Several media reports say that the merger of satellite radio companies Sirius (SIRI) and XM (XMSR) will be approved based on FCC staff recommendations. Once that process is done, there will be negotiations about putting a cap on what the new company can charge for its subscription services and radio receivers. That could take another several months.
In the meantime, satellite radio is already a failed medium. Subscription growth is growing. Many customers get the product when they buy a new car. High gas prices and a recession have cut down that avenue.
Over the last two years products including the Apple (AAPL) iPod and multimedia phones have moved listening habits to devices other than satellite radio receivers. The iPod can be plugged into car radio systems.
Sirius and XM each have well over $1 billion in long-term debt and huge exposure to multi-year contracts for programming costs. In the last quarter, Sirius had an operating loss of $88 million. Neither company has even made an operating profit.
Because the two companies have incompatible transmission and receiver systems, it could take several quarters for the merger to create any significant savings.
At that point it will be too late. The only people tuned in to satellite radio will be long-haul truckers who need something to keep them up at night.
Douglas A. McIntyre
Contact [email protected] for any questions or corrections.
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