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John Parikhal on What if XM and Sirius do merge?

The merger speculative talk about a possible XM and Sirius merger continues to stay red-hot.

There are many pros (reduced operating and competitive costs, larger OEM relationship network, etc.) and cons (FCC opposition, less competition no longer contraining subscriber fees, incompatible technologies, etc.). The Street.com's Jim Cramer loves the idea -- while Wall Street continues to speculate.

If it happens, the deal will have to happen soon (within the next 6-8 weeks, and approved by company stakeholders by this summer) if it is to pass through all the regulatory hurdles before the 2008 elections.

Bridge Ratings just released their updated subscriber projections (assuming the two companies don't merge), anticipating a total of 35 million subscribers by 2020. Here's their provided chart:

Both XM Radio's CEO Hugh Pinero and Sirius Radio's CEO Mel Karmazin publically say they are not exploring combining the satellite radio into one company. Of course, that doesn't cover any possible private conversations.

If the merge did happen, who would win?

Joint Communications' CEO John Parikhal shares his thoughts on a possible XM and Sirius merger:

XM and Sirius have different programming philosophies. Sirius has more technical problems than XM. In a perfect world, XM would win.

But ... Mel Karmazin is a smart cookie. He's pushing for a merger to deflect the fact that Sirius is far behind XM. My bet is (I could be wrong) that he figures Wall Street will crown him to run any merged entity ... so he beats the merger drum.

Because ... XM has fumbled the marketing ball more than once. They have not created enough need. Which is what gives Mel his bully pulpit.

XM had a huge opportunity to grow during the early years of consolidation when the arrogant roll-up artists were bragging about how they could run 16 minutes of spots an hour on music radio. Where was XM with a "commercial free" ad campaign? Instead we got stupid TV ads with David Bowie crashing through the roof.

XM still shies away from "commercial free" music with lots of choice, choosing to promote second tier programming that has big names but little that is fresh or new. And ... much of the "talk" and news programming has commercials!! How many people are going to pony up $14 a month for Oprah's sidekick (Oprah is not really Oprah) or to listen to a golf match.

XM lost the chance to cripple if not kill Sirius when it raised its price to $14 a month from $10. They could have clobbered Sirius (before they hired Stern) by focusing on what a deal $10 a month was compared to Sirius $14.

Having said all this ... there's still a good business in satellite radio. There is a real market of between 20 and 25 million people for the product. It will coexist with terrestrial radio just as cable coexists with network.

Both companies need to focus on marketing, not personality stunting, if they are going to get the respect they deserve. They might take a page from the old Rolls Royce advertising strategy - who focused on those who already bought a Rolls - "reminded" them of how great their car was - tried to make others envious - used "emotion" to create the need.