What would Teddy Roosevelt say?

Webster’s dictionary defines a monopoly as – Exclusive control of a commodity or service in a given market.

If Teddy 'The Trustbuster' Roosevelt were alive today, I'll bet he'd be asking how today's merger between Sirius and XM Satellite Radio doesn’t fit this description?

Those lobbying, public relations and other powerful interests representing both Sirius and XM have argued hard and steady that this deal is only good for consumers because it will ultimately bring costs down. They’ve also reasoned that this can’t be considered a monopoly because satellite radio is not an industry unto itself. No, instead it competes with the MP3, iPod and high definition radio categories. Thus, a merger will actually create stronger competition among these burgeoning categories.

I say hogwash to that.

I’m no anti-trust attorney, but the rationale behind why this is as much a monopoly as Standard Oil or owning Park Place and Boardwalk is as clear as a sunny day to me. Only two companies comprise this industry. That’s the fact. By allowing these companies to become one, consumers will absolutely be vulnerable to higher prices and a host of other negative factors because there is no other competitor to offer anything else. The argument that terrestrial radio, iPods and all the rest compete with satellite may be true from a thirty thousand feet view point. But, they are still completely different offerings that aren’t dead on alternatives to each other.

Both Sirius and XM are losing money… a lot of it. By reading today’s news, it almost feels like this reality helped to foster the merger along (i.e. if we can’t merge, both companies will die and then consumers will have nothing). That inference is even more ridiculous than the Justice Department’s anti-monopoly explanation.

In the end, you have to tip your hat to Sirius CEO Mel Karmazin and his army of influencers (which included his own on-air celebrities like Howard Stern). While the Bush Administration has rarely ever truly stood behind the interests of the American consumer, Mel’s tenacious, never die fight over the last year (or so) clearly made the difference in this war – a war that should never have been won by the satellite companies.

Comments

[Steve Shannon]

I think it depends on what you define as a unique service. Sure XM and Sirius do compete in delivering radio programming signals via satellite to my car, but if you remove the "via satellite" part, they have plenty of competition. Every car sold in the US comes standard with an "over the air" compliant radio, but not so with satellite radios. I subscribe to XM and hope they do merge with Sirius so I get even more programming choices (and good deal of them commercial free - well worth my money just for that). If they do raise the price too much, I'll do what every consumer has the right to do - cancel, and I will still have the option of listening to over the air radio, free. In addition, this decision affects 17 million customers, hardly a large part of the US population, and certainly a small part of the radio listening population as well.

[Sean Williams]

Hi Ed - I see your point, but think that it's likely that we would see one or both of the two companies fail without the merger.

The market isn't that big for Satellite Radio (though I am an XM subscriber), owing to the tendency of the emerging consumer to eschew radio entirely. iPods and other players, CD changers in the car...

Terrestrial radio is also getting a boost from so-called HD Radio - sideband broadcasts that are often commercial free.

Also, cable and satellite TV typically includes audio music channels.

If a company wants to invest the capital, you could get another competitor to the new combination. The open question is whether the business plan can make this enterprise work at all.