Essays on The Proposed Merger of XM and Sirius Satellite Radio Case Study

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The paper "The Proposed Merger of XM and Sirius Satellite Radio" is a great example of a case study on business. Sirius Satellite Radio and XM Satellite Radio Holdings Inc are the only two satellite radios operating in the United States for the last six years. The two companies have grown with nearly similar programming, totaling 14 million subscribers from coast to coast as well as in Canada. At the end of 2006, XM, based in Washington D. C, had a subscriber base of 8 million while Sirius, based in New York City, subscriber base grew by 80 percent over the previous year following signing up celebrity talk show host Howard Stein, to 6 million (New York Times, 2007).

In February 2007, the two companies announced that they would merge, created a combined entity valued at $13 billion, including $1.6 billion in debt (Lieberman, 2007). By the merger, XM shareholders are proposed to receive 4.6 shares of Sirius for each share of XM (IBLS Journal, 2007). Sirius’ chairman, Mel Karmazin, is proposed to be the chairman of the combined entity.

The merger is proposed despite the fact that the two companies were given licenses to operate on the condition that they would not own each other’ s license (New York Times, 2007). The proposal is seen a last-ditch effort by the two biggest rivals in the Satellite Radio space to overcome accumulated financial losses, which is currently $6 billion in the books of the two companies. Although the Federal Communication Commission (FCC) initially considered the merger proposal as an infringement on industry competition, it has subsequently mellowed down and the FCC Chairman has reportedly said that rules can be altered in the view that the market has changed over the years, with more free radio options that pose as direct competition to satellite radio.

However, anti-trust concerns on monopoly pricing as well as an undue advantage over the free-to-air radio remain with the possible merger of the two biggest players. In this paper, I will study the evolution of satellite radio in the US, the competition it faces, the fallout of the merger proposal, codenamed Project Big Sky by XM (New York Times, 2007) in terms of programming and reach, the investors’ perception and the financial viability of the merger.

References

Liberman, David, How Sirius-XM Merger would cut companies’ costs still unclear, USA Today, February 20, 2007, http://www.usatoday.com/money/media/2007-02-19-xm-sirius-talks_x.htm

New York Times, Merger would end Satellite Radio’s Rivalry, February 20, 2007, http://www.nytimes.com/2007/02/20/business/media/20radio.html?ex=1329627600&en=c6026ee40b4c237b&ei=5088&partner=rssnyt&emc=rss

Satellite Radio Zone, Sirius XM Comparison, http://www.satelliteradiozone.com/Satellite-Radio-Comparison/

Arstechnica, Satellite Radio Review, July 2, 2002, http://arstechnica.com/reviews/other/xm-radio.ars

Hazlett, Thomas, Local Motives: Why the FCC should scrap its absurd rules for satellite radio, March 16, 2004, http://www.slate.com/id/2097247/

Damerjian, Dave, Will Digital Radio Boom in the US? Wired, January 18, 2007, http://www.wired.com/science/discoveries/news/2007/01/72514

Davidson, Paul, Digital radio emerges into the future, USA Today, August 23, 2005, http://www.usatoday.com/tech/products/gear/2005-08-23-digital-radio_x.htm

Digital Podcast, Bye Bye Internet Radio, 2007, http://www.digitalpodcast.com/podcastnews/2007/03/08/bye-bye-us-internet-radio/

Suroweicki, James, Satellite Sisters, New Yorker, March 19, 2007, http://www.newyorker.com/talk/2007/03/19/070319ta_talk_surowiecki

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