Saturday, July 26, 2008

Communism in the USA

It is a fact now.
Yesterday the FCC (Federal Communications Commission) approved the merger of satellite radio companies Sirius and XM.

It was a 3-2 decision.
To notice is that the 3 in favour were Republicans and the 2 opposed were Democrats.

The President Bush appointee Kevin Martin, Chairman of the FCC claimed:
"I think it's going to be, in the end, a good thing for consumers and be in the public interest".
Critical and alert fervent and loyal blog readers will notice especially three words in this statement:
“…in the end…”
Kevin Martin is already putting up his defences for when contrary to all promises satellite radio is going to be more expensive.

Because now it has become a monopoly.
It has become a take it or leave it situation for the customers.
A situation every entrepreneur only dreams of.

The reality is that it is not a merger at all.
The fact is that Sirius eliminates competition by buying out XM.
This costs $ 3.3 billion (€ 2,1 billion) and we may wonder where that money comes from and where it goes.
For sure the XM subscribers will not see one penny of those $ 3.3 billion.
And the only way for Sirius to regain those $ 3.3 billion is by charging more to the 18 million-plus customers for the exclusive services they are the only one now offering.

We should expect that not much will change for the next three years.
Because Sirius voluntarily agreed to a set of conditions, including a three-year price cap and an 8 percent set-aside of "full-time audio channels" for public interest and minority programming.

Again critical and alert fervent and loyal blog readers see one word shining in that promise.
It is therefore a promise worth nothing.
If they raise prices next year, who will stop them?

Democratic FCC-commissioner Jonathan Adelstein said after the vote:
" I hope they keep their edge and don't become a fat and happy monopoly."
That is very naive but much to the point.
Because in the USA, satellite radio is now organized like in a Communist State.
And we all know how that works in a devastating way imploding eventually the business.

It is a fact that both Sirius and XM were never profitable businesses.
All the years of their existence they have been losing money.
So, one could argue that it is better to have one company than eventually no companies at all.
However, one must remember that Sirius and XM have been in competition with each other in a lunatic way.
For example, Howard Stern, a popular radio talk host, was hired for $ 80 million a year and receiving Sirius stock worth $ 200 million.
Simple calculations show that never ever can that money return by getting more subscribers.

Stern was not the only one who had advantage of bad business strategies of the satellite radio companies.
Who willingly ran around like chickens without heads hiring all kinds of disc jockeys for enormous amounts of money.
Maybe a deliberate strategy: to open the way for a merger and monopoly.
XM walks away with $ 3.3 Billion and Sirius has the hands free to milk the 18 million-plus as much as they want.

We will see now how long it will take before a new posting will be published on this blog about Sirius/XM.
Announcing increase of fees or limitation of available channels.
Title will be:
“I told you so”
In Russian.


To learn more about the irresponsible business practices of Sirius and XM, click on:


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