Sirius Says a Merger Makes Sense, XM Keeps Mum

Karmazin

Mel Karmazin, chief executive of Sirius, has touted the benefits of a merger with XM Satellite Radio for a number of months.

Other Sirius officials have said that a merger would be a good thing, though XM has not commented on the possibility, writes The New York Times.

With two companies in the same industry, there is a similar cost structure, and a merger clearly makes sense from an investor’s point of view, “to reduce costs, and to have a better return,” David Frear, CFO for Sirius, is quoted as saying.

Neither company has said whether they have actually discussed the issue.

According to analyst Richard Doherty with the Envisioneering Group, the two services “mirror each other tremendously. More people know that one service has Howard Stern than know which one has him.”

Because of that, purchase decisions tend to be made based on ease of purchase rather than on programming, the article claims, and goes on to speculate that consumer choice will become even less of a factor in coming years, as more and more new cars are sold with factory installed satellite radios.
Both Sirius and XM lowered their 2006 subscriber level expectations, but XM president Nate Davis said the slower-than-expected growth rate was XM’s own doing, by failing to stimulate the market with new products, and was not a result of any softening of the market.

There is little doubt that satellite radio has embedded itself in the consciousness of consumers. Sirius claims that 83 percent of consumers aged 18 to 55 are now aware of satellite radio.