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Sirius XM Radio

Sirius XM Radio. Geoff Goodside Rafael Sosa 4/21/11. Introduction. Provides two satellite radio services in the U.S. and Canada - Sirius Satellite Radio - XM Satellite Radio. Introduction. Founded in 1990 as Satellite CD Radio, Inc 2008 Sirius XM Radio Inc on

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Sirius XM Radio

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  1. Sirius XM Radio Geoff Goodside Rafael Sosa 4/21/11

  2. Introduction • Provides two satellite radio services in the U.S. and Canada - Sirius Satellite Radio - XM Satellite Radio

  3. Introduction • Founded in 1990 as Satellite CD Radio, Inc • 2008 Sirius XM Radio Inc on • Key Contributors: - Eddy Hartenstein (Chairman) - Mel Karmazin (CEO) - Scott Greenstein (President and CCO)

  4. Introduction • Revenue: $2.8 Billion • Operating Income: $ 465.4 Million • Net Income: $ 43.06 Million • Total Assets: $ 7.383 Billion • Total Equity: $ 207.6 million • Employees: 1479

  5. Summary • February 19th, 2007 merger announced • March 20th, 2007 “Consolidated Application for Authority to Transfer Control” • June 8, 2007 “Public Notice” accepted

  6. Summary • November 13, 2007, approval of XM • March 24, 2008, DOJ closed investigation citing no harm • June 16, 2008 concessions made public • July 25, 2008, FCC approves merger • July 29, 2008 Sirius XM officially merge

  7. Market Definition • XM: defined relevant market as audio entertainment, including: • Free over the air radio (AM, FM, HD) • Internet Radio • iPods and other MP3 players • CD players • Cell phones • Satellite Radio

  8. Market Definition • FCC: market consists of satellite audio programming provided to people in the U.S. for a fee. • Terrestrial radio is not in the relevant market. • DARS is a premium service (better audio quality, greater programming variety, no commercial interruption). • DARS and Terrestrial radio are complements.

  9. Market Concentration

  10. Pricing • XM and Sirius are each others competitive restraint on prices. • Firms suggest that other forms of delivering audio will constrain their ability to raise prices. • Huge entry barriers, threat of entry is not a constrain for price increases by merged firm.

  11. Effects on Competition • The proposed merger will lessen competition, as prohibited by the Clayton Act. • Relevant Market goes from having two firms to one monopolist with 100% market share.

  12. Efficiencies • Firms argue that merged firm would have “much stronger programming lineup”. • Firm would have a lower cost structure based on the elimination of overlapping facilities and personnel. • According to Merger Guidelines: • “Efficiencies almost never justify a merger to monopoly”

  13. Remedies • DOJ disfavors conduct remedies (price regulation), instead structural remedies (firm must divest assets to allow entry) are preferred because they are clean and avoid extra costs for the government. • The remedy suggested by parties was to maintain price levels for a certain period of time.

  14. Post Merger • A La carte option • Purchase of new radios • 50 Channels vs. 100 Channels • Best of both content • Subscriptions for multiple radios increase

  15. Conclusion • Lowers cost • More variety • New development • Greater competition

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