Speculation on Sirius / Xm Merger in Canada

[hugh]

I thought it would be interesting to speculate on what will happen in the next month or two with Sirius and XM in Canada.

Facts

Sirius Canada is a Canadian partnership between Standard Broadcasting, the Canadian Broadcasting Corporation and Sirius in the United States. The company is privately owned and does not publicly report subscriber counts of financial results.

XM Radio Canada is the operating name of Canadian Satellite Radio Holdings Inc., a public corporation on the Toronto Stock exchange. The company is controlled by CEO John Bitove, who owns a majority of shares, while the next largest shareholder is XM Satellite Radio out of the U.S. which owns about a quarter of all shares.

Sirius Satellite and XM in the U.S. have merged to become Sirius / XM in the U.S. This means the merged Sirius / XM owns about 25% of XM Canada and about the same in Sirius Canada.

Speculation

I believe a merger is inevitable. Even if Sirius and XM Canada don't want it, I think that Sirius / XM will demand it. I don't think the CRTC will do anything about it if the companies decide to merge.

Long term the Merger will allow Sirius/XM Canadians to drop almost half the Canadian stations as the number of channels gets rationalized and you need fewer stations to meet the Canadian content regs.

The big question is which company gets the upper hand.

The facts are that Sirius has 750K subs, XM under 400K. XM has gone through a fair bit of senior management problems and right now is giving its product away or only charging $5 a month to anyone who threatens to quit. Sirius management seems strong and is kicking XM's butt in Canada.

I think the merged company will be driven by the senior management team currently at Sirius Canada. Corporately it will be interesting because Sirius is private and XM is public. I suspect that it would be cheaper to make the new merged company a public company so there wouldn't be a big cost to buy out XM Canada.

Anyone else care to speculate?

[CamDAB]

Originally Posted by hugh

Anyone else care to speculate?

This could go several ways:

CRTC goes completely "hands off" on satellite regulation meaning U.S. subs only but legal in Canada

A revival of the DAB band for a paid terrestrial radio service. (remote chance)

Like TV, completely "technically" illegal for U.S. signals. (remote chance)

The problem is clout of a single entity. The Canadian operations of both Sirius and XM WILL have to be dealt with. I can't see the U.S. operations putting up with the duality for very long. The logistics are too complicating. Not to mention CANCON.

There's a lot of dust to settle and it ain't going to be pretty.

Cameron

[mrhooie]

it's interesting to say the least, how two small sub companies could live in Canada when two found it hard to live in the US.

What is Sirius-XM bought XM Canada and played the hand that way?

[I_Want_My_HDTV]

I can see the CRTC getting involved in any merger due to cancon requirements. As with other segments of the broadcasting industry, the CRTC is likely to require more cancon and more Canadian production before it approves any changes. Other than cancon and ownership requirements, the CRTC will likely remain hands off.

[Deckster]

Personally I think that a merger is inevitable. The vast majority of programming comes from Sirius XM. Since there will be only one programming supplier (other than the few Canadian stations), how can you have two competing brands with the exact same product?

[FLACer]

Originally Posted by hugh

Long term the Merger will allow Sirius/XM Canadians to drop almost half the Canadian stations as the number of channels gets rationalized and you need fewer stations to meet the Canadian content regs.

This is something that I have always wondered about and how it would ultimately affect Canadian subs. If Sirius XM starts dropping Canadian channels on the US side, yet the 9 to 1 ratio remains intact in Canada, they will have to be careful to not put Canadian subs in the situation where they may actually have fewer total channels available to them. It's not likely that any of the CBC channels will be dropped from the Sirius side since they have a 25% stake in the Canadian operation and they are popular channels with both Americans and Canadians who have either relocated to the US or spend any amount of time there during the year, so when the slashing begins, what goes?

I wonder if the CRTC will end up having to relax the 9 to 1 ratio rule because of the merger?

I have always said that the best way to go is to have a US sub because you have more channels for less money and absolutely no interference from the CRTC. Because of the CRTC meddling and the approval of the merger in the US, it looks like this will remain the preferred way to get the most out of either service.

[Canterbury Tail]

Why is it inevitable? A lot of people seem to think that Sirius - XM has the ability to make such a demand on the Canadian companies, but you don't know what is in agreements signed between the Canadian companies and the US ones. As for both surviving, well Blockbuster and Hollywood Video both resell and rent the same items from US studios, but they aren't forced to merge. No reason they can't offer nearly the same product and let the consumer decide.

[Arc|Angel]

My bet is they'll bypass CTRC by just closing XM Canada and Sirius Canada will offer a migration discount. The positive cash flow for XM just finally went into profit at the last reporting and does not make up for pass losses.

[Wharfe]

Originally Posted by Arc|Angel

My bet is they'll bypass CTRC by just closing XM Canada and Sirius Canada will offer a migration discount. The positive cash flow for XM just finally went into profit at the last reporting and does not make up for pass losses.

