You’re cruising down a state highway in west Texas flipping through radio stations, but the reception is horrible. A couple of small-town AM warriors are keeping the waves breathing with old standards and second-tier conservative talk shows. Satellite radio would sure pay off right now.
The problem is, however, which provider do you choose? XM, known for it’s better musical selection, or Sirius, with its talk-heavy roster?
If the two merge, as was recently proposed, you might not have to. And fewer choices could mean a better product.
Of course, you’d get some repeats. A shining example cited by Forrester Research Vice President, Josh Bernoff, in an interview with PBS’s NewsHour with Jim Leher, is the shock jocks.
"In this case, one company has the NFL on it, and the other one has baseball," said Bernoff. "One has Howard Stern, and the other has Opie and Anthony."
That might not be such a bad thing, though, said Bernoff, because both companies are currently operating at a loss with somewhat soft subscriber bases, and a merger might be a benefit. It would force the companies to cut extraneous shows and focus on what works.
The deal means potential users would get more bang for their buck. But will the companies even be allowed to merge?
When they started up a few years ago, one of the stipulations agreed upon with the FCC was that the companies would remain two separate and distinct entities. Anti-trust issues are something of a hot button with the American public, and the satellite players wouldn’t have any direct satellite competitors if this occured.
Bernoff said it’s important to keep in mind that just because there’s no direct competition, it doesn’t mean that there’s no competition period.
"The most liberal way to look at it is that everything competes with everything else," said Bernoff. "And for that reason, merging these two similar companies means they’ll still have to compete with iPods, and Internet radio, and high-definition terrestrial radio and so on."
And while things like podcasts and new media outlets such as YouTube are giving traditional formats like radio and cable a run for their money, it’s highly debatable if the merger will even make a difference.
Why? Because the bottom line with any company in the free market is that until it starts turning a profit, the business model is essentially unproven. And neither XM or Sirius are profitable.
This is obvious in companies such as Amazon and Netflix, which even today-despite impressive subscriber and user growth-see hesitation from mainstream investors and businessmen.
Though Bernoff quoted a study in which 13% of consumers polled said they would be open to trying a satellite radio format, theoretically proving that a market exists, capturing that market is another story.
The problem lies in converting an every day consumer who might appreciate the novelty of the concept, to using a pay-per-month subscription service. The advertising cost in winning customers this way is, in short, crippling on top of the medium’s other expenses-paying mind boggling sums to high-profile media celebrities like Howard Stern and Oprah that attract users.
Additionally, the American public has grown up taking free media for granted; it’s able to reach down, twiddle the dial, and pull up a wide selection of music at little or no cost. With the advent of increasingly powerful cellphones that offer streaming music options, as well as a growing selection of well-done internet radio, what’s the draw to pay $12 a month for a service that still seems to be at the far end of the luxury spectrum?
The consensus among media analysts thus far seems to be that a merger is a good idea. What looked, until only a few months ago, like two nascent media giants riding a sinking ship, may have something of a fighting chance.
Many questions still remain, and as yet, the media world seems to be holding its breath, waiting to exhale until the FCC metes out a ruling.
If it goes through, satellite radio just might be in your future next time you’re cruising through the boondocks. And don’t worry-if you miss it, you’ll always be able to catch the entire ourvre of Lawrence Welk on AM.