Study: Merger violates Antitrust

[Kieran]

Satellite Radio Is Confirmed a Distinct Product Market Raising Antitrust
Concerns

WASHINGTON, March 29 /PRNewswire/ -- A study sent yesterday to the
Federal Communications Commission and the Department of Justice
demonstrates that the proposed merger between XM and Sirius would create a
monopoly, constituting a likely violation of the antitrust laws.
Conducted by one of the country's leading economists and scholars, the
study lends concrete evidence and analysis to some of the most important
questions that have plagued lawmakers since the merger was announced
earlier this year.
As lawmakers on Capitol Hill began to focus increasingly on what the
relevant product market is for satellite radio and what impact this merger
would have on consumers, the Consumer Coalition for Competition in
Satellite Radio ("C3SR") -- the only group solely dedicated to protecting
the interests of the over 14 million satellite radio subscribers in the
United States -- approached J. Gregory Sidak of Criterion Economics, L.L.C
to prepare an expert declaration analyzing the likely competitive impact of
the proposed merger of XM and Sirius.
Specifically, Sidak, a former Deputy General Counsel for the FCC, was
asked to determine whether subscription-based satellite digital audio radio
services ("SDARS") are a relevant product market for antitrust purposes,
and to assess the unilateral pricing effects of the proposed merger in the
relevant product market.
Major Findings of the Criterion Study:
-- Distinct Market: SDARS are a distinct antitrust product market.
-- Anti-Competitive: The proposed merge would be anti-competitive as (i)
it constitutes a monopoly under the most reasonable market definition;
and (ii) even under a more expansive market definition the proposed
merger would increase seller concentration ratios to unacceptably high
levels.
-- Consumer Benefit: The majority of efficiencies identified by XM and
Sirius would not benefit consumers.
-- Consumer Welfare: The conditions offered by XM and Sirius would not
preserve consumer welfare.
The study took into account competition from other audio products such
as MP3 players and Internet radio, and determined that satellite radio is a
distinct product market for antitrust analysis. Even when the product
market is expanded to include AM, FM and HD radio, the proposed XM-Sirius
merger still raises serious antitrust concerns.
"Regardless of the definition, a satellite radio merger still has an
antitrust component that must be thoroughly examined by the Department of
Justice and the Federal Communications Commission," said Sidak. "No matter
how you slice it, dice it or package it, the merger of XM and Sirius would
establish a monopoly, which are typically characterized by a lack of
economic competition for the good or service that they provide, as well as
a lack of viable substitute goods."
The results of the study give subscribers further cause for concern
about the future of their satellite radio service and strongly suggest that
Sirius-XM would have the incentive and opportunity to raise prices and cut
programming. "This study confirms, empirically, what we have been stressing
since before this merger was even announced: subscribers do not view their
satellite radio service as a substitute for other forms of entertainment,
and a merged provider would be able and motivated to raise prices and cut
back the programming that so many listeners value and depend on," said
Chris Reale, a founder of C3SR.
The study could prove to be an important component for Congress, the
FCC, and the DOJ in determining whether or not to approve Sirius and XM's
merger proposal, as it addresses many of the questions posed by lawmakers
in a series of hearings held earlier this month.

[unRheal]

I'm thinkin: They needed a Study to figure this out?

[dmccorm140]

Good News I love Sirius and XM but separately!!!!!!!

[Hung.N]

Nothing else provides the same product as satellite radio, not AM/FM, not HD, and certainly not Mp3 players. Sidak's paper shows what we already know, nothing constrains the price of XM and Sirius except XM and Sirius. If this merger goes through they'll have every ability to raise prices, increase commercials, and degrade quality. Only honest competition with each other can stop them from hurting listeners.

[wayner99]

How anyone can consider a merger between Sirius and XM a monopoly just doesn't get it.

First of all, both companies are bleeding money. At some point one of them will have to fold because there is no investor in the world that will continue to pour more money into a sinking ship. That would leave one company left in business- and when that happens, you can be certain that rates will rise.

Secondly, Sirius and XM have both said that in any merger, rates will stay the same or even be lower! A quick google search proves the point http://www.siriusmerger.com/

Thirdly, no one has to subscribe to either service if they don't want to. There are numerous radio stations to choose from that are FREE, not to mention iPods and other MP3 players.

Remember folks, satellite radio is a subscription service, and available to those that wish to pay for it. If you don't wish to pay, then don't- it's as simple as that.

Myself? I'd love to be able to choose my programming, and limit some of the types of channels that I have no desire to listen to such as Disney, Martha Stewart, Oprah and CRTC mandated french channels.

If you still want to call that a monopoly, then go right ahead. But don't complain to me when XM folds and you can't get your money back!

[hockeymancw]

None of your points support your argument that if XM and Sirius merge, that it would not be a monopoly. Just because companies are bleeding money, doesn't mean that they should merge, it is because of bad management, overpaying for talent/sports rights and poor business decisions. At this point, both of these companies should have been close to breaking even.

Both companies said that rates will not raise initially, but there is nothing to say that in 5 years you won't be getting a bill that looks similar to your cable/sat bill from XM/Sirius. That scares me.

No one has to subscribe to a tv provider either, I can go on the internet and watch shows, get OTA shows, rent movies, but that doesn't mean that all the tv providers should merge into one company.

I don't think the merger will go through. If Direct TV and Dish got rejected, I can't see how they can allow XM and Sirius.

[wayner99]

So you don't like any of my points? Frankly I am not crazy about your counter-arguments either.

You said that satellite radio has overpaid for talent/sports rights. Possibly. Yes, Howard Stern did get paid a record sum- but did you know that Sirius has earned that back through advertising contracts and new listeners? As for sports rights- those contracts are negotiated with the various leagues- and you can be damn certain that they are similar to other deals negotiated with "free" radio and television stations.

But please don't use catch-all phrases like, "bad management", or "poor business decisions." Prove your point or don't make general statements.

I will grant you that a merger would create a monopoly within the sphere of satellite radio, but so what? There is plenty of competition from "free" radio, and in fact, this whole deal would have been approved already if it wasn't for the immense lobbying going on by the National Association of Broadcasters.

The NAB fears (and rightfully so) that satellite radio threatens their way of doing business. You must remember that right- 12 minutes of commercials in a row!

A true monopoly exists with cable television, or, as you so rightfully suggest satellite television. But the fact is that within in the U.S., where this fight is going on, millions of people do not have access to cable television. So I really do understand why Direct TV and Dish were not allowed to merge.

And if satellite radio decides to raise their rates, so what? Cancel your subscription and go back to "free" radio. At least you will have a choice. I really don't think the same can be said of cable television. Go back to watching tv with an antennae?

[Wayne]

Originally Posted by wayner99

You said that satellite radio has overpaid for talent/sports rights. Possibly. Yes, Howard Stern did get paid a record sum- but did you know that Sirius has earned that back through advertising contracts and new listeners? As for sports rights- those contracts are negotiated with the various leagues- and you can be damn certain that they are similar to other deals negotiated with "free" radio and television stations.

I really doubt that the amount paid by "free" radio in the past was anywhere near what was paid by XM and Sirius. There weren't really strong radio networks in the past few decades - I would bet that the amount paid in the past was less than 10% of what was paid by the satellite guys. The amount paid by TV has very little relevance here - TV ratings are orders of magnitudes higher than radio. Who sits by their radio all day on Sundays to listen to football?

As far as Howard Stern goes - if it was a great business decision then Sirius would be earning a profit. Increased revenue does not lead to profitability if expenses rise faster - that is a lesson that was really proved in the high tech bubble that popped 7 years ago.