Merger of XM and Sirius Finally Nears Completion

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Merger of XM and Sirius
Finally Nears Completion

By SARAH MCBRIDE and AMY SCHATZ
July 25, 2008; Page B1

The pending approval of the satellite-radio merger by the Federal Communications Commission will finally remove the two companies -- and their 18.3 million customers -- from a long state of limbo. But it will also usher in a time of decision for customers, who will suddenly have far more options.

FCC Commissioner Deborah Taylor Tat's vote, the last of five, will provide final regulatory clearance for Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. to combine. "It's fair to say an agreement in principle has been reached," FCC Chairman Kevin Martin said in an interview Thursday morning. "We're still trying to work out the language."

The approval, which involved a host of concessions by the companies, will end 17 months of uncertainty following announcement of the merger in February 2007. While the deal will leave the U.S. with just one satellite-radio company, the companies argue that they won't be a monopoly because so many other audio-entertainment options exist. Even after the merger, XM and Sirius will retain their own programming identities. The merger will also mean fiercer competition for traditional radio broadcasters and other entertainment outlets.

The satellite companies have promised to offer services that will allow consumers to pay less for plans that provide fewer channels -- and eventually to pick the channels they want. The standard monthly subscription price for each company's programming is now $12.95, but going forward the services will offer a $9.99 plan that offers fewer channels and a $16.99 plan with more stations. Listeners will also be able to knock $1 off their bills if they don't want to listen to racier fare like Howard Stern's channels on Sirius or XM Comedy. Existing radios will allow consumers to select from different sized packages using preselected stations.

XM and Sirius say they will have a new generation of radio receivers, called "à la carte," on store shelves within three months -- and possibly sooner -- that can accommodate greater programming flexibility. The new radios will allow customers to buy a package with 50 or 100 channels of their choosing, and to get additional selections by paying a little extra. But the radios will still force consumers to pick packages that are made up primarily of programming from one service or the other, with just limited ability to, for example, mix Sirius stations into a package of XM offerings.

Customers will be able to install the à la carte radios in car dashboards. But the radios won't come built into new cars -- the chief source of sales for both companies -- for a year or two, people familiar with the matter say.

Patient customers could wait until Sirius releases a truly interoperable radio that will allow customers to pick up the full lineup of programming from both services. But it will be up to a year before that radio -- which could offer more than 300 channels -- hits the market.

Consumers are likely to see a number of programming changes as Sirius and XM eliminate redundant programming. In addition, the two will need to make room for the additional channels for minorities and noncommercial programming that they promised the FCC.

The companies declined to comment on programming or their plans. But the lowest-rated channels won't necessarily go. Agreements under which the services are sold in Canada require that there be such French language programming as "Sur la Route" on XM and "Premiere Plus" on Sirius, so the companies can't ditch those stations, says Lee Abrams, chief programming officer at XM until early April and now chief innovation officer at Tribune Co. Also unlikely to go: programming that attracts a small but particularly loyal audience, such as XM's "Fine Tuning," a world music channel, and Sirius's "Underground Garage" rock channel.

Instead, says Mr. Abrams, who is no longer involved with programming decisions, listeners can expect trims where there is obvious duplication, like traffic and weather channels and classical music channels. Some low-ranking channels, such as XM's "National Lampoon Comedy," will probably disappear, too.

However, "you have to do it with a lot of dignity and respect for the listeners' feelings," Mr. Abrams says, adding that customer-service representatives will be trained so they know how to respond to angry or inquiring phone calls.