Sirius XM Radio, Inc. (NASDAQ: SIRI) is the holding company for two satellite radio services (SDARS) operating in the United States and Canada, Sirius Satellite Radio and XM Satellite Radio. The two parent companies completed their merger (technically the acquisition of XM by Sirius) on July 29, 2008.
On February 19, 2007, Sirius Satellite Radio and XM Satellite Radio announced a merger that would combine the two radio services and create a single satellite radio network in the United States. The merger brought the combined companies a total of more than 18.5 million subscribers based on current subscriber numbers on the date of merging.
The proposed merger was controversial because, in 1997, the FCC granted only two licenses and, in order to ensure a state of competition, stipulated that one of the holders would not be permitted to acquire control of the other.’
Each share of XM stock was replaced with 4.6 shares of Sirius. Each company's stockholders initially retain approximately 50% of the joined company. Sirius CEO Mel Karmazin is the CEO of the new company, and XM chairman Gary Parsons is likewise the chairman. XM CEO Hugh Panero stepped down from his company in August 2007.
Merger history
- February 19, 2007, the merger was officially announced to shareholders of the company. This came after many months of speculation by industry watchers. On February 20 , an open conference call was organized between executives of both companies.
- March 20, 2007, the two companies filed a "Consolidated Application for Authority to Transfer Control" at the FCC.
- June 8, 2007, the FCC's Mass Media Bureau gave "Public Notice" that it had accepted the application for filing and started its informal six-month merger review clock. The notice also set a pleading cycle requiring comments or petitions be filed by July 9, 2007, and responses or oppositions be filed by July 24, 2007.
- October 4, 2007, Sirius and XM satellite radio announced that both companies will conduct a shareholder vote. Sirius scheduled its meeting for Tuesday November 13, 2007, for shareholders to vote on the proposed merger. XM scheduled a similar shareholder vote in Washington, D.C., on the same date.
- November 13, 2007, Shareholders of Sirius Satellite Radio Inc. approved the company's $5 billion acquisition of rival XM Satellite Radio Holdings Inc. 96% of Sirius Satellite Radio shareholder's votes cast approved the acquisition.
- January 15, 2008, it was reported that the FCC expects to come to a decision in Q1 2008.
- March 24, 2008, the United States Department of Justice Antitrust Division announced it closed its investigation of the merger of the two companies, citing no harm to consumers or competition.
- May 23, 2008, FCC Chairman Kevin Martin said at a press conference that "the Commission could act by the end of the second quarter", which ends June 30, 2008. Earlier that week senators called upon the FCC to enact strict requirements on the merger such as returning some of the radio spectrum to competitors and open its service to all manufacturers of satellite radio players.
- June 16, 2008, FCC Chairman Kevin Martin announced his recommendation to approve the merger with the conditions that 24 channels be turned over to noncommercial and minority programming and that a three-year price freeze for consumers be instated. The combined companies would also agree to offer a la carte channel subscriptions, low price plans, and encourage development of third-party devices. "best of" XM packages will also be offered to existing Sirius customers and "best of" Sirius packages offered to XM customers with the merged company deciding what is included in those packages.
- June 16, 2008, The official concessions by Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. have been made public by the Federal Communications Commission.
- July 25, 2008, FCC approves merger in a 3 to 2 vote along party lines.
- July 29, 2008, Sirius and XM officially merge as Sirius XM Radio, Inc. Sirius XM chosen as new name. XM Canada and Sirius Canada remain separate companies.
Post-merger history
- July 29, 2008 Sirius CEO Mel Karmazin hosts a town-hall type meeting at XM Radio's Washington, D.C. headquarters which is broadcast companywide. Reveals that the management team will consist of him with a second tier of as many as 26 Executive Vice Presidents.
