Finally, more than a year after the deal was first announced, the Department of Justice approved the merger of Sirius Satellite Radio and XM Satellite Radio. This deal took longer to review than Google’s DoubleClick acquisition. And it is not over yet. The FCC still has to put its stamp of approval on the paperwork. Washington really needs to speed up the merger-review process. Deal, or no deal: it should take no more than six months tops for Washington regulators to render their verdict on an acquisition.
If this merger does go through, as it should, what will the result be? A struggling company with a combined $2 billion in 2007 revenues, $1.25 billion in combined net losses, 17 million total subscribers, and more than 1,500 employees (there’s your costs savings right there). The logic of the deal has always been about reaching critical mass. Satellite-based businesses have huge sunk costs and they need to reach a massive number of paying customers in order to compete.
Will this be enough? Satellite radio is a superior product to terrestrial radio, but it still faces two main challenges: it is not free, and you really only need it in your car. With the increasing diversity of music choices on the Web (both legal and not) and the ubiquity of iPods, terrestrial radio is the least of Sirius/XM’s worries. Maybe Apple should just buy the combined entity and put it out of its misery. I’ve always thought that an iPod/XM radio would be a killer product.
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