Sirius and XM Merger: Monopoly?

Sirius and XM Merger Monopoly



In episode #19, Rob and I debated at length the merger of Sirius Satellite Radio and XM Satellite Radio. At the time of the recording, the The United States Dept of Justice just announced that they approved the merger. The approval only came after they decided whether or not there would be any harm to customers and that there would still be competition in the ad medium. The FCC still needs to approve the merger for it to go through, but in the mean time there are over 17 million subscribers hanging in the balance. While in the car the other evening with CB, Rob and Christine, the topic came up and once again everyone in the car went back at it. I thought it would be a good idea to post my thoughts on the conflict here, in a more organized fashion in comparison to the craziness of our show.

First and foremost, I think it's only right to just check out our definition of monopoly: A monopoly is the exclusive position or control of a commodity or service in a particular market where the company or group in control has the ability to manipulate the prices of said commodity or service. In my opinion, the key phrase to look at in that definition is "in a particular market." I believe that Blu-ray holds a monopoly over the high definition digital video disk market. The best example of this is that as soon as HD-DVD was no longer in the market to distribute HD-DVD players and discs, Blu-ray players increased in price. BUT that is an argument for a another time.

The current subscription cost for both XM and Sirius is $12.95. If the merger goes though I'm sure the first piece of business will be job layoffs and mergers. It will be to cut costs, but other than that the cost for the new satellite radio company is most likely going to increase. Sure they will have more subscribers than they did before, but they will also have twice the talent to pay. The cost might stay down in the beginning but either the quality / content will diminish and/or the costs will increase in the near future, forcing anyone who wishes to use satellite radio to pay more, since there is no other option.

The obvious rebuttal is that there are other ways to obtain radio. HD Radio and standard AM/FM Radio being the competition. So, in theory, the competition to a pay service is free. The difference is that the content is not the same. If I am in my car listening to 92.3 FM in NYC, unless their parent company owns affiliates in other markets, I would not be able to hear the same content nationally. This is the biggest difference between standard radio and satellite radio. I can be in California or in Charles County Maryland and still hear the same content on satellite radio. In addition, satellite isn't as limited by the FCC. It would be as if someone was to compare standard major network television to cable television. You are paying for the content not just the method of delivery. Imagine how it would be if there was only one cable TV provider, or even one satellite TV provider for that matter.

So is the Sirius/XM merger a monopoly? It's kind of hard to say that it isn't.

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