Sirius, XM One Step Away From Merger

March 24, 2008

The future of in-car satellite radio cleared up a little today as the Department of Justice gave its nod to the proposed merger of Sirius Satellite Radio and XM Satellite Radio.

The two pioneers in the niche had announced their intent to merge last February--and have been in the governmental approval process since then.

Like waiting in line at the DMV, approval for a deal of this magnitude takes a while. The proposed multibillion-dollar merger had to pass the Feds' monopoly scrutiny--and outlets like the Wall Street Journal say that the winning tactic for the sat-radio twins was their argument that they weren't creating a monopoly, just building a rival to in-car entertainment from terrestrial radio, high-definition radio, and the ubiquitous iPod.

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What does the future hold for the duo? First, the pair must pass the same hurdle at the Federal Communications Commission. The FCC might torpedo the deal, but with Justice's blessing, that's seen as a long shot. More likely is that the FCC will tailor the deal to address some of those lingering monopoly concerns.

Neither XM and Sirius has ever made a profit. As they built their subscriber bases by wooing away huge radio draws like Howard Stern, Oprah, Major League Baseball and NASCAR, they also ran through billions of startup dollars. It's still unclear whether the merged companies will be able to pare costs and combine themselves in a rational way that will also be profitable -- but with new offerings like cheaper monthly packages (less than the $13 average now paid per subscriber) and new features like the Travel Link data that warns of coming traffic, the duo may have a better shot at sustainability than they would alone.

The downside for consumers? Unless you own both tuners, you won't be able to get all the channels without upgrading your hardware. Where have we heard that before?

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