See, I Told You So (or, A Sad Tale of Satellite Radio)

By Timothy R. Butler | Feb 11, 2009 at 20:34:43

Anyone who spends years of his or her life writing for public consumption, particularly when that writing is commentary, faces two distinct truths. First, you will get things wrong. Second, you will get things right. When a story from the back catalog beckons as being proven more and more right, it just must be pulled out again. The Sirius XM merger was a bad idea, I said in February 2007, and as the combined company allegedly teeters on bankruptcy, my point is being proven.

I noted just days short of two years ago that the proposed merger would lead to a lack of competition that would hurt, not help, consumers. While XM and Sirius argued that they had to compete with iPods, standard radio and HD Radio, they never were able to account for the vast variety of unique features satellite offers not available elsewhere – features like commercial free music and dedicated local traffic and weather. Improvements to these services were driven only by virtue of the competition in satellite radio services.

Since the merger, the decline of these features has already started to appear. For example, XM subscribers accustomed to dedicated local weather and traffic channels now find those channels merged into two city channels. This is not a huge deal, but it means often waiting through weather conditions in Chicago before I can hear how the traffic is in St. Louis. That isn’t helpful, but what is a person to do? Cancel the service and have to wait even longer between updates on a normal broadcast station?

Likewise, the music channels have received some serious shuffling, with some folks’ favorite channels getting the axe, and others ending up with new “features.” One of my favorite channels gained a new “music news” segment that interrupts the music and repeats way too often. This is a music channel, folks; I can get music news (if I want it at all) when I am at home, online, thank you very much. Thankfully there aren’t commercials yet, but with financial troubles and no ready competition, what’s to stop Sirius XM from offering those too?

But larger than minor programming grumbles is the looming bankruptcy itself, a point I did not even raise in my original piece of dissent from the merger. Continuity of service is now at risk. There are only licenses for two satellite radio operators in the United States, and one financially troubled company now owns both of them. What if Sirius XM does go into bankruptcy protection and, like so many companies in the present economy, it is unable to find a way to renegotiate its credit? In such a scenario, it is conceivable that satellite radio would simply cease to exist in the United States, at least for a time.

Anyone remember when Iridium’s satellite phone network was nearly de-orbited until a new set of investors came in and bought up the assets? Now imagine a similar situation only with a service vastly more people use and enjoy. Sure, if Sirius XM were to end up in Chapter 7 liquidation, someone, someday would sell satellite radio service again – but keeping the airwaves full with no interruption? Maybe, maybe not.

That’s the problem with thoughtless consolidation. I’m a free marketeer, but when the government only issues two licenses to do something, there is a reason that those licenses were not suppose to be owned by the same company. Competition and continuity are key.

But, the merger happened and now consumers just have to hope the remaining company survives. Perhaps a better fate would be for some other company – such as Dish Network – to offer to buy just one of Sirius XM’s networks. That would restore competition and perhaps allow Sirius XM cash to continue running its remaining network. Thinking they would do something so sensible is probably wishful thinking, however.

What isn’t whimsical at all is that satellite radio is facing an uncertain future after the merger meant to secure its future. See, I told you so.

Timothy R. Butler is Editor-in-Chief of Open for Business.