Satellite radio in limbo as merger stalls

Sinn Fein

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Aug 29, 2002
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#1
Satellite radio in limbo as merger stalls

By Paul Bond

LOS ANGELES (Hollywood Reporter) - Sirius Satellite Radio CEO Mel Karmazin has more than just a stalled merger with XM Satellite on his mind. He's also wondering what it's going to cost to keep his star talker, Howard Stern, on board.

"Great content costs money," Karmazin reminded analysts Tuesday during a conference call to discuss quarterly earnings.

"If Howard is on the call and listening, if he would like to extend his deal at less money, we would be interested in that," Karmazin told the analysts. "But from my history with him, I don't think that is apt to happen."

Stern costs Sirius $500 million for five years, and he's in his third year already. Add to that the billions Sirius spent on rights to the NFL, NBA, NASCAR and other content, not to mention the building and launching of expensive satellites, and its easy to see why Sirius wants so desperately to merge with XM, though regulators have yet to approve that plan.

In fact, the termination date for the merger deal is Saturday, though Karmazin said Tuesday that he expects the boards of both companies to meet before then to extend the deadline. XM will no doubt update analysts Thursday when it reports financial results.

Karmazin was once optimistic that the merger would be complete at the end of 2007, even while referring to it on occasion as "an uphill battle."

Not only has Karmazin's timetable been thrashed, but the one-year anniversary of the deal struck on February 19, 2007, also has passed, a significant milestone given that more than 200 mergers have been completed since then, each taking an average 110 days to complete.

Still, the bureaucrats aren't in any hurry. In fact, 10 months into the process, Rep. John Conyers, D-Mich., the chairman of the House Judiciary Committee, asked the Justice Department not to "rush through" an approval, if there is to be one.

"We wait by our telephone," Karmazin said Tuesday. "But we really have not heard anything from them. It has been more radio silence than anything else."

Even if the DOJ approves, the Federal Communications Commission must also bless the merger.

Karmazin also said that confusion about the merger among consumers is having a negative impact on retail sales, though Sirius posted better-than-expected quarterly results Tuesday.

The company added 654,000 new subscribers to 8.3 million on its way to losing $166.2 million, compared with a loss of $245.6 million in the year-ago quarter. Revenue rose 29% to $249.8 million.

Sirius posted a full-year net loss of $565.3 million; the year earlier it lost $1.1 billion. Sirius and XM together have burned through billions in the past decade, and merging the companies, by some estimates, would save them an equal amount over the next several years.

Many observers seem to think there's not much of a reason to reject the planned merger, though that hasn't stopped Wall Street from hammering the stock prices as if deal approval were a long shot.

Since February 20, 2007, Sirius shares have fallen 22% to $3.05, while XM shares have sunk 15% to $13.13.

Regulators presumably have been considering for more than a year now the question of whether a merger of the only two satellite radio firms in the nation would constitute a monopoly that would harm consumers.

But most observers seem to have come to the conclusion long ago that the answer is no, considering that sat radio is used mostly in vehicles where competing devices like free radio, iPod docks and CD players are also options, as are DVD players. Soon, the Internet and satellite television will become mainstream attractions in cars, as well.

Anyone blocking the deal on the grounds that merging the two companies would stifle competition "may as well lay on the ground and become fossil fuel for that kind of dinosaur thinking," Motley Fool senior analyst Rick Munarriz said.

Munarriz, like others, worries that two competing satellite radio services can't survive. If they don't merge, Munarriz predicts, "one or the other will fail, and that will give the victor the monopoly it wanted."

Munarriz suggests that investors buy shares of XM and Sirius because the stocks will pop when the merger is approved. "Obviously it's a gamble to get in at this point, but the uncertainty is also discounting the shares," he said.

Steve Birenberg of Northlake Capital also advises buying the stocks, but he says to sell them once the deal is approved and buyers rush in.

"I don't think that satellite radio will ever be the pervasive technology for in-car entertainment based on the current subscription model," he said.

One particularly bearish analyst, Mark Wienkes, said recently that it is "increasingly unlikely" that regulators will block the deal, though he wouldn't buy either stock, merger or no merger.

"Our outlook for satellite radio is cautious given our view of unrealistic cash flow expectations," he said.

