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Technology Stocks : XM Satellite Radio Holdings Inc. (XMSR)
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To: HEXonX who wrote (3244)2/19/2007 11:33:05 AM
From: TimF  Read Replies (1) of 3386
 
I'm not so sure a merger is a good idea. In the long run there may be ways to cut costs and still maintain a lot of the current subscribers, but in the short to medium run I don't see any benefit. The satellite costs isn't going away, the costs for the content aren't going to be greatly reduced. I suppose marketing could be cut, but its not like XM and Sirius compete only against each other, they need to compete against terrestrial radio, and to a lesser extent against other forms of communications and entertainment, and they need to continue to develop the market, so marketing cuts can only go so far.

In the long run they might save on content costs, and maybe satellite costs, but only by having a combined service that's less then the sum of the two separate companies service.

If when the satellites eventually have to be replaced, they reduced the capacity and channels below the current total of both companies, money would be saved, but only at the expense of having a new company that is less then the sum of its previous parts. And what about all the people who own receivers that only get one set of channels right now, what would they receive after a future merged company combined on some number of channels that is more than the current for each but less than the current total for both? Would they get only part of the channel lineup? Would they have to buy new receivers to get any channels?
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