George Washington University law student Chris Reale may not have a background in radio, but as an XM subscriber who has also worked at a lobbying firm for the past three years, Reale has taken a vested interest in the proposed merger of XM and Sirius Satellite Radio and the antitrust obstacles that come along with it. As a subscriber who is concerned about a monopoly situation, Reale wanted his voice to be heard by the powers that will preside over the decision, such as the FCC and the Department Of Justice. Therefore, along with five other GW law students, he founded the Consumer Coalition For Competition In Satellite Radio (C3SR). The coalition made its debut in January at the National Conference on Media Reform in Memphis, and since then has been raising consumer awareness through its Web site, C3SR.org, and Internet blog. The coalition also is in the process of creating educational materials for consumers that will outline the concerns involved in a satellite radio merger, and partnering with other interest groups and industry allies to work together to fight the joint venture. As the congressional hearings regarding the merger are being hotly debated on Capitol Hill, FMQB spoke to Reale to gain more insight into C3SR’s perspective.
What inspired you to start the coalition?
It was in the press for a while that they were talking about merging. I’ve subscribed to XM for about two years, and from talking to different people both at school and in the industry, the merger was something that resonated with me. After deciding to form it, I started networking the idea with different interest groups. I went to the National Conference for Media Reform in Memphis in January, and I’ve been attending other meetings and getting input from subscribers and consumer groups.
What do you see as the biggest negative consumer consequences of the merger?
There are two main concerns that are equal in scope. One is pricing, which has come out in the past couple of weeks with [Sirius CEO] Mel Karmazin testifying on the Hill. That’s a concern I know is shared by many others. Additionally it’s the different programming formats that are available on both XM and Sirius. We’re in the process of doing an analysis on the fact that when Sirius did something programming-wise, XM also tried to compete. That’s where you’ve seen independent musicians and independent labels getting more airplay on these different channels. If the companies consolidate, then theoretically you’re going to have less programming for those niche formats.
If they combine, why wouldn’t that mean more channels for the consumer?
They’ve already said that they’re definitely going to eliminate some channels. In the hearings, Karmazin was saying that it’s good to listen to the NFL and Major League Baseball on one service. And if it’s not profitable for a monopoly to keep providing these niche programming formats, then there’s no incentive for them to keep that on as opposed to sports programming, for example.
How do you respond to the satcasters’ argument that they are competing against all forms of traditional and new media (terrestrial, HD, Internet radio, etc.) with the suggestion that they are at an unfair competitive disadvantage?
Personally, and I think a lot of subscribers will agree, that satellite radio is not a substitute for anything else. It’s the only mechanism that allows you to have portable, national service. I don’t think there’s any other system where you can drive across the country and listen to the same thing the whole way. It’s a great service, and it’s brought a lot of good things to media and consumers. I don’t view it as competing with those other technologies, which are good in their own right independently.
It appears that XM and Sirius had dug deep financial holes and suffered the consequences on Wall Street, losing much of their market capitalization last year. Why isn’t this merger a healthier situation for consumers, since a healthier company could mean a better product?
Karmazin essentially took that argument off the table at the congressional hearing. He said that he’s not making a failing business argument. He basically said, “We’ll be healthy and we’ll survive no matter what.” Originally I thought that would be an argument they would make and that was something we took into consideration, but they took that off the table. So if there’s going to be two services no matter what, then that benefits consumers much more than one monopoly provider.
Mel Karmazin has a successful track record of lobbying the FCC on big acquisition deals (i.e., Infinity/CBS and CBS/Viacom). You probably couldn’t cast a better broadcast executive in that role. In your opinion, how much of this issue will be salesmanship and how much will be law?
I’m not really sure. I know that Congress thus far has taken a pretty circumspect view on how this will benefit consumers. Our hope is that it will focus on the law and how this impacts consumers and the public interest, and not how many promises Mel Karmazin makes that prices won’t rise and that consumers will be taken care of.
Do you feel that Karmazin’s promise to freeze subscription prices is a solution to the problem?
Not really because the satcasters have had a track record of breaking promises. They were supposed to develop inter-operable equipment that both services could be used on, and that hasn’t come to fruition. I think that consumers would be best served by competition, and that has been proven over the past few years as we’ve seen XM and Sirius compete for content and subscribers. His promises are not encouraging in the sense that those things are already being served by competition.
Gigi Sohn of Public Knowledge said the merger should be approved if there are a la carte tiered subscription choices and more educational programming. Would these concessions sway your position at all?
Like I said before, our position is that the merger is bad, and we’re fearful of giving power to a monopoly provider even with concessions. They have a track record of breaking those promises, so competition would still be better than one monopoly provider with certain conditions that they can interpret one way or the other. If it ultimately comes down to either approving the merger with or without conditions, we’d obviously prefer it be done with conditions. But there is no set of conditions that would make us say, “Okay, let them merge.”
What is your group doing to educate consumers about your concerns?
We’re trying to be as active as possible on the Internet through blogging. We’ve been hearing from consumers and subscribers through our Web site. We’re also in the midst of preparing educational materials, because I feel that over the past couple of weeks, there has been a lot of talk but not a lot of knowledge out there about what this really means. There has also been a lot of concern on the part of subscribers about what is going to happen to their equipment. So we’re laying the groundwork to get some of that information out there and alert people to the potential problems of the merger.
Have you been hearing from people about what kind of programming they are afraid they’ll lose if the companies merge?
We’ve been hearing a lot from Opie & Anthony subscribers and a lot of people that are fans of niche programming that they think would be lost to the larger things that draw more subscribers, such as the NFL, MLB and Howard Stern. We hear from people that subscribe to both XM and Sirius. Karmazin even confirmed that concern at the hearing, because they’re talking about how they have overlapping and duplicative services, and how that doesn’t make business sense. For example, right now each of them have about five Jazz channels, and I don’t know if they’d keep ten, from a technological stand point and also from a business standpoint.
Are you working in conjunction with the NAB or any other groups in support of your position?
We put out a press release for support from interest groups, and we’re continuing to work on that. We really welcome anybody. This is something that came on rather quickly, because we formed the group and then about two weeks later they announced the merger. We’d like to work with more groups and we’re continuing to try to do that.
What do you think needs to happen for the FCC and DOJ to understand how many consumers feel about this merger?
I think there needs to be more education from the grassroots level and the states and federal level. Getting people engaged, writing letters to their congressmen, writing letters to the FCC and DOJ about why they oppose the merger. People need to share the anecdotal stories about what they fear they will lose. We’re trying to work towards both those goals. We’re just spreading the good word. That’s our main goal.
** QB Content by Mandy Feingold **