Karmazin touted several positive outcomes if the merger were approved, including a la carte programming and cheaper prices for consumers. Plus, the company and its shareholders will benefit from increased advertising revenue.

Sirius only sells about $35 million a year in ads, an anemic amount considering it features dozens of channels with advertising, including two with Howard Stern.

"We ought to be doing a better job in selling Howard," Karmazin said Tuesday.
 

FellowTraveler

Frank Reynolds is my hero
Jul 24, 2005
1,976
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#2
Merger is stalled...Karmazin wants Hoo Hoo to extend for less money

Basically it looks like Sirius is reliant on Hoo Hoo and nothing else. Good luck with that.

long article:
Satellite radio in limbo as merger stalls
Wed Feb 27, 2008 8:24am EST

By Paul Bond

LOS ANGELES (Hollywood Reporter) - Sirius Satellite Radio CEO Mel Karmazin has more than just a stalled merger with XM Satellite on his mind. He's also wondering what it's going to cost to keep his star talker, Howard Stern, on board.

"Great content costs money," Karmazin reminded analysts Tuesday during a conference call to discuss quarterly earnings.

"If Howard is on the call and listening, if he would like to extend his deal at less money, we would be interested in that," Karmazin told the analysts. "But from my history with him, I don't think that is apt to happen."

Stern costs Sirius $500 million for five years, and he's in his third year already. Add to that the billions Sirius spent on rights to the NFL, NBA, NASCAR and other content, not to mention the building and launching of expensive satellites, and its easy to see why Sirius wants so desperately to merge with XM, though regulators have yet to approve that plan.

In fact, the termination date for the merger deal is Saturday, though Karmazin said Tuesday that he expects the boards of both companies to meet before then to extend the deadline. XM will no doubt update analysts Thursday when it reports financial results.

Karmazin was once optimistic that the merger would be complete at the end of 2007, even while referring to it on occasion as "an uphill battle."

Not only has Karmazin's timetable been thrashed, but the one-year anniversary of the deal struck on February 19, 2007, also has passed, a significant milestone given that more than 200 mergers have been completed since then, each taking an average 110 days to complete.

Still, the bureaucrats aren't in any hurry. In fact, 10 months into the process, Rep. John Conyers, D-Mich., the chairman of the House Judiciary Committee, asked the Justice Department not to "rush through" an approval, if there is to be one.

"We wait by our telephone," Karmazin said Tuesday. "But we really have not heard anything from them. It has been more radio silence than anything else."

Even if the DOJ approves, the Federal Communications Commission must also bless the merger.

Karmazin also said that confusion about the merger among consumers is having a negative impact on retail sales, though Sirius posted better-than-expected quarterly results Tuesday.

The company added 654,000 new subscribers to 8.3 million on its way to losing $166.2 million, compared with a loss of $245.6 million in the year-ago quarter. Revenue rose 29% to $249.8 million.

Sirius posted a full-year net loss of $565.3 million; the year earlier it lost $1.1 billion. Sirius and XM together have burned through billions in the past decade, and merging the companies, by some estimates, would save them an equal amount over the next several years.

Many observers seem to think there's not much of a reason to reject the planned merger, though that hasn't stopped Wall Street from hammering the stock prices as if deal approval were a long shot.

Since February 20, 2007, Sirius shares have fallen 22% to $3.05, while XM shares have sunk 15% to $13.13.

Regulators presumably have been considering for more than a year now the question of whether a merger of the only two satellite radio firms in the nation would constitute a monopoly that would harm consumers.

But most observers seem to have come to the conclusion long ago that the answer is no, considering that sat radio is used mostly in vehicles where competing devices like free radio, iPod docks and CD players are also options, as are DVD players. Soon, the Internet and satellite television will become mainstream attractions in cars, as well.

Anyone blocking the deal on the grounds that merging the two companies would stifle competition "may as well lay on the ground and become fossil fuel for that kind of dinosaur thinking," Motley Fool senior analyst Rick Munarriz said.

Munarriz, like others, worries that two competing satellite radio services can't survive. If they don't merge, Munarriz predicts, "one or the other will fail, and that will give the victor the monopoly it wanted."

Munarriz suggests that investors buy shares of XM and Sirius because the stocks will pop when the merger is approved. "Obviously it's a gamble to get in at this point, but the uncertainty is also discounting the shares," he said.

