The XM-Sirius Merger
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.