TWICE: When the merger occurs, presumably the merged company will adopt the best practices of both companies. Can you identify each company’s strengths?
Karmazin: We have not been able to get into each other’s businesses. There are antitrust concerns that are out there that would stop us from sharing any information at all with XM. All I know about XM is what I know as a competitor. So there hasn’t been one bit of information that is confidential that I have learned, or conversely that we have provided to XM, during this period. We’re prohibited from knowing.
TWICE: How would you accomplish your “one-radio, two-services” pledge? By porting some XM content to Sirius radios, and vice versa?
Karmazin: We started our service with 100 channels, and through compression technology and engineering enhancement and the normal rotation, we now have 135 channels instead of 100. So what we say is that we’d be able to increase our capacity by a certain number so that our existing receivers would be able to get some additional content. So as an example, if we wanted to have some baseball, or we wanted to have Oprah, or we wanted to have some of this content, we’d be able to deliver that to our satellites and to our receivers subject to the content partners’ agreements. We couldn’t offer a full complement of both services.
TWICE: Could we see a 50/50 split between XM and Sirius content on an existing satellite radio?
Karmazin: If we wanted to do that, but why would we want to do that if you’re a Sirius subscriber and you like our content? We’re basically saying to you that we don’t want you to be disenfranchised. We saying to you that “You’re an existing subscriber, you don’t have to pay more than $12.95 after the merger, and your existing radio is going to work.”
TWICE: And you would eliminate redundancies in the selection of channels offered by Sirius and XM after the merger to make room for some of the extra channels?
Karmazin: Let’s assume for a second that, when the time came, that we’d take a look, and say that we both have a ’50s station. Now can you sit there and say, “Which of the ’50s channels might be the best channel?” And we’d have some cost savings at the head end, and we would not be producing two 50s channels.
TWICE: So Sirius would still have its voice and brand, and XM would have its voice and brand, a Sirius receiver would continue to get existing Sirius channels plus some additional XM content, and vice versa?
Karmazin: Right.
TWICE: And down the road?
Karmazin: The opportunity exists for us to commercially market an interoperable radio. Right now we have developed it. There’s one in my office right now, which is an interoperable radio, which is a receiver that in essence has an XM component and a Sirius component sort of Velcro-ed together. So we developed that, and one of the things that we have the opportunity to do is to market it into retail stores as an interoperable radio, one that would be priced attractively and be able to get the consumer both services. A radio that gets the best of both services is sort of attractive and again enables the two companies to not water each other down but to have a stronger service while competing with all of these other technologies.