- July 30, 2008 Karmazin hosts a similar town-hall meeting with Sirius employees after appearing on several Sirius and XM shows, explaining the future of the new company. Karmazin also thanked the National Association of Broadcasters (NAB) for the strong opposition to the merger which, in his words, established that terrestrial radio and satellite radio were still competitors.
- September 9, 2008 Sirius XM announces new "Best of Both" content, and will be available to most satellite radio customers on October 6, 2008 at a monthly cost of $16.99. The following Sirius programming will be included in Best of Both being aired on XM: Howard 100, Howard 101, Martha Stewart Living Radio, Sirius NFL and NASCAR Radio, as well as Playboy Radio. The following XM programming will be included in Best of Both being aired on Sirius: NBA, NHL Home Ice, Oprah & Friends, The Virus, Public Radio with Bob Edwards, College Sports, and the PGA Tour.
- November 12, 2008 Sirius XM begin broadcasting new combined channel lineups across both the Sirius and XM platforms. On January 15, 2009, some stations previously dropped were added back to the line-up, due to subscriber demand.
- February 10, 2009 It is reported that Sirius XM has hired advisors to prepare for a possible Chapter 11 bankruptcy filing.
- February 17, 2009 Liberty Media (49%-owner of DirecTV) acquires 40% of Sirius XM, with rights to acquire another 11%.
- March 11, 2009 is when the new increased rates will take effect. Subscriptions for multiple radios (i.e. 2nd–4th radios) will increase from $6.99 per month to $8.99 per month. The base subscription rate will not increase. In addition, the online listening platform will be upgraded to a higher quality digital audio and no longer included as part of a base subscription at no charge.
- June 16, 2009 Sirius XM announces to their subscribers that beginning July 29, 2009 (as accounts renew after that date) subscribers will have to pay an additional $1.98 per primary account radio and $0.97 for each additional radio for radios 2–5 on an account as a Music Royalty Fee per month.
Stated benefits of the merger
Cost
Because both companies will operate as one, this may reduce the cost of licensing the broadcast material. It will also almost certainly reduce the staff required to run the company. Also, programming can be spread out among the companies' combined satellite constellations.
Variety
If all of the non-duplicate channels are kept, this will result in more programming being made available to subscribers of both services. Many subscribers from the pre-merger days contend that the variety and quality of programming has decreased since the consolidation.
New development
With only one company to develop products for, the new company can afford to spend more money to develop new products. So far, services have been developed which were not even conceived of when satellite radio was launched. XM and Sirius now carry satellite weather and traffic, and Sirius launched television programming in 2007. Likewise, it is expected that new technologies and products will continue to be developed and integrated in to the combined infrastructure of XM and Sirius Radio.
Opposition arguments
The main opposition to the merger is the National Association of Broadcasters (NAB) and the Consumer Coalition for Competition in Satellite Radio (a group run by the NAB). NAB representatives have been present at both Congressional hearings, and have produced several advertisements regarding the merger. The NAB's contention is that the merged company will be a monopoly, and that their increased market power will harm consumers. Four primary concerns are proposed.
Cost
As the only provider of satellite radio, the new company could raise the subscription price, and subscribers would have no choice but to pay it if they want satellite radio service. This appears to already be underway, as rate-hikes have already been announced (see March 11 events above in post-merger history). Sirius argues that the competition from terrestrial radio, Internet radio, and portable media players would act to moderate the cost. Sirius CEO Mel Karmazin has also offered to fix prices in order to satisfy regulators and consumers.
Innovation
XM and Sirius are constantly developing new products. The original satellite receivers were larger and offered fewer features than modern receivers. The argument is that XM's competition with Sirius has prodded this progress.
Competition
Arguments against the merger state that none of the economic studies offered by XM and Sirius prove that the relevant product market is any larger than satellite radio services under the Department of Justice (“DOJ”) and Federal Trade Commission’s long-established Horizontal Merger Guidelines. Therefore, because XM and Sirius are the only two competitors in the satellite radio industry, it has been argued that their combination would result in a merg
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