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Karmazin, Withers, Testify On Sirius/XM Merger
Amid the continuing industry buzz regarding Imus and NAB’07 being held this week in Vegas, there was another hearing yesterday on Capitol Hill – this time at the US Senate Committee on Commerce, Science & Transportation – regarding the XM/Sirius merger. Offering opposing views on the proposed merger were Sirius CEO Mel Karmazin and NAB Radio Board Vice Chairman Russ Withers.
Karmazin told the committee that a combined XM and Sirius “will offer consumers more choice at lower prices.” He explained, saying “today, Sirius and XM each provide consumers one service offering at one price—$12.95 per month. Consumers have only a limited ability to tailor their service, and those seeking programming from both Sirius and XM must subscribe to both services for a combined payment of $25.90 per month. The merger of Sirius and XM will enable the combined company to enhance these offerings through better pricing, more choices and more diverse programming.”
Karmazin also emphasized that a merger “will create operational efficiencies and safeguard the future of satellite radio.”
Withers, who in addition to his position at NAB is owner of Withers Broadcasting Companies, countered, saying that “when the FCC allocated spectrum to Sirius and XM in 1997, it specifically ruled against a single monopoly provider. The Commission foresaw the dangers of a monopoly. It explicitly licensed more than one provider to ensure ‘intra-market’ competition and to prohibit one satellite radio provider from ever acquiring control of the other. There is no reason,” he said, “to change that position now.
“These companies have claimed that no one should worry about this monopoly, because local radio competes against XM and Sirius. Let's be very clear on this point: radio broadcasters do not compete in the national market of the satellite radio companies, but XM and Sirius do compete in the local radio markets – markets that I operate in everyday – markets like Cape Girardeau and Sikeston, Missouri.
“Local radio stations can only broadcast within their FCC-defined coverage area. Local broadcasters' signals are not nationwide, and are not subscription. The national availability of satellite radio sets it apart from local broadcasters.
“Withers Broadcasting operates in small and medium markets like Bridgeport, West Virginia. We are the voice of the community in times of emergency and have a unique connection to our listeners that no other medium provides.
“XM and Sirius, by contrast, offer a pre-packaged bundle of national, mobile digital audio channels. KGMO in Missouri delivers outstanding local news, sports and entertainment.
“Consumers, however, would never consider my station's local programming a comparable product to Sirius' 133 channels or XM's 170. A local radio station's programming is clearly not a substitute for the array of services offered by XM and Sirius. Services like XM and Sirius compete with each other – and no one else – in the national satellite radio market.
“I can understand why XM and Sirius would want a monopoly, but that does not mean it is in the public interest. XM and Sirius, by their own admission, are not failing companies. Their current highly leveraged position is due to extraordinary fees paid for marketing and on-air talent, including the $500 million contract that Sirius awarded to Howard Stern and the $83 million dollar bonus paid to him just last year. But even with these costs, XM and Sirius have made clear they can succeed without a merger.
“For these reasons and others, local broadcasters strongly oppose a government-sanctioned monopoly for satellite radio.”
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