Do you mean XM subs would then have to switch to Sirius radios?? No way! Not sure if that's what you meant.

I don't know what's going to happen. In the US they are offering the best of each service on the other platform, why couldn't they just not do this in Canada? Sirius would still have Howard in Canada, and XM still have The Virus, etc.. then it's not entirely the same product, but I guess sooner or later that would cause problems.. I don't know.. I just really like XM Canada, they've been very good to me, and the two repeaters here (and their entire repeater network) is great.. would hate to see them absorbed by Sirius Canada.

[starchoice]

Originally Posted by Wharfe

I don't know what's going to happen. In the US they are offering the best of each service on the other platform, why couldn't they just not do this in Canada?

Because in Canada, they are two separate companies.

[Jez000]

If they don't merge in Canada won't it encourage more users to get American subs to get the better choice of programming / pricing ?

[cdn_tbird]

Originally Posted by Jez000

If they don't merge in Canada won't it encourage more users to get American subs to get the better choice of programming / pricing ?

The best pricing plan at the moment happens to be in Canada for the lifetime subscription which is about $550+taxes. They don't offer a lifetime subscription in the US.

[Walter Dnes]

Some facts first...

1. In approving Sirius' application, in http://www.crtc.gc.ca/archive/ENG/De...db2005-247.htm the CRTC said...
   

   By condition of licence, the licensee must provide a minimum of eight original Canadian-produced channels at the beginning of operations, and may distribute, to any Canadian subscriber, a maximum of nine non-Canadian-produced channels for each original Canadian-produced channel that it distributes. A minimum of 85% of the musical selections broadcast on all Canadian-produced channels, considered together, must be Canadian selections.
   The licensee must also, by condition of licence, distribute a minimum of three French-language original Canadian-produced channels at the beginning of operations and at any time, not less than 25% of the original Canadian-produced channels offered by the undertaking must be French-language channels. A minimum of 65% of all category 2 (popular music) vocal musical selections broadcast on each French-language channel must be French-language selections.

2. When control of a broadcast licence changes hands, an extra tax ("levy", or whatever other euphemism you want to use) is paid by the purchaser to fund Canadian broadcasting.
3. XM's satellites are in geostationary orbit, staying at one spot in the sky, right at the equator. Sirius puts their satellites in an eliptical and tilted geosynchronous orbit, whereby the satellite is at a fixed longitude, but "wobbles" north and south of the equator. With proper synchronization amongst 3 satellites, there's always 1 or 2 well above the equator. This allows for better reception up north, i.e in Alaska and Canada.
4. Sirius-Canada has a lot more customers in Canada than does XM-Canada

Speculation: The higher-ups at Sirius and XM are rational and logical.

Here's what they SHOULD do...

• XM-Canada should cease operations
• XM-Canada should surrender its licence
• Sirius-Canada should "buy XM-Canada's customer list" to buy off XM-Canada
• Sirius-Canada should offer XM-Canada's subscribers a "special introductory offer", namely free Sirius radios and honour prepaid XM-Canada subscriptions as Sirius-Canada subscriptions.

Why this would be best for everybody involved

• because XM-Canada shuts down, and surrenders, rather than selling, its licence, there is no change of control for the CRTC to tax
• no change of control also avoids a CRTC review of a hypothetical licence-transfer which could see some rather nasty interventions, and demands for more Cancon to replace the now-defunct XM-Canada CanCon.
• Since there are fewer XM-Canada than Sirius-Canada subscribers, handing out free Sirius-Canada receivers to XM-Canada customers is cheaper than visa versa
• The Sirius satellites are better-positioned to serve Canadian customers.
• Since XM would no longer be accepting Canadian customers, they could drop their CanCon channels entirely, with possibly 1 or 2 migrating to Sirius. This would free up several slots on XM. XM could load up on Spanish-language channels. The XM satellites sit over the equator, so they're best at serving the Latin market, i.e. southern US, Mexico, Central America, and a big chunk of South America.

The merged Sirius/XM is talking about a-la-carte and genre packages. The Canadian operation could offer...

• a "basic" service with 8 CanCon channels, and up to 72 non-Canadian channels
• a "premium" service with a larger number of CanCon channels, and therefore more non-Canadian channels

[starchoice]

Originally Posted by Jez000

If they don't merge in Canada won't it encourage more users to get American subs to get the better choice of programming / pricing ?

Doesn't a cheaper subscription rate and additional channels encourage more users to get American subs? Apparently not.

[Wharfe]

If I am forced to get a Sirius radio I will be canelling right there and then. It won't happen. I don't know about anyone else.


I don't have the room for that kind of thing


And I really don't think giving out 400,000 new radios is the best way of doing this.. If the two platforms can remain with a merger in the US, there's no reason why the companies in Canada couldn't merge and keep both platforms running.