Steve Birenberg of Northlake Capital also advises buying the stocks, but he says to sell them once the deal is approved and buyers rush in.

"I don't think that satellite radio will ever be the pervasive technology for in-car entertainment based on the current subscription model," he said.

One particularly bearish analyst, Mark Wienkes, said recently that it is "increasingly unlikely" that regulators will block the deal, though he wouldn't buy either stock, merger or no merger.

"Our outlook for satellite radio is cautious given our view of unrealistic cash flow expectations," he said.

Karmazin touted several positive outcomes if the merger were approved, including a la carte programming and cheaper prices for consumers. Plus, the company and its shareholders will benefit from increased advertising revenue.

Sirius only sells about $35 million a year in ads, an anemic amount considering it features dozens of channels with advertising, including two with Howard Stern.

"We ought to be doing a better job in selling Howard," Karmazin said Tuesday.

Reuters/Hollywood Reporter
 
O

OzarkBandit

Guest
#3
I guess he is sugessting/realizing Hoo hoo isn't really worth it....

"Great content costs money," Karmazin reminded analysts Tuesday during a conference call to discuss quarterly earnings.

"If Howard is on the call and listening, if he would like to extend his deal at less money, we would be interested in that,"
 

Barbwire Mike

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Jan 30, 2007
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#6
"We ought to be doing a better job in selling Howard," Karmazin said Tuesday.
He's one of the big selling points in every Sirius ad I've ever seen. But then I guess Mel's not going to issue press releases calling his buddy's show a money pit that maxed out the number of subscribers he was capable of bringing in years ago.

And yes, let's bring him back at less money. You know, because he's delivering such inspired radio with his current salary and I'm sure will try even harder at a reduced rate. "whaa"
 

dms964

Registered User
Feb 5, 2006
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#7
He's one of the big selling points in every Sirius ad I've ever seen. But then I guess Mel's not going to issue press releases calling his buddy's show a money pit that maxed out the number of subscribers he was capable of bringing in years ago.

And yes, let's bring him back at less money. You know, because he's delivering such inspired radio with his current salary and I'm sure will try even harder at a reduced rate. "whaa"

He was not talking about selling Stern to subscribers, he was talking about selling Stern to advertisers. The ad dollars have not been there for satellite radio, just listen to the crap advertisers both Stern and O&A have. I tend to think cash for gold would not be there if they had to pay Stern's old rate. Sirius only took in 35 million ad dollars, given Mel's history he'd have to have thought they'd be well over 100 million by now.
 

Barbwire Mike

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Jan 30, 2007
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#8
He was not talking about selling Stern to subscribers, he was talking about selling Stern to advertisers. The ad dollars have not been there for satellite radio, just listen to the crap advertisers both Stern and O&A have. I tend to think cash for gold would not be there if they had to pay Stern's old rate. Sirius only took in 35 million ad dollars, given Mel's history he'd have to have thought they'd be well over 100 million by now.
Oh I'm sure, but even with that as the floor that would still leave 80% of Stern's salary which would have to be justified by subscriptions... and that's if you assumed every single ad on Sirius could be attributed to Howard.

I just love watching Mel squirm. :icon_mrgr
 

Creasy Bear

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#9
Stern may have almost been worth the initial pop... to bring the 1/20th or so of his hardcore zombies on board with Sirius... but that's a one time shot. Whatever they give him after his five years is up, will just be gasoline on the conflagration that is Sirius.

Stern will probably end up sending both companies crashing down in flames, and he'll probably jump ship right before the whole mess hits the ground... just wait and see.
 

MelissaY1

Resident Star Fucker
Nov 28, 2005
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#11
I guess he is sugessting/realizing Hoo hoo isn't really worth it....

"Great content costs money," Karmazin reminded analysts Tuesday during a conference call to discuss quarterly earnings.

"If Howard is on the call and listening, if he would like to extend his deal at less money, we would be interested in that,"
You know what, I've said it here before, and I'll say it again. I know some DIE HARD Stern fans who have never bothered to subscribe to Sirius because they have said themselves the show is not what it used to be anymore, or it's not worth the money, or they're waiting on the merger, etc. Basically a stream of excuses. And that's just the fans. If the company who's employing him is having second thoughts or regrets, that is BAD....but I love it :D
 

Vyce

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Feb 11, 2006
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#12
Anyone blocking the deal on the grounds that merging the two companies would stifle competition "may as well lay on the ground and become fossil fuel for that kind of dinosaur thinking," Motley Fool senior analyst Rick Munarriz said.
Call me a dinosaur, then, because I don't see this merger doing anything but fucking over the consumer.
 

