XM, Sirius offer a la carte options

Satellite radio trying to appease regulators

Satellite radio companies XM and Sirius took a bold step toward trying to appease regulators, unveiling plans Monday to offer fully a la carte subscription options — including a credit for blocking unwanted content — that will become available should the proposed merger of the world’s only two satcasters be approved.

Speaking at a National Press Club luncheon Monday, Sirius topper Mel Karmazin called the options a first. While some cable TV companies have offered so-called family friendly subscription packages, cablers and satellite TV operators have claimed that fully a la carte subs, in which consumers pick only the channels they want, are economically unfeasible.

Federal Communications Commission chairman Kevin J. Martin is a strong advocate of a la carte subs, as are some key members of Congress. Both the FCC and Congress have cast critical eyes on the proposed merger, which the FCC and the Dept. of Justice are reviewing.

Karmazin outlined eight different subscription models that will be available, two of which will allow consumers to specify what channels they want to receive.

In the first a la carte model, subscribers can choose 50 channels from either 100 Sirius channels or 100 XM channels for a monthly rate of $6.99. Currently, the rate for receiving all channels from either service is $12.95.

In the second, listeners can pick a total 100 channels from Sirius and XM programming for $14.99. Right now, listening to both services requires a separate radio for each plus a subscription to each. Two subs alone cost $25.90.

Also available will be a family friendly option, which will allow blocking of adult-oriented channels and will cost $11.95, reflecting a $1 credit against the normal $12.95 rate. “That way, people who don’t want to subsidize those channels won’t have to,” Karmazin said.

The most expensive option would be receiving all channels from one service plus “select” channels from the other, for a monthly charge of $16.99. Subscribers could also choose from two other options — one offering primarily music, the other primarily news, sports and talk.

Current subscribers who want to continue with their existing service will be able to as well at no extra charge.

New radios would be required for only the two fully a la carte options, Karmazin said, adding that the price of the equipment would be “comparable” to prices of radios already on the market. Existing radios would be able to receive all other subscription deals.

Karmazin framed the new subs as a follow-through on promises he made earlier this year that the merger would benefit consumers. A major regulatory hurdle is having to show that the merger will be in the public interest. Karmazin said the new options demonstrate it will be.

The other hurdle is showing the merger will not be anti-competitive. Karmazin used his speech to emphasize that the market for audio entertainment is large and diverse, and that satellite radio is but one among many competitors, including terrestrial radio (230 million listeners), iPod/mp3 players (116 million) and Internet radio (72 million). XM and Sirius combined have 14 million, or 3.4% of the radio listening audience, he said.

“Terrestrial radio is still the 800-pound gorilla,” Karmazin said.

Critics of the merger, particularly the National Assn. of Broadcasters, have contended satellite radio is a market unto itself and the merger should therefore be prevented to avoid creating a monopoly. NAB also issued a quick response to the new subscription options, stating:

“Policymakers should not be hoodwinked by today’s announcement, since nothing is stopping either XM or Sirius from individually offering consumers a more affordable choice in limited program packages.”

Asked Karmazin, “Do you believe what NAB says when its agenda is to block the merger, or when they are filing comments with the FCC?” Karmazin noted that Clear Channel execs as well as NAB prexy David Rehr himself have referred to satellite radio as competitors in a vast audio market when the issue of loosening ownership rules arises.

Afterward, in an interview with Daily Variety, Karmazin and XM chairman Gary Parsons said they had no projections of listener growth that would result from the new options, assuming the merger is approved, but Karmazin said he expects the $6.99 option to “drive significant numbers of new subscriptions.”

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