Sirius XM Radio
Geoff Goodside
Rafael Sosa
4/21/11
Introduction
• Provides two satellite radio services in
the U.S. and Canada
- Sirius Satellite Radio
- XM Satellite Radio
Introduction
• Founded in 1990 as Satellite CD Radio,
Inc
• 2008 Sirius XM Radio Inc on
• Key Contributors:
- Eddy Hartenstein (Chairman)
- Mel Karmazin (CEO)
- Scott Greenstein (President and
CCO)
Introduction
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Revenue: $2.8 Billion
Operating Income: $ 465.4 Million
Net Income: $ 43.06 Million
Total Assets: $ 7.383 Billion
Total Equity: $ 207.6 million
Employees: 1479
Summary
• February 19th, 2007 merger announced
• March 20th, 2007 “Consolidated
Application for Authority to Transfer
Control”
• June 8, 2007 “Public Notice” accepted
Summary
• November 13, 2007, approval of XM
• March 24, 2008, DOJ closed
investigation citing no harm
• June 16, 2008 concessions made public
• July 25, 2008, FCC approves merger
• July 29, 2008 Sirius XM officially merge
Market Definition
• XM: defined relevant market as audio
entertainment, including:
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Free over the air radio (AM, FM, HD)
Internet Radio
iPods and other MP3 players
CD players
Cell phones
Satellite Radio
Market Definition
• FCC: market consists of satellite audio
programming provided to people in the
U.S. for a fee.
• Terrestrial radio is not in the relevant market.
• DARS is a premium service (better audio quality,
greater programming variety, no commercial
interruption).
• DARS and Terrestrial radio are
complements.
Market Concentration
Pricing
• XM and Sirius are each others
competitive restraint on prices.
• Firms suggest that other forms of
delivering audio will constrain their
ability to raise prices.
• Huge entry barriers, threat of entry is
not a constrain for price increases by
merged firm.
Effects on Competition
• The proposed merger will lessen
competition, as prohibited by the
Clayton Act.
• Relevant Market goes from having two
firms to one monopolist with 100%
market share.
Efficiencies
• Firms argue that merged firm would
have “much stronger programming
lineup”.
• Firm would have a lower cost structure
based on the elimination of overlapping
facilities and personnel.
• According to Merger Guidelines:
• “Efficiencies almost never justify a merger
to monopoly”
Remedies
• DOJ disfavors conduct remedies (price
regulation), instead structural remedies
(firm must divest assets to allow entry)
are preferred because they are clean
and avoid extra costs for the
government.
• The remedy suggested by parties was
to maintain price levels for a certain
period of time.
Post Merger
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A La carte option
Purchase of new radios
50 Channels vs. 100 Channels
Best of both content
Subscriptions for multiple radios
increase
Conclusion
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Lowers cost
More variety
New development
Greater competition