A lot has already been written and said about the DOJ’s approval of the XM-Sirius merger. A popular view is that the approval amounts to nothing more than yet another U.S. government bailout.
A column in today’s Washington Post by Steve Pearlstein takes this view.
It’s a reasonable point of view. The fact is, as Pearlstein points out, that over the last 6+ years of competing against each other for customers that neither company has been able to turn a profit. They’ve both spent huge sums of money in marketing and content (among other things) in the pursuit of the satellite radio customer – but in spite of attracting millions of subscribers (17 million between them) they still haven’t been able to make the business model work. So from the “bailout” camp the view is that now that they’ve spent this money and still haven’t made a profit, the merger was their way of throwing up their hands and saying, “help!”
But let’s look at it from the consumers’ viewpoint. Throughout this battle consumers have been the winner – two companies offering overall high-quality and intriguing content with enough differentiation for consumers to pick one over the other. But the concern in some parts is that with two companies becoming one, the consumer will eventually become the loser. Those critical of this deal say it’s inevitable that consumers will now be faced with higher prices, less choice and weaker content.
Hmmmm…But that won’t be the case here. This is a very unique situation. It’s unique because of the confluence of a number of things including, great technological change and a big shift in consumers’ attitudes and expectations with how, when and where they get their content.
But even if it were true – if a combined XM-Sirius eventually decided to go down the path of higher prices, weaker content or less choice – guess what would happen? Exactly. The subscriber would either choose to remain a subscriber because he still saw value in the offering or he would become a former subscriber. The subscriber is not held hostage in this situation because he has a ton of other very good options – options from competitors.
So again, it gets back to a basic question: How do you define competition?
Those who are in the camp of deeming the merger anti-competitive have a very narrow view of what provides competition to satellite radio. To say that satellite radio is in the ‘satellite radio industry’ is simplistic. After all, it’s not just satellite radio, it’s radio. And even more to the point, it’s not just radio, it’s audio entertainment (and news/information).
So the competition is out there. And whether it’s one company or two, the challenge remains the same. Produce compelling content at a good price and demonstrate to consumers that the value proposition is there. Because if they don’t feel that it is, they won’t be subscribers. Even as a merged company they’re still competing against free.
The playing field is level. Now play ball!
Tagged: Competition, Merger, Satellite Radio, Sirius, XM