XM/Sirius Merger Announcement: 14 Knee-Jerk Predictions

1. Despite protestations to the contrary, the deal will be consummated. The NAB will do its best to block the process because consolidation is only a good thing when its your own members who want to consolidate.

2. The deal will take months and months with plenty of “near misses.” But the argument that “this is bad for consumers” will ultimately fail to pass the sniff test. Such is the mediascape in 2007.

3. In the interim, it will be incredibly difficult for XM or Sirius to persuade consumers to subscribe. Confusion and risk are never good for business. New subscriptions in the short run will tank causing many to question whether there’s even enough room for one satellite company, let alone two.

4. Post-consolidation, monthly subscription rates will increase by at least $3/month.

5. Price increases will be justified on the basis of consolidated content, and this argument will ring true. Higher price, but greater value. The end result will be less churn than would otherwise be expected since consumers will be quick to acknowledge that the best of both XM and Sirius is better than either alone.

6. Of course, higher prices mean less motivation to subscribe for non-subscribers. But this will be more than offset by the power that the new XM/Sirius will have with automakers. Look for this to be the primary distribution thrust for the new company from this point forward.

7. In the long run, XM/Sirius will divest itself of many expensive deals as their terms expire. They will retain the core premium deals – the ones shown to generate subscription leverage. All the other stuff will be replaced by bargain rate non-original content or non-stop music programming.

8. Oodles of people from both services will be let go (that’s a safe bet for any prognosticator)

9. The new company will cling tenaciously to the notion that their future is dependent on subscriptions (which is wrong, by the way).

10. Now that XM/Sirius needs to sell the category exclusively instead of their particular brand within the category, the marketing challenge will shift from XM vs. Sirius to satellite vs. local – or, as I think it will take shape, “national” vs. local. “National” will be the place for the big talent and the music channels “too good for commercials.” “Local” will be positioned as the place for all of radio’s negative baggage. Terrestrial radio will be the enemy, now more than ever.

11. XM/Sirius will be able to exploit new media opportunities that continue to escape many broadcasters because a consolidated company has fewer decision-makers, fewer decisions, and more marketplace leverage. Terrestrial radio, ironically, is too UNconsolidated by comparison.

12. The distribution for Stern, Oprah, Martha and the rest just doubled. Distribution will potentially stoke interest which will further promote distribution (i.e., subscription).

13. HD Radio will be a harder sell than ever before. Even harder than it is already. Which do you want, the new radio with the nationally known premium brands, clearly communicated, and found everywhere? Or the new radio that presumably gets a few new stations?

14. Radio will worry too much about this deal. We may well miss the fact that this deal is even possible because of the nature of a new media landscape which provides many more profit-making opportunities to radio than it takes away. The smart broadcasters will focus on those opportunities as XM/Sirius spends a year or more getting its newly consolidated house in order.

While many will be glued to their rear-view mirrors or hoping against hope that this deal falls apart, I recommend you take a different path:

Look forward.




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