Karmazin: NAB Reaction Proves Our Point
By Joseph Palenchar and Amy Gilroy -- TWICE, 6/19/2007
New York – The intensity of the National Association of Broadcasters (NAB) campaign to shoot down the proposed XM-Sirius merger, although “probably predictable,” proves the point that satellite and terrestrial radio compete and the proposed merger would not make a monopoly out of a duopoly, Sirius CEO Mel Karmazin contended in an interview with TWICE.
Karmazin said the aggressiveness of the NAB response “makes our argument that we are competing with them, and if we are competing with them, then their message that this is a duopoly becoming a monopoly can’t be true because why are they involved? If it was a market called satellite radio, why should they care what happens to satellite radio if it did not compete with them?”
Sirius has had to step up its lobbying activities to counter the NAB’s aggressiveness, he also said. “We had not really had a Washington [lobbying] office. And suddenly, when this thing was announced, the NAB came out firing all of the guns.”
During the interview, which will be appear online and the print edition of TWICE on July 2, Karmazin also said:
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He didn’t expect four hearings in Congress, given that not even the BellSouth/AT&T merger generated congressional hearings.
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The merger announcement “probably created some disruption at retail” and that Sirius has tried to minimize it, in part with its guarantee that existing radios will continue to work. Nonetheless, Sirius’ net new subscriber numbers continued to grow to account for 66 percent of all net new satellite-radio subscribers in the first quarter and 76 percent of all net new subscribers at the aftermarket level, Karmazin said. Sirius “would be doing even better numbers” if it weren’t for the announcement, he contended.
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As previously stated, the combined entity will offer “more choice, lower prices, and more a la carte”-type subscription plans. “We will be open to giving people not just the ability to block [a channel], but they won’t have to subsidize it,” he said.
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Sirius subscribers will be able to access some XM content on their existing Sirius radios, and vice versa, after the merger. At first, Sirius will port select XM channels to Sirius subscribers without reducing the number of Sirius channels, he said, pointing to Sirius’s ability to use compression and engineering enhancements to add channels to its existing bandwidth.
Fully interoperable radios will also come after the merger, he reiterated.
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Sirius has in the past 12 months “been working with car dealers to engage them more with the customer,” offering such things as hang tags in the car.”
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Sirius has been “experimenting with some [car] dealers” to incentivize car dealer salespeople to sell Sirius subscriptions.
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He met personally with the five FCC commissioners after the Feb. 19 merger announcement but before the FCC’s public comment period, which began this month. Karmazin said he also expects to meet with Department of Justice officials in the future. “I’ve known the five commissioners for a long time. We know what they have an interest in,” he said regarding any concerns they might have.
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Incredible. Absolutely incredible. These two operators agree before getting license that they will not merge and then when they have failed miserably at making it succeed they come up crying to the FCC before they potentially lose a pro-business Republican dominance on the Commission.
I hope to God the FCC sees through this. These incompetant boobs - I dare give them any credit by calling them businessmen - should have to suffer the humiliation that most other people have to go through when they run a business aground - failure.
The argument that no one could have forsaw the impact of iPods, internet radio, etc. is absolute hogwash. The biggest competitor for satellite is and still is terrestrial radio. That''s the way it was when the commission approved setting up satellite radio and that''s the way it is today. It''s also the way it will be for some time to come.
In Radio World magazine ten years ago the satellite radio "professionals" projected that they would be turning a profit once they hit a million subscribers. They''re well past a million now and no stable profitability in sight.
These clowns have no idea how to run satellite radio. Both of them need to go down in flames like the early huge-dish satellite TV providers did so that someone will pick up the pieces and put a real 2-system service online that is profitable for stockholders.
Karmazin is amazing. He may just have enough private meetings to pull this off - that is "influence" (read corruption) at the highest level.
Please, dear God let someone see the light and do something RIGHT for this country. Make them both go broke - nothing I would like more than to see my framed picture of Panero of XM on the Cover of Forbes (headline reading CRUSHING RADIO) come full circle.
bob from VA
Bob Williams - 2007-22-7 22:04:00 EDT -
Merger good. NAB bad.
It's about choice. Do I want to pay a subscription fee to listen to commercial free music featuring unlimited play lists or listen to terrestial radio, tons of silly commercials, and the same music over and over? Hmmm.
Regarding the engineer's comments about sound quality - my Sirius channels sound good enough to me either at home or in the car.
Regarding escalating costs - pay radio has competition unlike pay television, i.e. cable. If people want to watch TV they must pay the tariff, no matter how high it skyrockets. People have choices when it comes to subscription radio - ipod, free radio, internet channels, etc. If the price gets to high, people will cancel.
God bless, America and freedom of choice!!
Big Al - 2007-20-6 11:17:00 EDT -
First of all, subscribers already have the ability to request channel blocking on XM and Sirius, though blocking a channel doesn''''t change the subscription price. Secondly, the concept of fully interoperable radios was an original mandate by the FCC when Sirius and XM were granted their licenses. And if the post-merger company crams channels from XM on Sirius and vice versa without removing some existing channels, the already-execrable sound quality degenerates even further.
And that''''s before we look at the pricing, which is likely to go up for certain content, some of which most will likely want (think cable TV''''s migration of popular channels to its more expensive digital tiers over the past 5 years).
As someone who dislikes government intervention in private industry, I''''d like the FCC to let the merger go through (though the government already controls the electronic media marketplace by how it grants spectrum). As an XM subscriber, I can''''t see any advantage I''''d gain from a merged XM-Sirius. XM''''s music channels are superior to Sirius'''', and I don''''t care about football audio or Howard Stern. And the audio quality can''''t get any worse without causing a migrane.
I hope the FCC allows it, and the market rejects it. Unfortunately, it looks like the long-suffering stockholders will welcome it. And that''''s bad news.
Mark Beryllium - 2007-20-6 07:12:00 EDT -
What monopoly? If you don't think it's worth the money don't subscribe! Do you actually believe that both of these companies can survive with out the merger. Better to let them merge w/restrictions from the FCC than to let one fold and let the winner have the spoils. Yes, Mel will most likley make a bundle. But only if they have something worth paying the price they are asking. I say let the FCC put in some guidelines to the merger and let us the consumers vote on it w/ our wallets. Nobody has a gun to our heads. Digital music is not a comodity like gasoline.
Neal T. Barkett - 2007-19-6 16:53:00 EDT -
Those who forget history are condemned to repeat it.
No monopoly has ever been anything but a knife in the back of consumers.
This one is no different, maybe worse. Mr. K let the cat out of the bag at the first post-merger press conference when he lamented satellite radio''s limited ad revenues relative to terrestrial radio. He didn''t mention, however, that terrestrial radio doesn''t charge listeners for its services.
The point of this merger is nothing more or less than asking the government for a license to charge people subscriptions to listen to satellite-delivered AM radio with 25 minutes of programming and 35 minutes of ugly commercials every hour.
Short term it will make XM/Sirius lots of money and Mr. K''s next 20 generations of descendent''s will be able to live large on the proceeds of his stock options.
Long term, it will kill satellite radio as more and more subscribers like me get tickets for littering as we throw our satellite receivers out the car window.
Why the NAB is opposing this scheme, which is the best that could happen to them is amazing?
Even more astounding -- and infuriating -- is the way congress and the FCC is totally ignoring the point that satellite radio was founded on the promise of commercial free music.
In a real-world debate, every discussion of the so-called cost benefit for consumers would be prefaced that even if direct costs go down a bit, the cost per minute of delivered content is going to skyrocket.
Elliot Borin - 2007-19-6 15:55:00 EDT
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