XM Or Sirius Or Both Or Neither

When technology moves the goalposts, business plans that sound like Ponzi schemes make sense. For a while. Lots of established businesses like Amazon started out by hemorrhaging cash to establish market share, in the hope of turning a profit later. Well, time might be running out for satellite radio. Sooner or later, someone's going to have to make some dough, or we'll be back to listening to Flock Of Seagulls songs on FM radio again.

Even if they both come up short this year, Sirius and XM will have built an impressive market. But the growth is coming at the expense of profits. And even well-funded firms have limited life spans. At the end of the third quarter, in which it lost $154 million on operations, Sirius had $352 million in cash and $1 billion in debt. At the end of the third quarter, in which it lost $60 million on operations, XM had $285 million in cash. The business models of expensive talent, discounted subscriptions, and heavy marketing clearly aren't sustainable for too much longer. And so it's not surprising that analysts have begun to speculate about a potential merger. A merger of equals is certainly possible, though not likely given the egos involved. More likely is a situation in which one falters significantly and the other pounces for an acquisition. A third possibility, which analysts seem unable to contemplate, is that both could fail, and somebody else could end up with both of their carcasses.

If they merge, what will we call it? Xirius? S and M? An antitrust violation? Geez, make some money, will you? Try paying Howard Stern less than the GDP of half the countries in Africa.

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