Seventeen months and a slew of concessions later, the FCC is poised to officially grant permission for the only two U.S. satellite radio operators to merge.
On Wednesday, insiders confirmed that FCC commissioner Jonathan Adelstein joined fellow Democrat Michael Copps in voting against allowing Sirius and XM to join forces, giving commissioner Deborah Taylor Tate the fifth and deciding vote.
Now Tate is ready to join fellow Republicans chairman Kevin Martin and commissioner Robert McDowell in voting in favor of the merger because XM and Sirius have agreed to certain conditions. Her vote, expected Thursday or Friday, will break the 2-2 tie.
The concessions that Tate was pushing are for XM and Sirius to pay a fine for past indiscretions that involve radio receivers that exceeded FCC power limits. She also was disturbed that XM and Sirius still have not produced a radio that works with both services, even though they have promised to do so.
The deal reportedly will also include a three-year price freeze and two dozen channels dedicated to noncommercial programming.
The Department of Justice determined four months ago that the merger wouldn’t harm consumers and approved the deal.
The National Association of Broadcasters, which represents the traditional radio industry, was quick to denounce any deal involving merger approval as anti-competitive and suggested that the fight is not over.
“We’re not convinced the final chapter has been written,” NAB executive vp Dennis Wharton said.
He also called merger approval a “sweetheart deal for Wall Street speculators” and said that XM and Sirius, in their 11 years of existence, “have had more luck flaunting the FCC’s own rules than creating a successful business model.”
Adelstein, who was the most vocal FCC opponent this week — assuming the role that Copps had played earlier — said he was pushing for a six-year price freeze and for more noncommercial channels than XM and Sirius have agreed to create.
“Instead, it appears they’re going to get a monopoly with window dressing,” he said Wednesday. “We missed a great opportunity to reach a bipartisan agreement that would have benefited the American people.”
Shares of both companies spiked on the news that a deal was imminent, with Sirius up 13% to $2.68 and XM up 10% to $10.04.
Sirius and XM have been lobbying hard for merger approval, and their case has been bolstered by the huge losses they have been racking up. XM said this week that it lost $120 million in just its second quarter despite having 9.7 million subscribers paying up to $12.95 per month for the service.
With losses like that, XM or Sirius might have gone bankrupt without the benefits of a merger, two primary ones being:
1. With a combined 18.3 million subscribers, the medium becomes a more powerful advertising platform. While XM and Sirius are known for their commercial-free music channel, they sell ads on their sports, news, talk and comedy channels, including Howard Stern’s channels on Sirius.
2. Though they haven’t struck any big-ticket deals in about two years, they’ll not again need to bid against each other for top content, like $500 million for Stern, $650 million for Major League Baseball on XM, $107.5 million for NASCAR on Sirius, $220 million for the NFL on Sirius and $55 million for Oprah Winfrey on XM.