Satellite Radio: You can’t always get what the NAB wants

So XM and Sirius announce their intention to provide a variety of pricing tiers on their merged offerings, thus giving federal regulators what they want: An assurance that the “price of entry” will not necessarily rise once the two satellite radio services are consolidated.

Higher prices have been a major complaint of the NAB, of course, in its intense fight against this merger. And even now NAB smells a rat:

Policymakers should not be hoodwinked by today’s announcement, since nothing is stopping either XM or Sirius from individually offering consumers a more affordable choice in limited program packages

…said NAB Executive Vice President of Media Relations Dennis Wharton.

True enough, Dennis. But Sirius and XM never said they needed to merge in order to justify tiered rate plans. They’re offering tiered rates so they can merge, they’re not merging so they can offer tiered rates. This is stunningly obvious and I would urge NAB to make arguments with more force, if not more logic, behind them.

Wharton goes on:

Moreover, after reading the fine print, one discovers that XM and Sirius customers have to buy a new radio for an undisclosed fee to reap the alleged rewards from today’s announcement.

More proof that tiered rates were never in the satellite radio cards, otherwise all radios to date would have been designed and built with this capability. When you provide new features you very often have to do it on new equipment. That’s as true of new radios as it is of new phones.

Obviously NAB is dead set against this merger, despite the fact that they – and our industry – have much bigger proverbial fish to fry.

But what does it say about the strength of your case when the strength of your argument is so weak?

On the rate issue, way back in February I predicted that average rates on consolidation would rise by three dollars per month. And that will happen not because subscribers will be forced to pay higher rates, but because they will be enticed to.

And that’s called capitalism. Based on what Sirius and XM are proposing, I now think that $3 prediction is a bit high. But there’s no question that the satellite folks will be deriving more revenue overall from their subs – just as tiered rates provide more revenue to airlines who sell seats for different prices to different customers.

Just as radio stations manage their inventory according to demand.

Oddly enough, I think the NAB has done satellite radio a favor by directing them towards a more profitable business strategy.

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