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Question of the Day
The top executives at the nation's two satellite radio companies detailed pricing plans yesterday that they said would let customers choose which channels they want to receive if the two firms are permitted to merge.
XM Satellite Radio and Sirius Satellite Radio announced the $4.7 billion deal in February. The combination requires approval from antitrust regulators and the Federal Communications Commission.
The pricing plans announced yesterday range from $6.99 per month for 50 channels offered by one service to $16.99 per month in which customers would keep their existing service, plus "choose from the best" of channels offered by the other service.
That means a customer could subscribe to both the Major League Baseball channel on XM and the National Football League channel offered by Sirius on the same radio.
Currently, the price of a monthly subscription for each company is $12.95 and there is no channel choice, or "a la carte" option.
A merger of Sirius and XM, which broadcast to a combined 14 million subscribers, faces steep regulatory challenges, however. When the companies received their licenses from the FCC to begin offering subscription radio service via satellite, they agreed not to combine.
The companies must prove to the Justice Department that the deal is not anticompetitive. They must also prove to the FCC that a merger would be in the best interest of the public, which owns the airwaves the two companies use to deliver their signals.
Sirius Chief Executive Officer Mel Karmazin, in a speech at the National Press Club yesterday, said the U.S. is in a "revolutionary age of audio entertainment" and that the companies must compete with a whole range of products that weren't around when the licenses were issued.
He said the companies compete with free services, including portable digital music players, cell phones that download music, digital radio and the "800-pound gorilla" that is terrestrial radio.
Mr. Karmazin said savings to be realized with a merger would amount to "hundreds of millions of dollars per year" as a result of a drop in expenses. Such a savings is what would make the "a la carte" packages possible.
If a merger is approved, the companies say, they would sell eight packages.
The lowest-priced "a la carte" package would feature 50 stations from one service for $6.99 per month, plus additional nonpremium stations within the service at 25 cents apiece. Premium programming, however, such as professional sports and Howard Stern's show, would cost $5 or $6 more.
A second "a la carte" plan would let customers tune to 100 channels, mostly from one service, plus a handful of "best of" channels on the other service, for $14.99.
Both packages would require the purchase of a new radio, the companies said.
Other packages would include family friendly lineups, a music package and a news talk package, both for $9.99. Customers happy with their existing service would continue to pay $12.95 per month.
Consumer groups have opposed the merger.
Chris Murray, senior counsel at Consumers Union, the nonprofit publisher of Consumer Reports magazine, called the announcement an "interesting positive development." However, he said, the merger of the two companies would still result in a monopoly, which he thinks would ultimately be bad for consumers.
By Michael P. Orsi
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