny by the Federal Communications Commission, Securities and Exchange Commission, Department of Justice and possibly other federal organizations. The FCC also poses a major hurdle: when the satellite radio service was first created by the FCC, one of the licensing conditions was that one company could never own both satellite radio licenses. In order for the merger to be approved, the FCC would have to waive this provision. The request for transfer was filed with the FCC on March 20, 2007.

The question at hand is whether the merger will create a monopoly. XM and Sirius both assert that the company would not be a monopoly, as satellite radio is only part of the larger audio entertainment industry, which encompasses traditional terrestrial radio, HD Radio, digital media players such as Apple's iPod, and on-line radio. The battle in Washington, D.C., is heating up, with the National Association of Broadcasters pitting itself against the satellite radio companies.

In a strongly worded press release on February 19, 2007, the National Association of Broadcasters decried the plan, stating that the merger would create a monopoly in the United States satellite radio market.^[14] The NAB continues to be the merger's largest and most outspoken opponent, having taken out full-page ads in Washington, D.C., area newspapers. NAB critics point out that the NAB's strong and outspoken interest in this transaction validates the opinion that Sirius and XM do indeed compete with the NAB's members. Merger proponents also point to NAB's own President and CEO, David Rehr, who previously stated that terrestrial radio competes with satellite radio.^[15][16] NAB itself said the same--the opposite of its position on market definition today, an inconsistency noted in Reason magazine.^[17][18] And at a recent public hearing on media consolidation issues generally, FCC Commissioner Jonathan S. Adelstein--normally a skeptic about further consolidation--characterized satellite radio (along with Internet radio) as competitors to terrestrial broadcasters^[19]:

The fact of matter is that broadcasting still dominates the media today. In the 2006-2007 seasons, broadcasters – not cable, satellite or Internet programmers – had the top 200 highest rated programs on television. And all but a handful of the top 500 programs were on broadcast television. On the radio, the two satellite radio companies have a total of about 16 million subscribers and 50 million American last used the Internet for music, while over 240 million people listen to terrestrial radio on a weekly basis.

One anti-trust hearing has already taken place but has not come to any clear conclusion on the issue. More hearings are expected, and the question of whether the new company would be a monopoly will have to be resolved before the merger can be approved.^[20]

In Canada, the Canadian Radio-television and Telecommunications Commission (CRTC) would have to approve any merger between Sirius Canada and XM Canada. XM Canada and Sirius Canada are partially owned by their American counterparts in joint ventures with Canadian companies. Complicating matters is that Sirius Canada has nearly 80% of the total satellite radio subscribers in that country, and feels they deserve greater than a 50/50 split of the new company. XM Canada feels that their deal with the NHL warrants a significant amount of value in the new company. The Canadian musical content mix ratio will also have to be negotiated for a combined XM-Sirius/US-Canada service.

Currently, XM and Sirius use different compression and conditional access systems, making their receivers incompatible with each other's service. Some of the receivers on the market can cost upwards of US$300, and replacing them would be a significant cost burden to subscribers.

Executives from both companies have stated that XM and Sirius will continue to operate as separate services. Buying another radio to receive programming from the other service will be optional.^[21][22][6] However, a unified receiver that can receive programming from both networks would allow subscribers to listen to the entire range of channels. Interoperable Technologies, a joint venture of both companies, was formed in 2003 and announced such a receiver in 2006. Mel Karmazin has confirmed the existence and operation of the radio, "We have one. It's in my office." Karmazin's dual system radio can expect competitors--according to tech-site Gizmodo, Onkyo is entering the interoperable radio arena.^[23]

There are currently 7 satellites in orbit: 4 XM and 3 Sirius satellites. Each company also has a ground spare, of identical construction to its first generation of satellite. Also, Sirius will continue its plans to launch its newest satellite, Radiosat-5.

There are no publicly available facts concerning the cross-compatibility of the satellites themselves. If it is possible to use XM satellites to propagate Sirius's signal, this would give Sirius immediate access to a second geostationary satellite, which would improve reception for stationary receivers, such as those at businesses and homes. In the long term, consolidating transponders on to fewer satellites will reduce infrastructure costs significantly: to build and launch one satellite can cost more than US$300 million,^[24] with a lifetime of approximately 15 years. Once next generation of satellites begins construction, combining satellite networks could result in a savings of US$40 million a year.

• The merger conference call announced that previously exclusive content, including sports and talk, will be folded into one unified service which offers "even more channel capacity" and a la carte ordering of premium services (the ability to order a single channel or small subset of channels).
• CEO Karmazin said in an interview that both the XM and Sirius brands will be offered as separate brands/services for the next 15 years.^[21] Any combined or unified services would be in addition to these separate services.

• Both companies compete primarily with free services. Executives from XM and Sirius both made it clear that they do not want to slow down the adoption of satellite radio, so they hope to not increase the subscriber price, but to gain new revenues from new services: video, navigation, and advertising.
• One concern voiced by some subscribers regards the Sirius lifetime subscription: for a one-time fee, Sirius subscribers were able to obtain a lifetime subscription for a receiver. This subscription is tied to the individual receiver, and there was a concern that the subscription may not transfer to a new universal receiver. However, Sirius' FAQ page regarding the merger states that "Any plan you sign up for now will be honored by the merged company." As they also have guaranteed that no radio will become obsolete, it is likely that this concern will be addressed via some new, merged signal.^[25]

• While both companies declare the deal to be a "merger of equals", Bloomberg reports that, in truth, Sirius will acquire XM for US$4.57 billion in stock.^[26]

The following milestones have been set for the merger:

Date	Event	Comments
February 2007	Execute definitive agreement	Announced February 20, 2007
Mar 2007	File FCC application	Filed March 20, 2007
June 2007	FCC places application on "Public Notice" (DA 07-2417)	Comments/Petitions due July 11, 2007; Responses/Oppositions due July 24, 2007
Nov 13, 2007	SIRIUS/XM shareholder votes	Announced October 4, 2007. 96% of SIRI shareholders approved the merger[27], and 99.8% of XMSR shareholders also approved.[28]
Pending	Receive regulatory approvals	Anticipated early 2008
Pending	Close transaction	Anticipated early-mid 2008

• Sirius Satellite Radio
• XM Satellite Radio
• National Association of Broadcasters

• Federal Communications Commission's XM-Sirius transaction page