Higher Prices, Less Content and A Monopoly: Good For The Consumer?

By: Jimmy Schaeffler

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Publication length 11 pages

Presently, the U.S. satellite radio duopoly of New York City-based Sirius Satellite Radio 1 and Washington, DC-based XM Satellite Radio 2 are attempting to “merge” into a single satellite radio monopoly service and product.

If this merger were approved, every subscriber would be beholden to a single satellite radio monopoly, resulting in less service, less affordability, less diversity, and less choice in content and hardware. America can’t let Mel Karmazin sell it, “Less Is More.”

The main claims of Sirius and XM since announcement of the merger proposal on Monday, February 19, 2007, include 1) the merger is not anti-competitive, 2) the merger is in the public interest. This study outlines the opposition to and the dire consequences from this so-called “merger,” especially as it impacts consumers, content providers and performing artists. 4 This paper also contains numerous alternative recommendations for these companies and the future of satellite radio.

Overall opposition to this merger is significant and growing. It comes from consumer groups, trade groups, the media, legislative representatives, and the public.
Among the consuming public, concern resonates around the very idea of a merger-to-monopoly and its inherently anti-competitive aspects.
Among content providers and performing artists, the key element involves less choice. This means less choice in the negotiation process, fewer vendors and providers, loss of existing and future employment, and more market power used against them by a huge monopoly in a “closed market.”
True supporters of this merger appear to be few in number. Other than the companies themselves, suggested or actual support comes from but a scattering of Wall Street bankers and related analysts; additionally, one consumer group, Public Knowledge, did mention approval, but only based upon extremely restrictive and unrealistic conditions.
Neither company is approaching dire financial straights. In essence, this merger proposal amounts to corporate and financial greed by an impatient Sirius and XM.
In sum, nowhere in this equation is there a significant benefit provided to the consumer, content provider or performing artist, as a result of this proposed merger.

Table of Contents

• 2EXECUTIVE SUMMARY
• 3BACKGROUND: COMPETITIVE LANDSCAPE
• 5IMPACT ON CONSUMERS
• 8IMPACT ON CONTENT PROVIDERS AND PERFORMING ARTISTS
• 9CONCLUSION
• 10APPENDICES