Turfmower

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Jan 17, 2005
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#13
Can some one explain how when they merge how it will save money? They will still have to pay for all current content O&A, Stern, news , sports ETC. and 2 sets of satellites. The only thing i can see that they will save money on is they will need 50 ipods for the music channel instead of 100. and the salaries of bunch of executives.
 

Creasy Bear

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#14
Can some one explain how when they merge how it will save money? They will still have to pay for all current content O&A, Stern, news , sports ETC. and 2 sets of satellites. The only thing i can see that they will save money on is they will need 50 ipods for the music channel instead of 100. and the salaries of bunch of executives.
Ding! Ding! Ding!

Everything and everybody XM in Washington DC... GONE! Count on it.

But even after that bloodletting... you're correct... the reduction in operating costs after combining the two companies, trimming the redundancy, and eliminating jobs still won't be nearly enough to make the new company profitable... it won't even bring them close to break even.
 

dms964

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Feb 5, 2006
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#15
Can some one explain how when they merge how it will save money? They will still have to pay for all current content O&A, Stern, news , sports ETC. and 2 sets of satellites. The only thing i can see that they will save money on is they will need 50 ipods for the music channel instead of 100. and the salaries of bunch of executives.


One company would be in a better position to negotiate with the car makers, Stern and the sports leagues, bringing costs down. Both companies are in alot of trouble and a merger may not cure them, but it's their best chance. For all the talk here about Sirius needing this to bail them out, it's very possible XM would be the one to close its doors if this fails. XM's subscriber acquisition costs have been going through the roof over the last couple quarters while Sirius has been bringing theirs down. XM was the company who accepted the buyout. Both companies will need more money to continue operations, given Karmazin's history he will have a much better chance of getting it on his terms.
 

habeasrob

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#16
What I have never understood is why this deal makes any sense for XM. Sirius has obviously overspent for programming and cannot recoup that investment through subscribers and ad revenue. Spending more than you earn = bankruptcy. Let Sirius fail, then pick up the pieces, such as NFL for much less money.
 

Sinn Fein

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#18
Mel's comments seem to give credence to the fear some have that satellite radio will be laden with 15-minute stretches of commercials like terrestrial radio has now... It sure seems like he's focused on bringing more advertising to the platform...
 

LiddyRules

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Jun 1, 2005
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#19
Jeepers this is a mess.
 

Rackrunner

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Nov 19, 2005
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#20
Mel's comments seem to give credence to the fear some have that satellite radio will be laden with 15-minute stretches of commercials like terrestrial radio has now... It sure seems like he's focused on bringing more advertising to the platform...
QFT :clap::clap::clap:

Either that or they need some higher quality advertisers to spend real money instead of Tahiti Village, Ashley Madison, Cash4gold, etc...
 

UnOriginal

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Feb 16, 2005
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#21
A failed merger sounds good to me.
 

Sinn Fein

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#22
The fact that consumers who are currently not being over-burdened with commercials on a pay service will most likely find themselves in that position should be enough of a reason for the merger to not happen. That, combined with the fact that nothing good will come out of it for O&A as well as their fans, is why I am solidly opposed to it.
 

Ballbuster1

In The Danger Zone...
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Aug 26, 2002
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#23
Satellite = Betamax

The Beta format was far superior to VHS in both sound and video.
I still have a working Betamax player that plays all formats of beta
I, II and III. VHS couldn't touch it. Price was the big downfall.

People aren't going to pay for sat rad if it goes to way more commercials
because they can get that for free as it is now.

The competition from Ipods and MP3 players that can give you
commercial free music that you want to hear and the still readily
available music from "free" stations on FM will be tough to beat.
 

d0uche_n0zzle

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Sep 15, 2004
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#25
Melvin was trying to buy Howie a high billable audience by "merging" with XM.

Too bad, Melvin is nothing more then an ad salesman in disguise, he's no CEO who understands satellite's niche.

Fuck him, Howie, and the stoopid merger.