XM and Sirius, Spared From Extinction

If the satellite radio firms merge, there will still be plenty of competition.

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Do government regulators jam to E Street Radio? Or crank up Liquid Metal? Or snicker at Howard Stern?

Maybe so. It took the Justice Department a year to officially ascertain what many consumers already know, but its ruling on satellite radio is evidence of a pretty hip attitude toward music and technology. By approving a proposed merger between the two big satellite radio operators, XM and Sirius—which both lose money, even though listeners love them—Justice may help secure an important source of music and other entertainment that's now threatened by mounting losses.

The yearlong review focused on whether a merger of the two satellite radio outfits would produce a monopoly with the power to gouge consumers. The conventional, hidebound answer would have been—duh, yeah. XM and Sirius are the only two companies offering satellite radio. So put them together, and there's only one.

But anybody who listens to radio knows there are plenty of alternatives to satellite, with more arriving all the time. That's why a merger ought to pose no threat to consumers. The Federal Communications Commission still needs to sign off on the deal, and could slow things down or insist on modifications like tiered pricing, which would allow listeners to subscribe just to certain channels, for less. That might be a consumer-friendly move, but radio is one industry where there's so much innovation—and low barriers to entry—that the market itself is consumer-friendly. Consider all the options:

At home. On the Internet, there seem to be more offerings than ordinary consumers can keep up with, including free services like Pandora and Rhapsody that let you "program" your own station, according to your tastes. Most cable services offer dozens of music channels through your TV. As a bonus, Internet radio and cable music are usually commercial free. Oh, yeah, there's also conventional AM/FM radio for old-fashioned listeners who enjoy intrusive commercials and a small set of popular songs selected by corporate programmers.

In the car. There are fewer choices here, but that will change. Satellite is the most obvious alternative to the commercial radio you dial up on the dashboard, but many new cars these days come with an auxiliary jack that allows you to run your MP3 player through your car stereo. (Hint to new-car buyers: Insist on this feature.) That expands your listening options to anything that can be downloaded: podcasts of your favorite Internet radio programs, digital audiobooks, and of course all the music you can fit on your player. Some cars now come with a 30- or 40-gigabyte hard drive that lets you transfer your whole music collection straight to the car. And let's not forget CD players, which are basically standard equipment on cars these days, even if the CD itself seems bound for obsolescence.

On the go. The other big market for satellite radio, in addition to cars, is portable players. Again, the alternative here is anything listeners can download and squeeze onto their MP3 players, with more offerings available all the time. That includes video, and for many people, it might be a lot more compelling to watch snippets from Saturday Night Live or The Daily Show than to listen to comedy bits on the radio.

In the pipeline. Future offerings are likely to include music through your cellphone, portable Internet radio, and probably dozens of other gizmos and services that will bring entertainment to you no matter where you are. If the government gives final approval to the XM-Sirius merger and these companies get their business model ironed out, satellite radio might just stay in the mix.

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  • Rick Newman

    Rick Newman is the author of Rebounders: How Winners Pivot From Setback to Success and the co-author of two other books. Follow him on Twitter or e-mail him at rnewman@usnews.com.

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