The XM-Sirius Merger
posted by Frank Pasquale
I’ve been puzzled as to what to think about the XM-Sirius merger for some time. Josh Wright has done a nice round-up of some interesting leads. James Surowiecki provides what, for me at least, is a killer argument in favor of letting it go ahead:
Many consumers have hesitated to subscribe to satellite because they didn’t know which company would survive. And desirable content is split between the companies: if you want major-league baseball and Bob Edwards, you need XM, but if you want N.F.L. games and Howard Stern, you need Sirius. Allowing Sirius and XM to merge would eliminate this problem in one stroke. And that would significantly increase the competitive pressure on traditional radio stations, perhaps forcing them to abandon their cookie-cutter model. Paradoxically, by reducing choice you could stimulate more diversity. Sometimes, it seems, you can have fewer competitors but more competition.
In other words, the merger appears analogous to standard-setting, which can be “a species of private ordering that [solves] a fundamental dilemma of intellectual property law: the fact that intellectual property rights seem to promote innovation in some industries but harm innovation in others.” In other words, at one point we may well have hoped that satellite radio would be an innovation market with two eager rivals battling to control the field. But now that we see that the split of satellite content might kill this infant industry, a better industrial policy is to promote their consolidation (especially if it means undermining the Clear Channel leviathan!).
On the other hand, given that the FCC conditioned their licenses on their pledge not to merge, perhaps consumers who counted on that pledge as a guarantee of competition should at least get some assurance from the companies that they won’t raise prices too precipitously upon merging. There seems to be some reliance interest there. On the other hand, such consumers can probably equip their cars with an iPod and cancel their subscription.
April 15, 2007 at 10:27 pm
Posted in: Antitrust, Economic Analysis of Law
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Responses (5)
Chris Hoofnagle - April 16, 2007 at 10:29 am
Another possible solution is to sell devices than can hop from one provider to the other. Sirius proposed creating such receivers, but XM opposed it.
Once you’ve bought a receiver, you’re basically locked in, so the competitive element is a bit illusory.
David - April 16, 2007 at 5:42 pm
Awesome–I just can’t live without both Bob Edwards and Howard Stern.
David - April 16, 2007 at 6:10 pm
BTW–what does it say about football that it’s slumming with Howard Stern, whereas baseball resides in the penthouse suite with Mr. Bob Edwards?
Jens - April 18, 2007 at 5:47 pm
Hu? You have to pay the satellite company in the US? Here in Europe (at least in Germany), there are two major satellite systems for TV transmission: Astra and Eutelsat Hotbird. Both have many major free TV channels, and I think most Pay TV packages are on both systems. Well, the TV stations pay the satellite operators for broadcasting, and if you want to subscribe to Pay TV, you have a contract with a Pay TV company (who rent equipment, but you can also use your own) …
Sounds like better opportunities for competition to me …
Ah, and I forgot one thing: There are multi-feed satellite dishes with which you can receive both Astra and Eutelsat Hotbird.
john of sparta - May 8, 2007 at 9:17 pm
satellite anything is outdated.
WiFi will take that market share.
yes, some low population areas don’t
and won’t get WiFi, but Big Media doesn’t
care about them. as long as WiFi saturates
NY/CA/FL the rest of the US can do without.
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