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Satellite radio firms unveil pricing plans

The top executives at the nation’s two satellite radio companies detailed pricing plans Monday that they said would let customers choose which channels they want to receive if the two firms are combined.
/ Source: The Associated Press

The top executives at the nation’s two satellite radio companies detailed pricing plans Monday that they said would let customers choose which channels they want to receive if the two firms are combined.

Sirius Satellite Radio Inc. announced last February that it would acquire XM Satellite Radio Holdings Inc. for $4.7 billion. The combination requires approval from antitrust regulators and the Federal Communications Commission.

The pricing plans announced Monday range from $6.99 per month for 50 channels offered by one service to $16.99 per month where customers would keep their existing service, plus “choose from the best” of channels offered by the other service.

That means a customer could subscribe to both the Major League Baseball channel on XM and the National Football League channel offered by Sirius, on the same radio.

Currently, the price of a monthly subscription for both companies is $12.95 and there is no channel choice, or “a la carte” option.

A combination of Sirius and XM, which broadcast to a combined 14 million subscribers, faces steep regulatory challenges, however. When the companies received their licenses from the FCC to begin offering subscription radio service via satellite, they agreed not to merge.

The companies must prove to the Justice Department that the deal is not anticompetitive. They must also prove to the FCC that the acquisition would be in the best interest of the public, which owns the airwaves the two companies use to deliver their signals.

Sirius CEO Mel Karmazin, in a speech at the National Press Club in Washington on Monday, said the U.S. is in a “revolutionary age of audio entertainment” and that the companies must compete with a whole range of products that weren’t around when the licenses were first issued.

He said the companies compete with free services, including portable digital music players, cell phones that download music, digital radio and the “800-pound gorilla” that is terrestrial radio.

The National Association of Broadcasters opposes the acquisition, calling it a “government-sanctioned monopoly.”

Spokesman Dennis Wharton said in a written statement that policymakers “should not be hoodwinked” by the announcement. He said the “a la carte” option would require customers to buy new radios and he said that nothing in the past has prevented either company from offering an a la carte option before.

Karmazin noted that the NAB itself claims satellite radio is a competitor when it lobbies the FCC to loosen limits on radio station ownership. He said the NAB is “not just in conflict with us, they are in conflict with themselves.”

He said savings to be realized with a combination would amount to “hundreds of millions of dollars per year,” thanks to a drop in expenses. Such a savings is what would make the “a la carte” packages possible.

He noted that Sirius has never turned a profit in its 17-year history and lost $1 billion last year, but insisted that if the proposed acquisition does not go through, nothing will change.

“I believe both companies will be able to compete in a robust market,” he said.

If the buyout is approved, the combined company would offer a total of eight different packages.

The lowest-priced “a la carte” package would offer 50 stations from one service for $6.99 per month, plus additional nonpremium stations within the service at 25 cents apiece. Premium programming, however, like professional sports and the Howard Stern show, would cost $5 or $6 more.

A second “a la carte” plan would let customers tune in to 100 channels, mostly from one service, plus a handful of “best of” channels on the other service, for $14.99.

Both the a la carte packages would require the purchase of a new radio, the companies said.

Other packages would include family friendly lineups priced at $11.95 and $14.95 and music and news talk packages, both for $9.99. Customers happy with their existing service would still pay $12.95 per month.

Consumer groups have opposed the deal.

Chris Murray, senior counsel at Consumers Union, the nonprofit publisher of “Consumer Reports” magazine, called the announcement an “interesting, positive development.” However, he said, the merger of the two companies would still result in a monopoly, which would ultimately be bad for consumers.

Sirius and XM hope to close the deal by the end of the year.