It was inevitable sooner or later, and now Mel Karmazin, of Sirius, has finally
decided to buy agreed to merge
with his great rival, XM. The decision seems to have been made on the basis
that it’ll be easier to persuade the FCC to agree to the merger now than it
would be under a future Democratic administration – why should that be
the case? And if the problem is that the two companies are the only companies
licensed to offer satellite radio in the US, why can’t they just agree to the
FCC issuing another license?
The deal reminds me of the Sky-BSB
merger in the UK in 1990. (I’m showing my age here.) And like that merger,
it makes sense both financially and at a common-sense level. Competition between
the two companies does not keep the price of a subscription down – rather,
both charge $12.95 per month, which is pretty much the maximum that Americans
will pay for radio. A merged company would (presumably) have much more programming
for the same price, which is a good thing for consumers.
Weirdly, it’s the protectionist broadcasters, who are lobbying against the
merger, who are playing the part of the big evil corporations here – and
not the would-be monopolists. As the WSJ
Two years ago, the National Association of Broadcasters lobbied hard against
XM’s effort to acquire WCS Wireless LLC for $195 million. The deal would have
given XM additional radio frequencies and allowed it to expand its service.
Broadcasters, however, complained that XM would use the acquisition to provide
local programming, which isn’t allowed under its current license. Ultimately,
the deal fell through after languishing without action at the FCC for nearly
has the color on how the deal was done:
Anxious about Mr. Karmazin and Mr. Parsons being spotted together, the two
sides decided to meet in an inconspicuous spot: the Upper East Side apartment
of one of Mr. Parsons’s bankers, Dennis S. Hersch, a former lawyer who
joined JPMorgan Chase two years ago.
Mr. Karmazin met with Mr. Parsons for several hours in Mr. Hersch’s
living room one morning in late December, these people said. They sat on sofas
flanked by their advisers, James B. Lee and Mr. Hersch of JPMorgan Chase,
which represented XM, and Paul Taubman of Morgan Stanley, which worked for
Sirius. The men decided to pursue a deal.
How did I know Jimmy Lee would be involved somehow?