A La Carte Packages Could Help Sirius-XM Merger

By Amy Gilroy -- TWICE, 7/23/2007 1:19:00 PM

New York — Analysts said the a la carte programming announced July 23 by Sirius and XM in the event of a merger, could help the merger gain regulatory approve by the Federal Communications Commission (FCC).

Early on Monday, XM and Sirius said the merged company would offer consumers a basic package of 50 channels for as low as $6.99, which is almost half the price of the current $12.99 monthly fee charged by each service independently

David Bank of RBC Capital Markets said “the probability of a merger increases as [XM and Sirius] appear willing to quantify concessions to the FCC” in the form of both a la carte pricing and family-aimed program packages.

Analyst April Horace of Janco Partners, said of the announcement, “It clearly has all the right buzz words. The FCC is very focused on a la carte … One thing the FCC chairman Kevin Martin has been focused on in the cable TV industry is a la carte programming as a way to offer consumers more choice. So clearly, they are using the right buzz words.” 

XM and Sirius said they hope the a la carte options starting at $6.99 per month, almost half the price of a current subscription, will demonstrate a merger would be in the public interest and help the merger win federal approval.

On the heels of the announcement today, Sirius CEO Mel Karmazin told the National Press Club that the a la carte programming option would mark the first time any company offered a la carte choice in subscription entertainment.

The eight programming options are as follows:

1. An a la carte choice of 50 channels, selected by the user via the Internet from a pool of either most XM or most Sirius stations. Other channels may be added for 25 cents and some premium channels will be offered at $3 to $6. It is not yet clear if Howard Stern programming is part of the a la carte menu. This selection will require the purchase of a new satellite radio receiver at prices comparable to today’s receivers.

2. A second a la carte choice of 100 mixed XM and Sirius channels at $14.99 per month. This would also require a new receiver.

The remaining choices do not require a new receiver:

3. A family-friendly package this is offered by one service (either XM or Sirius) at $11.99 that includes the best of family aimed programming from that service.

4. A family-friendly package that includes the best family programming from one service but also adds some programming from the “other” service at $14.99.

5. A plan which includes every channel from one of the services plus select channels from the other service at $16.99.

6. A mostly music package from one service that offers mainly commercial-free music programming at $9.99.

7. A mostly news, talk and sports package from one service at $9.99.

8. The user can elect to keep his current XM or Sirius package at the current $12.95 per month.

Click here for additional programming details.

The National Association of Broadcasters issued a statement in response to the a la carte announcement, claiming, “Policymakers should not be hoodwinked by today’s announcement, since nothing is stopping either XM or Sirius from individually offering consumers a more affordable choice in limited program packages.”

Karmazin told the National Press Club that the a la carte packages would be offered only in the event of a Sirius-XM merger as the cost savings from the merger would permit the choices.