Satellite Radio A la carte
Monday, July 23, 2007SUSIE GHARIB: Satellite radio from Sirius and XM are getting creative so that they can win approval of their $13 billion merger. The two firms said today that they'll let consumers buy only the programming they want and cut prices if regulators approve the deal. As Stephanie Dhue reports, experts say that so-called "a la carte" pricing could cinch the deal.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Facing tough regulatory scrutiny of their merger plans, XM and Sirius say together they will have the financial muscle to offer consumers a wider choice of programming at lower prices. Sirius Chairman Mel Karmazin says a la carte pricing will be a benefit of the merger.
MEL KARMAZIN, CEO, SIRIUS SATELLITE RADIO: The idea of offering this a la carte service is made possible for the synergies connected with the merger and it would be a very risky proposition for us with no sort of a way of covering the cost of this thing.
DHUE: Within one year of the merger, XM and Sirius say they will roll out two new pricing packages. One lets consumers pick 50 channels for $6.99 a month. The second lets customers pick from 100 channels for $14.99. That compares to the current monthly $12.95 standard package each company offers. The National Association of Broadcasters says the merger is anti-competitive because the combination would leave only one satellite radio company. Spokesman Dennis Wharton says there's nothing to keep that company from raising prices later.
DENNIS WHARTON, SPOKESMAN, NATIONAL ASSOCIATION OF BROADCASTERS: Sure, they're going to promise the earth, the sky, the heavens to get this monopoly through and consumers are going to be left holding the bag.
DHUE: XM Chairman Gary Parsons says the combined company would have less than 4 percent of the overall radio market, making it difficult to raise prices.
GARY PARSONS, CHAIRMAN, XM SATELLITE RADIO: There is a history from the two companies not increasing prices and the real reason is, we are competing with free.
DHUE: XM and Sirius also point to competition from Internet radio, the Apple iPhone and plug-in MP3 players as reasons why their deal won't hurt competition. The Justice Department and the Federal Communications Commission must approve the merger. Analyst Blair Levin says offering a la carte pricing will make it harder for the FCC to say no.
BLAIR LEVIN, ANALYST, STIFEL NICOLAUS ASSOCIATES: I know there are a number of FCC commissioners, including the chairman who have a lot of concerns about the deal, but I think this goes a very long way to making very concrete what the public benefits would be.
DHUE: XM and Sirius say they are eager to work with regulators to get their merger approved. The companies hope to close the deal by the end of the year. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
