Sirius / XM Merger: An Expensive Endeavor

One of the most closely watched developments of the radio world is the proposed merger of Satellite radio giants XM and Sirius. We are all anxiously awaiting the FCC's response to the "Consolidated Application for Authority to Transfer Control" which was filed by the companies this year. As the situation progresses, CEO Mel Karmazin of Sirius and Chairmen of XM Gary Parsons are finding themselves spending hundreds of thousands of dollars in their efforts to have the merger approved. In a recent article, BusinessWeek reports that XM had spent $580,000 on lobbyists in the first half of this year, while Sirius spent $650,000. In total they have hired 13 different lobbying firms this year.

Surprisingly, this much capital is only a fraction of what the opposition has put on the table. The NAB (The National Association of Broadcasters) has spent $4.3 million in the same time frame. The NAB represents the nations traditional tv and radio stations. Obviously these groups would be threatened by the merger. The companies claim that the merger will result in a variety of benefits for consumers, which include a wider array of programming content and lower prices. Not surprisingly, the NAB is arguing that the merger would create a monopoly in the market, which would result in harm to radio stations across the nation.

What would this merger mean for marketing? If they can pull it off, it will most likely lead to a conbined increase in advertising revenue. I feel as though the union will lead to a synergistic aggregation of market share. Once the cost goes down and people start buzzing about the merger, more and more people will begin subscribing: and a larger audience = a more appetizing prospect for marketers. Basically the merger would mean bad news for traditional radio, but great news for the two companies. Many believe the FCC won't allow the merger due to the precedent of their ruling regarding It'll be exciting if it happens, but for now all the companies can do is nervously anticipate a government ruling, which should be made early next year.


This chart from Wikipedia shows the increasing number of consumer subscriptions to both Sirius and XM Satellite radio (the y axis is in millions). Both companies have promising futures, and if these trends continue they will slowly eat away at traditional radio's market share. Advertisers will, theoretically at the same rate, stray from traditional radio as well- and flock to either XM or Sirius (or the merger they create). If allowed, the merger would be huge news for the world of marketing, financial markets in the US, and obviously everyone associated with these companies. However, if the merger is shot down, all of these swelling lobbyist expenses will have gone to waste. We'll just have to wait to see how it all unfolds.