What would Teddy Roosevelt say?

Webster’s dictionary defines a monopoly as – Exclusive control of a commodity or service in a given market.

If Teddy 'The Trustbuster' Roosevelt were alive today, I'll bet he'd be asking how today's merger between Sirius and XM Satellite Radio doesn’t fit this description?

Those lobbying, public relations and other powerful interests representing both Sirius and XM have argued hard and steady that this deal is only good for consumers because it will ultimately bring costs down. They’ve also reasoned that this can’t be considered a monopoly because satellite radio is not an industry unto itself. No, instead it competes with the MP3, iPod and high definition radio categories. Thus, a merger will actually create stronger competition among these burgeoning categories.

I say hogwash to that.

I’m no anti-trust attorney, but the rationale behind why this is as much a monopoly as Standard Oil or owning Park Place and Boardwalk is as clear as a sunny day to me. Only two companies comprise this industry. That’s the fact. By allowing these companies to become one, consumers will absolutely be vulnerable to higher prices and a host of other negative factors because there is no other competitor to offer anything else. The argument that terrestrial radio, iPods and all the rest compete with satellite may be true from a thirty thousand feet view point. But, they are still completely different offerings that aren’t dead on alternatives to each other.

Both Sirius and XM are losing money… a lot of it. By reading today’s news, it almost feels like this reality helped to foster the merger along (i.e. if we can’t merge, both companies will die and then consumers will have nothing). That inference is even more ridiculous than the Justice Department’s anti-monopoly explanation.

In the end, you have to tip your hat to Sirius CEO Mel Karmazin and his army of influencers (which included his own on-air celebrities like Howard Stern). While the Bush Administration has rarely ever truly stood behind the interests of the American consumer, Mel’s tenacious, never die fight over the last year (or so) clearly made the difference in this war – a war that should never have been won by the satellite companies.

Comments

[Steve Shannon]

I think it depends on what you define as a unique service. Sure XM and Sirius do compete in delivering radio programming signals via satellite to my car, but if you remove the "via satellite" part, they have plenty of competition. Every car sold in the US comes standard with an "over the air" compliant radio, but not so with satellite radios. I subscribe to XM and hope they do merge with Sirius so I get even more programming choices (and good deal of them commercial free - well worth my money just for that). If they do raise the price too much, I'll do what every consumer has the right to do - cancel, and I will still have the option of listening to over the air radio, free. In addition, this decision affects 17 million customers, hardly a large part of the US population, and certainly a small part of the radio listening population as well.

[Sean Williams]

Hi Ed - I see your point, but think that it's likely that we would see one or both of the two companies fail without the merger.

The market isn't that big for Satellite Radio (though I am an XM subscriber), owing to the tendency of the emerging consumer to eschew radio entirely. iPods and other players, CD changers in the car...

Terrestrial radio is also getting a boost from so-called HD Radio - sideband broadcasts that are often commercial free.

Also, cable and satellite TV typically includes audio music channels.

If a company wants to invest the capital, you could get another competitor to the new combination. The open question is whether the business plan can make this enterprise work at all.

[Eny]

Dear Damon:Just heard the interview with you on c-span (xm) which I have on cosltantny. C-span, that's all I listen to Damon. I do not turn on my TV, Damon, never.The interview with you was really great. You handled yourself well. And as for the subject, and your book, you are definitely onto something and, YOU ARE RIGHT. I used to tell my x all the time, We really should buy stock in satellite radio. That because I feel it will really take off. I just feel it in my gut.Now here's one of the things I wanted to tell you; it's something you missed. The rural market. (Actually I don't recall that in the interview you and the interviewer talked that much about the market for s radio, but that's what I'm talking about here.) Anyway, the rural market. I live in Moab, Utah. The population of the county is 10,000 people. There is NO radio in this area. We have a religious station, a country and western station, and a very poor listener-sponsored community radio station. OK? We have NO RADIO.Correction: Since I moved to this side of town, I can receive National Public Radio from Salt Lake City. When I lived on the other side of town, I could not get NPR.Retiring people are moving to this beautiful little town (Moab). They all have NO radio. The only answer for this locality is s radio.To whatever extent population resides in rural areas, outside of major media markets, and to whatever extent population is disbursing to these areas due to retirement, for example, and the high price of housing in major markets, to whatever extent such persons use their computers (as I do) to make a living, that is major piece of the market for s radio. In the same vein would be Americans living outside the United States. What kind of radio do we think they have anywhere outside the US? S radio will be the answer. Also, members of the armed forces, the US military.Another category of users is anyone who is mobile, truckers, certainly. When you are on the road, reception is often terrible. Also, people like to be able to listen to the same radio programs all the time, not just what they can get passing through town after town. You didn't mention it in your interview, but the reception with s radio is perfect, crystal clear all the time. When all the car makers start putting s radio in cars, that's the day s radio will really sky rocket.Another great strength of s radio is the large number of channels, enabling s radio to pander to a multiplicity of small splinter markets. It seems it is not very expensive for the s radio companies to have, and add to, the number of channels. I pay $10 a month to listen to ONE station c-span.I wish I had the job of marketing s radio, cause it's a fascinating question of how to reach the various markets that will buy it. Anyway, I am sure it will succeed and I think it was very precient of you to pick up on that and put out a book. The interview you did was great and I hope your book sells well.Oh, just thought of something. Probably the reason you got the interview on c-span is because c-span broadcasts on s radio. That might mean you would have an edge or a wedge to get interviews on many other of the stations which also broadcast on s radio. You should go after that!Kind regards, Elaine Douglass