Why Does The NAB Really Care About The XM-Sirius Merger?

The National Association of Broadcasters has taken the position (the NAB Position Statements) as defender of the public interest in the ongoing XM-Sirius merger battle. They state that the XM-Siruis merger will result in higher fees for subscribers and that the merger creates a monopoly that is not in the public interest. But why is a coalition of AM/FM radio broadcasters so concerned with us and how this affects our wallets? Shouldn’t they be concerned with how this affects them?

Apparently not. This doesn’t affect them. Or does it? In one statement, reinforcing their position as public defender, NAB President and CEO David K. Rehr agrees with the FCC that “audio services such as terrestrial radio (including HD radio), iPods, and Internet radio are not competitive substitutes for XM or Sirius.” But I don’t see it that way and neither does Sirius. On July 23, XM-Sirius announced a move that should increase competition between the satellite and radio worlds. They will be offering ala carte programming and specially priced packages.This makes radio like cable and satellite TV. You choose what you want to watch and you pay accordingly. You want 75 sports channels and no movie channels you can pay for that option. Now you can do that on the radio.

“The NAB will do and say anything to try to block the merger of XM and Sirius,” a Sirius spokeswoman said. “As more and more consumers voice their support for the merger of XM and Sirius, the more fearful of increased competition the NAB becomes and the more desperate their actions in response.”

After the announcement the NAB filed a report with the FCC (download here) that calls the XM-Sirius a la carte pricing model a “sham.” The report attempts to show that subscribers will pay higher prices for the new packages and ala carte programming by calculating the price per channel percent increase per channel and number of fewer channels. They list details and prices of the current XM & Sirius packages and the newly proposed packages and ala carte options and to bring the point home they use percentages.

Currently both XM & Sirius charge $12.95 for their services, offering over 100 channels of music, sports, new, weather, traffic, religion and kids programming. One of the new packages, Mostly Music XM, comes in at $9.99 and offers 65 channels of music, religion and kids programming. That’s 3 bucks cheaper and I don’t have to listen to the sports channels I won’t listen to anyway. Another option is $6.99 and you can handpick 50 non-premium channels (no Howard Stern). Sounds good to me. But, the report says that Mostly Music XM is actually 87% more money with 62% less channels. Wow, scary! But if you don’t want all the extras you don’t have to pay for them.

But, for the NAB this is still a bad thing. The NAB is afraid that consumers will pay for this convenience like they do with TV today. According to NAB EVP of Media Relations Dennis Wharton, “nothing is stopping either XM or Sirius from individually offering consumers a more affordable choice in limited program packages.” If you look at what the NAB has to offer it isn’t any better, it’s just free. AM/FM radio offers hundreds of free music, sports, talk, religion and kids programming compared to over 100 from the either XM or Sirius. But AM/FM radio can only be listened to when you are in proximity of a station antenna, and reception is good depending upon weather conditions. You also have no control over programming. If you don’t like what’s on there’s no one to call to say, “I don’t like these three talk radio stations, cancel them and give me 2 rock stations and 1 news station instead.” But that’s not all, there’s more.

Advertising revenue. Radio makes it’s money selling ad space. The higher the perceived value of a radio station the higher the ad rates. If radio starts to be perceived as less valuable than satellite radio then the advertisers will move the advertising dollars, spending more with satellite and less with radio. The NAB doesn’t want you to migrate to satellite radio because if you move it is very likely that the advertisers will move to. Satellite radio, like cable TV can provide their advertisers with accurate information about their listeners. Their media kits have much more precise details about their audience. Advertisers depend on this information being accurate so they don’t waste money advertising where people aren’t interested. AM/FM radio stations still have to rely on diaries, or log books, being filled out by people which can be unreliable, until the industry adopts Arbitron’s Portable People Meter which promises to deliver accurate ratings information. But this is still in very few markets.

The bottom line, the NAB is pretending to care about you to save their bottom line. Contrary to their pubic statements the evidence show that they are blocking the XM-Sirius merger because of the loss of AM/FM listeners and the revenue losses it will cause. However, even if this deal does not go through, the NAB has a lot to do to improve their situation. People aren’t happy with radio programming the way it is today. Stations are still trying to figure out how to keep listeners while Internet and satellite are seeing bigger audiences. And the satellites ala carte pricing could still attract many people who didn’t want to pay so much for so much they won’t use, still reducing the AM/FM audience.