Satellite Radio Merger: What Customers SIRIUSly Want
Mel Karmazin, CEO of Sirius Satellite Radio, discussed the proposed Sirius/XM merger at the Merrill Lynch Media and Entertainment Global Investor Conference in Marina del Ray, California. Karmazin highlighted the benefits for customers -- low-cost a la carte price plans that cost less than each company's current basic plans.
Forbes questions how this method will affect the merged companies' profitability:
Isn't Karmazin concerned that such an offering will cut the average revenue per user? Not really, he said. With only a small fraction of the radio audience currently subscribing to satellite radio, "we're not a mature business where the only way we grow our business is by growing our [average revenue per user]...The way we're going to grow our business is by growing our subscriber base and reducing costs," he said.CNN Money notes how some critics see higher costs for customers down the road:
But some critics of the merger have countered that a merger will create a monopoly that actually would lead to higher costs for consumers since they would have to pay for a new radio that would pick up channels from both Sirius and XM, and that the cost per channel in a la carte plans would actually be higher than the companies' current plans.It's no secret that neither company is expected to to be profitable in 2007, so a cost-cutting merger makes sense. And so does the spin. A July news release noted that the a la carte offering will "provide subscribers with more choices and lower prices and pave the way for a unique form of competition in the entertainment industry -- one based on the individual programming preferences of listeners." Unique? Maybe not. After all, isn't that the premise of the iPod? Skip the CD and just download what you want (which you can then play in your car)? Judging from Apple's success, that's not a bad model to emulate.
(SIRIUS Image by Michael248)