Media Curmudgeon

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December 12, 2006

Bill Grimes Comments on Sirius and XM

Bill Grimes writes:

Each company has another choice instead of waiting for an unlikely third participant to enter the market. If two cannot profit in an industry how can three? And that choice for either, or actually both, is to declare bankruptcy. Both are seemingly headed inexorably in that direction if you look at their financial operating performances and the huge amount of investment capital and the millions in equity and debt that have been used by customer-acquisition plans (advertising).

Also, churn is hurting each company as their CEOs spend millions to "steal" the others' subscribers. So why would any investor want to make more money available to two management teams that have recklessly spent other investors money with no return in sight and with no reason to believe that profitability is anywhere in sight.

Whichever company goes under first, the remaining one will line up at the court to buy their assets at a dime, or less, on the dollar, and that survivor will have a successful business, with no competition. You then must say, "What the FCC is now using as a reason to preclude the two from merging today will be forgotten when the public faces the prospect of no survivor." Or, if Dr. John Malone, who is acquiring DirectTV from Rupert Murdoch, steps up as the people's and his shareholder's hero by providing a new and vastly improved audio product, thus evoking public comments from ex-Sirius and XM subscribers, "What was the name of that service we had back in 2006?"

Posted by Charles Warner at December 12, 2006 08:06 PM

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