XM & Sirius Merger? Recent NewsRecent News cont.Similar Merger AttemptXM Radio: A BackgroundSirius Satellite RadioSirius SatellitesProducts, Products!XM Stock Prices – Before & AfterSirius Stock Prices – Before & AfterStock Prices - NormalizedA Duopoly into a Monopoly?Competition Landscape Market Power & Product Differentiation?Notable Unholy AlliancesThe Great Race Moral of the StoryXM & Sirius Merger?Kenny NguyenEEP 142 – Industrial OrganizationRecent News• February 19, 2007 announced merger• “Sirius Plans to Buy XM in $4.6B Stock Deal”» Reuters 20 Feb 2007Recent News cont.• Sirius, XM expect deal to close by end 2007• Tue Feb 20, 2007 1:45 PM GMT • Email This Article | Print This Article | RSS •[-] Text [+] • NEW YORK (Reuters) - Sirius Satellite Radio Inc. (SIRI.O: Quote, Profile , Research) and XM Satellite Radio Holdings Inc. (XMSR.O: Quote, Profile , Research) expect their merger to close by the end of 2007, according to presentation slides for an analysts' conference call on Tuesday.• The two companies expect shareholders to vote on the deal in four to six months and expect to receive regulatory approval in about nine months, according to the slides.• Sirius plans to buy rival XM for $4.6 billion in stock, but U.S. Federal Communications Commission Chairman Kevin Martin said on Monday the deal would face a tough time winning regulatory approval.• © Reuters 2007. All Rights Reserved. | Learn more about ReutersSimilar Merger Attempt• Direct TV & Dish Network• FCC rejected push for satellite media merger–Why?– How is the XM/Sirius merger different?XM Radio: A Background• NASDAQ: XMSR• Founded in 1988 as American Mobile Radio Corp.• HQ in DC• Services in US & Canada• 73 music, 83 news/entertainment channelsSirius Satellite Radio• HQ in NYC (seriously)• 69 music, 65 news/entertainment channels• Formerly known as Satellite CD Radio Inc. but changed name to Sirius Satellite RadioSirius SatellitesProducts, Products!• XM Radio• Home theater system• Car stereo• Portable player• Plug-&-Play hybrids• XM online• Sirius Satellite Radio• Home theater system• Car stereo• Portable player• Plug-&-Play hybrids• Sirius Internet RadioXM Stock Prices – Before & AfterDate Day PriceP delta % Vol. milV delta %13-Feb T 13.06 6.7220-Feb T 15.41 0.179939 81.16 11.0773827-Feb T 14.32 (0.0707) 13.22 (0.8371)6-Mar T 14.14 (0.0126) 13.93 0.0537 13-Mar T 13.35 (0.0559) 4.56 (0.6726)20-Mar T 13.54 0.0142 5.59 0.2259 27-Mar T 13.17 (0.0273) 3.47 (0.3792)3-Apr T 12.14 (0.0782) 7.12 1.0519 10-Apr T 12.6 0.0379 -17-Apr T 11.9 (0.0556) -0246810121416182/13/20072/27/20073/13/20073/27/20074/10/2007Series1Sirius Stock Prices – Before & AfterDate Day PriceP delta % Vol. milV delta %13-Feb T 3.57 24.4820-Feb T 3.92 0.098039 260.82 9.65441227-Feb T 3.65 (0.0689) 72.15 (0.7234)6-Mar T 3.47 (0.0493) 79.45 0.1012 13-Mar T 3.29 (0.0519) 37.07 (0.5334)20-Mar T 3.31 0.0061 44.53 0.2012 27-Mar T 3.26 (0.0151) 20.15 (0.5475)3-Apr T 3.09 (0.0521) 45.32 1.2491 10-Apr T 3.12 0.0097 -17-Apr T 3.03 (0.0288) -00.511.522.533.544.52/13/20072/27/20073/13/20073/27/20074/10/2007Series1Stock Prices - Normalized00.0010.0020.0030.0040.0050.0060.0072/13/20072/20/20072/27/20073/6/20073/13/20073/20/20073/27/20074/3/20074/10/20074/17/2007XMSiriusA Duopoly into a Monopoly?• We have a duopoly within satellite radio• Do they have market power?• How will market power change after merger?• How would the two-set of current subscribers be treated?– Few years still keep services separate– Slowly phase out one & replace losing sideCompetition Landscape •AM•FM• HD Radio• Digital Radio• Podcasts• CD/CassettesMarket Power & Product Differentiation?• Do consumers really believe that satellite radio is different?•If so, why?– Little to no commercials– Greater selection (e.g., choice of NFL games to listen to)–Quality– Exclusive access (e.g., Howard Stern)– XM & Sirius subscription & equipment are similarNotable Unholy Alliances• XM & Napster• XM & JetBlue & DirecTV• XM & AirTran Airways• XM & Zipcar• XM & DirecTV• XM & AOL Radio (free limited)• XM & Winamp• Exclusive satellite right to all NHL games• Sirius & Howard Stern• Sirius & Martha Stewart• Exclusive satellite rights to all NFL, CFL & NBA gamesThe Great RaceMoral of the Story• Don’t buy XM & Sirius because of merger rumors• This stuff is expensive for college students (so get it illegally – but don’t get caught)• The merger is uncertain• And most