Duo use different technology to beam signals
The newly merged Sirius XM Satellite Radio company is already up and running… and looking a lot like the two separate companies they once were.
That’s mainly because the two satcasters use different technology to beam dedicated signals. So XM’s 9.7 million subscribers’ radios can only receive XM’s signal and Sirius’ 8.9 million subscribers are similarly limited.
As a result, despite some overlap in programming (both have myriad channels of rock and country music), the full menu of channels for each service will remain in effect, at least for the time being. Both services will continue to operate independently for the foreseeable future.
Also, while combined SXM is headquartered in Sirius’ New York offices, the XM half of the new entity will maintain its D.C. digs and operations.
And don’t expect either service to spend big bucks wooing new talent like they did when they were chasing the likes of Howard Stern, Martha Stewart and Oprah Winfrey to distinguish themselves.
So, um, what is new?
“This was never about tapping or adding new programming,” says Blair Levin, media analyst for Stifel Nicolaus. “It’s really about packaging and subscription options for the consumer.”
And options there will be:
In three months, subscribers to one service will be able to add a “best of” package — as yet unspecified — of channels from the other service. Expect to pay about $4 more than the normal monthly sub rate of $12.95 monthly, and no new radio required.
New radios will be required if you want either of the a la carte deals — 50 channels from either Sirius or XM at $6.99 monthly, or 100 channels from both for $14.99. Those radios should be available in three months, the company says.
Other deals will be available for “family friendly,” “mostly music” or “mostly news-talk-sports” packages, and in nine months an interoperable radio should be on the market that will receive the full range of both XM and Sirius menus — more than 300 channels total — though subscription rates are not yet available.
(Sirius has an agreement with Variety that provides regular news reports from the paper’s newsroom.)
But if all you want is what you’ve been getting, that will continue at the same $12.95 monthly rate for at least three years — the amount of time the companies agreed to a price cap.
SXM’s expectation is that “new synergies” — the buzzwords in SXM-speak these days — will result in $400 million in cost savings next year and, for the first time, lead to “positive free cash flow, before satellite capital expenditures, for the full year 2009,” according to a statement. The company isn’t commenting on exactly where the cost savings will come from.
But add in those capital expenditures and the positive flow could turn negative. And some $1.1 billion of the new company’s combined debt of $3.4 billion comes due in various segments in February, May and December 2009.
“The really big question is how they will eventually accomplish merging the two technologies,” Levin says. “And then, how do you stay ahead of the technology?”
So, not everybody shares SXM topper Mel Karmazin‘s confidence that what’s really new is the merger’s potential for satellite radio to yield profits soon?
“Too soon to tell,” Levin says.