Sirius & XM - Satellite Radio
Will Sirius and XM merge?
(See here) where MSNBC reports such a merger is at least going to be attempted.
Problem is: such a merger would reduce competition. The "free market", through competition, is supposed to help drive prices down, keep operations efficient etc etc, so that the services that are offered come at reasonable prices. Will a service that can only be offered sans competition with the portion of the radio frequency spectrum they occupy (that portion that involves satellite broadcast) be justified if it must only survive through monopoly?
One problem is, that even with "reasonable" subscription rates, the number of subscribers have not mushroomed. The general public has proven to be resistant to the idea that satellite radio offers them something they just can not live without. For most people, the broadcast band still gives them everything they need when they need to listen to the radio.
However, there is a portion of the populace of our nation that is well served by satellite radio. This group includes anyone who's employment involves travel beyond the range of his/her favorite radio station. It also includes anyone who lives in remote areas who happens to like to listen to the radio while they work (or whenever), and who's area is under served by existing stations in the broadcast market.
I look at the proposed merger as being an opportunity for those of us who subscribe to satellite radio. Perhaps we do have some reason to be concerned about increased subscription prices with the removal of competition. However, the services we subscribe to, whether it be Sirius or XM, have not yet shown an ability to show an actual profit based upon the current model. If no changes are made, both concerns are going to expire. There is only so much cost cutting that can be done to keep the services viable. You might state they only need to avoid costly bidding wars for content (with a monopoly, this could reduce the expense of the content provided) however there is still going to be the unavoidable high cost of keeping the satellite(s) in orbit and the cost of maintaining the uplink station back on land.
The demand for satellite radio is limited.
If the revenue from subscriptions to both satellite services was combined, a profitable enterprise might emerge. Without long term profitability, neither enterprise is going to survive and the whole experiment called satellite radio might expire.
There is only limited demand for the service even at the downright reasonable subscription rates presently charged. Unreasonable increases in subscription rates from a merged enterprise will be balanced by further decreases in demand with every increase in the rates.
Perhaps such a merger would result in a decrease in the allocated amount of the radio frequency spectrum devoted to the service provided. Or perhaps through the combined spectrum available, the resulting enterprise would be able to offer increased services for the same reasonable price to broader portions of the American people so that more people would become subscribers, and thus the frequencies dedicated would be justified.
The only thing I am sure of is that which I can point to that is thus far evident. Neither Sirius nor XM is yet profitable. Expensive attempts to increase the subscriber base to make the services "gotta have" amongst the general public have been unsuccessful. There is enough demand from subscribers, if the subscriber base is combined, for ONE enterprise to be profitable at present subscription rates.
(See here) where MSNBC reports such a merger is at least going to be attempted.
Problem is: such a merger would reduce competition. The "free market", through competition, is supposed to help drive prices down, keep operations efficient etc etc, so that the services that are offered come at reasonable prices. Will a service that can only be offered sans competition with the portion of the radio frequency spectrum they occupy (that portion that involves satellite broadcast) be justified if it must only survive through monopoly?
One problem is, that even with "reasonable" subscription rates, the number of subscribers have not mushroomed. The general public has proven to be resistant to the idea that satellite radio offers them something they just can not live without. For most people, the broadcast band still gives them everything they need when they need to listen to the radio.
However, there is a portion of the populace of our nation that is well served by satellite radio. This group includes anyone who's employment involves travel beyond the range of his/her favorite radio station. It also includes anyone who lives in remote areas who happens to like to listen to the radio while they work (or whenever), and who's area is under served by existing stations in the broadcast market.
I look at the proposed merger as being an opportunity for those of us who subscribe to satellite radio. Perhaps we do have some reason to be concerned about increased subscription prices with the removal of competition. However, the services we subscribe to, whether it be Sirius or XM, have not yet shown an ability to show an actual profit based upon the current model. If no changes are made, both concerns are going to expire. There is only so much cost cutting that can be done to keep the services viable. You might state they only need to avoid costly bidding wars for content (with a monopoly, this could reduce the expense of the content provided) however there is still going to be the unavoidable high cost of keeping the satellite(s) in orbit and the cost of maintaining the uplink station back on land.
The demand for satellite radio is limited.
If the revenue from subscriptions to both satellite services was combined, a profitable enterprise might emerge. Without long term profitability, neither enterprise is going to survive and the whole experiment called satellite radio might expire.
There is only limited demand for the service even at the downright reasonable subscription rates presently charged. Unreasonable increases in subscription rates from a merged enterprise will be balanced by further decreases in demand with every increase in the rates.
Perhaps such a merger would result in a decrease in the allocated amount of the radio frequency spectrum devoted to the service provided. Or perhaps through the combined spectrum available, the resulting enterprise would be able to offer increased services for the same reasonable price to broader portions of the American people so that more people would become subscribers, and thus the frequencies dedicated would be justified.
The only thing I am sure of is that which I can point to that is thus far evident. Neither Sirius nor XM is yet profitable. Expensive attempts to increase the subscriber base to make the services "gotta have" amongst the general public have been unsuccessful. There is enough demand from subscribers, if the subscriber base is combined, for ONE enterprise to be profitable at present subscription rates.
posted by Little David at 2/19/2007 02:15:00 PM
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