Sirius Says It Won’t Offer A la Carte if Merger is Rejected
Sirius will not offer channels a la carte to subscribers if its $11 billion proposed merger with XM Satellite Radio is not approved, Sirius CEO Mel Karmazin said Monday at the National Press Club. “If the merger was not going to happen, we would have no plans to offer a la carte,” he said. Sirius and XM said Monday that the merged companies would offer a la carte options to subscribers buying new radios. Existing gear will not work with a la carte.
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For $6.99 a month, consumers could choose 50 channels, adding channels for 25 cents each. XM channels and Sirius channels would be segregated under this option. A $14.99 a la carte option would let customers pick 100 channels from all of one brand’s lineup and some of the other’s. Packages of 100 channels from either brand, plus some of the other’s, would be $16.99. For $9.99 a month, subscribers could choose either a “mostly music” option or a “just news” option. As promised to Congress (CD Mar 22 p5), the merged entity would offer options blocking adult entertainment channels and giving subscribers billing credits for them.
“Our aim is to have all of these packages available within a year,” Karmazin said. The companies will flesh out their a la carte proposal in comments to be filed Tuesday with the FCC replying to opponents, XM Chairman Gary Parsons said.
Analysts’ response was mixed. The a la carte “concession” will “offset the synergies” of the merger, said RBC Capital Markets. A la carte would reduce average revenue per user (ARPU) 5 percent, said RBC. “Any sort of negative impact likely will be offset by the efficiencies arising from the merger,” said Robert Peck of Bear Stearns.
The a la carte move is seen widely as a bid to advance a deal fiercely opposed by the National Association of Broadcasters (NAB) and consumer groups. But Karmazin said it is not a question of whether XM and Sirius have done enough to get the merger approved. “We think the public interest is served when consumers get lower prices and more choices,” he said. Former FCC chairmen James Quello and Richard Wiley lent their weight to the merger effort.
NAB again cited allegations that Sirius and XM broke the rules when they built terrestrial repeater networks, saying the satellite radio operators showed “brazen lack of candor… in breaking FCC interference and terrestrial repeater rules.” After Karmazin’s speech, Parsons told us the terrestrial repeater issue is an issue in the merger review. Earlier this year, FCC Chairman Kevin Martin told a Bear Stearns conference that “past infractions do not necessarily have ‘character implications,'” the firm said
NAB released a June 28 letter from Sen. Sam Brownback, R-Kan., opposing the merger. Brownback, running for president as a firm conservative, said the companies “prominently feature sexually explicit programming that is highly inappropriate and contributes to the increasing coarseness of American society.” The government “should not reward and encourage” such programming by “granting monopoly status to two of its providers,” he said.
Separately, National Public Radio told the FCC that the proposed merger is anticompetitive and should be rejected unless firm conditions are imposed. “We fear that a monopoly Satellite Digital Audio Radio Service (SDARS) provider might reduce the amount and quality of public radio programming, thereby forcing NPR and others to decide between program quality and carriage,” NPR said.
If the FCC approves the merger, it should force the new company to include HD radio receivers in all satellite radios and to return spectrum so a second satellite radio operator can be licensed. The agency also should impose “a tariff- like regulatory regime” so the public “ can scrutinize the applicants’ SDARS service offerings and pricing options on an ongoing basis,” NPR said.