JLF: Sirius - XM Merger. It's What's Wrong With This Government.

Not only have the Department of Justice and the Federal Communication Commission sat on this merger for over a year, but Congress has held FOUR hearings about it, hauling in Sirius' CEO, Mel Karmazin, and members of the National Association of Broadcasters (NAB), the group that represents the owners of terrestrial radio stations.  Well, shoot, that means that this must be of utmost importance to the American people.  This merger must be the largest current threat to the country, because, outside of steroids, nothing has gotten this much attention from the government.  Shoot, Congress met for days before approving military activity in Iraq.  Days for Iraq, but over a year for satellite companies to merge?  Let's look at how long other mergers to be approved by the Department of Justice. 

The Exxon Mobil merger took 11 months of review from the FTC in 1999.  Now, these two companies competed competitively in 40 markets and the resulting merger has grown into the largest privately held company in the world.  ExxonMobil has the largest sales and profits from any privately-held company ever.

Whirlpool's purchase of Maytag took 7 months to approve in 2006.  At the time, Whirlpool was the market's largest appliance manufacturer and Maytag was the second.  After the acquisition's approval, Whirlpool manufactured over 50% of the dishwashers in the U.S. and 70% of the clothes washers and dryers.  Analysts agree that Whirlpool's products' prices have risen since the acquisition.

AT&T's purchase of Cingular, in 2004, took 7 months to be approved.  It created the nation's largest cell phone company.

Again, Sirius and XM are hoping to merge to own 4% of the radio market.  It's been over a year to decide if Sirius and XM will be a monopoly?  Incidentally, Sirius and XM's merger is valued at $4.5 billion, while ExxonMobil's was $80 billion and AT&T's purchase of Cingular was $41 billion. 

Well, the insanity of the Sirius/XM merger is finally getting some attention.  The Philadelphia Daily News had a great article by Daniel Ballon a couple of days ago.  Jim Cramer, from CNBC's Mad Money with Jim Cramer, is on FIYA about how long it is taking to hand down a verdict.  The reason people are incensed is because the prolongation of the merger decision is a clear indication of what is wrong with our government. 

Anyone looking in on this must agree that the merger does not create a monopoly for American consumers.  Not only would the Sirius/XM company touch a measly 4% of radios, nationwide, but there is competition from all kinds of media: terrestrial radio, HD radio (owned by the same companies that own terrestrial radio), internet radio, cell phones (and all the entertainment they bring through internet), CD's, DVD's, podcasts, video games and the ubiquitous iPod.  In addition, there is no reason someone else couldn't throw some satellites up in the sky and start their own company!  This isn't like energy or petroleum companies that are a necessity of life.  This isn't like phone lines, where local companies own the pipeline, exclusively.  This isn't like the your local water or elecctrical company that provides you no other option for service.  We are talking about entertainment people pay for.  It's like NBC, ABC, CBS and Fox saying Showtime is a monopoly.  No one looking in on the facts of this merger can see a monopoly.  And yet, it's being delayed.  Why? 

The influence of lobbyists.  The NAB (National Association of Broadcasters) is, essentially, the lobbyist arm of the terrestrial radio owners, and they have spent over $4 million to stop this merger.  $4 million, straight up, in lobbying efforts.  Some of that money has been donated to congressmen's campaigns.  The NAB has taken out one-page, national ads pointing out what a monopoly this merger would lead to.  They have even hung a sign outside their headquarters saying, "XM + Sirius = Monopoly." 

Now, the very fact that the NAB is fighting the merger indicates that they are in competition with satellite radio companies.  No?  And, if Sirius/XM are in competition with terrestrial radio, then it wouldn't be a monopoly, now, would it?  I constructed the following statement on the NAB's behalf: "If XM and Sirius merge, they will be a monopoly that will compete with us for market share."  That's the only thing I could write that explained how insane it all is.

CNBC's Jim Cramer is so mad that he started reading names congress members who accepted money from the NAB and are now speaking out against the merger.  Apparently, they are hella cheap: Gene Green of Texas received $10,000 from NAB this cycle and $6,000 in the 2006 cycle.  Now, why wouldn't Sirius and XM give Green $20,000 to have him speak in their favor?  Well, because they are standing on the solid principal that their business will speak for itself.  That, and the government shouldn't be for sale.  I'm full HAWT.  The other members Cramer called out were even cheaper: Louise Slaughter (NY, D) $1,000; John Spratt (SC, D) $2,000 this cycle and $6,000 in 2006; Roy Blunt (Minority Whip, R) $5,000 in 2006; Tom Cole (AZ, R) $2,500 this cycle and $1,000 last cycle.

The thing is that I don't think the NAB wants the deal rejected by the DoJ and FCC.  For the NAB, this is the ultimate situation: XM and Sirius bleeding cash while waiting... waiting to see what their options are.  It's not like we are talking about Exxon, Google or other companies flush with cash.  In fact, neither company has yet to land a profitable quarter.  Last year, XM and Sirius had combined losses of $2 billion.  Every month without a decision from regulators costs XM and Sirius approximately $167 million as the companies just wait...  Every day their lobbying efforts delay a decision, XM and Sirius lose about $5.5 million as they wait...  That way, when the merger is approved--I can't see any outcome where it isn't--the combined XM and Sirius will have that much larger a hole to dig out of.  It makes me insane. 

Does the NAB have anything going for their argument?  One thing they are throwing around Washington is that the merger would result in raised subscription prices.  Well, in these congressional hearings, Sirius' CEO Mel Karmazin has reassured that the merger would not result in higher prices.  In fact, Sirius/XM would enact different pricing tiers that allow subscribers to pick the channels they want to pay for.  So, if they only want music, prices would be cheaper than they are now. 

Even if Sirius/XM did raise their prices, though, it would hurt them, in the end.  No one's forced to buy it--unlike electricty or telephone service, mergers that have been approved in months by the government--and so Sirius/XM needs to keep pricing competitive, or they'll lose listeners. 

I GET SO MAD ABOUT THIS WHOLE THING.  How much more hand-holding is Mel Karmazin and Sirius going to have to do to Congress?  How much longer are regulators going to have to think about this simple proposal?  What the balls is wrong with our government?  Can they really be bought?  Are they really putting this much attention on this particular merger when ExxonMobil was approved in ten months?  FULL HAWT.  If I was an alien looking in, I'd just level the planet and start again.

Always your pleasure.

  - JLF

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