Fresh Air is an essential manual on marketing radio stations and the radio industry, by Mark Ramsey. Read the iBiquity signals the end of NAB's satellite radio merger opposition
In every challenge there's an opportunity waiting to be discovered.
And the "bright idea" bulb must have been flashing over the heads at iBiquity, based on this letter to the FCC. Here are some highlights, following iBiquity's meeting with the FCC:
At this meeting, iBiquity reviewed the competitive implications on its business relevant to the proposed merger of XM/Sirius. Specifically, iBiquity indicated that a combined XM/Sirius could be in a better position to hamper iBiquity’s ability to introduce HD Radio technology into the marketplace. iBiquity raised concerns about exclusive arrangements between XM and Sirius and automobile manufacturers that could serve as a barrier to iBiquity’s ability to sell HD Radio receivers to end users. iBiquity also expressed concern that satellite radio companies may have used subsidies and incentives paid to the automobile manufacturers and their suppliers to discourage proliferation of HD Radio products. iBiquity discussed with the Commission staff its concern that the merger has the potential to exacerbate these problems. A merged entity will have a stronger economic position and more cash to fund subsidies and incentives. As the sole provider of satellite services, the merged entity will have greater leverage over retailers, car manufacturers and suppliers. This combined satellite monopoly would be in a better position to act anti-competitively to exclude HD Radio products.Although iBiquity has no formal position on the merger, iBiquity would urge that any approval be conditioned upon agreement by the merged entity to enact the following in order to insure a level competitive playing field between satellite radio and HD Radio technology:
- A requirement that HD Radio technology be included in all satellite radio receivers
- A requirement that the merged entity terminate all exclusive arrangements and prohibit the merged satellite company from entering into exclusive arrangements with suppliers, retailers and automobile manufacturers in the future.
So here's my translation of their argument:
We can't compete against two satellite radio companies, let alone one. And for no good reason we view satellite radio as our primary competitor, not all the other techno-stuff that brings audio into new vehicles. So we're happy to support this merger as long as we get a piece of the action in the bargain.
Interestingly, if the FCC were to buy this argument, it would no longer be possible for the radio industry to fight the merger, and the NAB's opposition would collapse utterly. Thus, since accidents of this sort don't happen and there's no better reason that iBiquity would visit the FCC in the quiet news days of late December, iBiquity would never approach the FCC with this option unless the wind was perceived as blowing in the direction of merger approval.
This is, in other words, a Hail Mary pass designed to achieve an "if we can't beat em, join em" outcome. This is the best indication yet that HD Radio's progress with the Detroit automakers is in trouble, folks.
To be clear, iBiquity's effort isn't a dumb idea at all, although I have a huge amount of difficulty imagining that the FCC would ever go for it. After all, the success that satellite radio has had with the auto industry was hard-earned. And why would the FCC want to punish them for their successes and reward HD Radio for their lack of same?
The marketplace has judged winners and losers, or at least that seems to be iBiquity's argument. Wouldn't it be worse for the FCC to tinker with the judgments of that marketplace than to allow two satellite competitors to become one?
If iBiquity's argument was to compel the FCC - and I really doubt it will - it would be a smart and easy way to introduce HD radio to tons of new cars as standard equipment, by piggybacking off the blood, sweat, tears, deals, and dollars of the satellite radio industry.
Nice try, but don't count on it.
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/t/trackback/9344/24455960
Listed below are links to weblogs that reference iBiquity signals the end of NAB's satellite radio merger opposition:
» If merger approved, HD Radio wants a piece of the action from Orbitcast
Here's a fun ongoing trend: organizations that are willing to accept the burden of responsibility - in the name of "public interest" - by asking the government to mandate that they get a piece of the Sirius-XM action. First we had U.S. Electronics and ... [Read More]
Mark,
Here is some more info:
"Under Construction: Radio Rules"
"A few other interesting issues in this area have been raised recently, one in this publication's April 27 issue. In a Guest Commentary, broadcast attorney John Garziglia calls for rules requiring all satellite radio receivers to include IBOC AM and FM capabilities. This is not unprecedented; the FCC's rules for new digital cable-ready receivers include a phase-in requirement for inclusion of ATSC terrestrial broadcast DTV tuners, for example."
"This would not be purely an issue of cost. Consider that the audio quality of satellite radio is fairly similar to that of analog radio. In fact, on a good reproduction system, FM analog terrestrial audio sounds noticeably better than satellite radio services, especially for voice-only channels. (Voice services on satellite radio are more akin to AM radio quality.) Nevertheless, satellite radio does not suffer from the impulse noise of terrestrial AM, nor the multipath distortion of FM, so on balance, quality issues are probably a wash between satellite and terrestrial analog radio. Add IBOC to this equation, however, and the balance could shift substantially in terrestrial radio's favor, with both music and voice services sounding substantially better on terrestrial than on satellite radio. Thus an attempt to require IBOC reception capability in satellite radios is likely to face a pitched battle."
http://www.rwonline.com/reference-room/skippizzi-bigpict/08_rwf_pizzi_june_8.shtml
Accoring to the FCC, the marketplace should determine the fate of HD Radio - items number 15 and 16:
"Digital Audio Broadcasting Systems and Their Impact on the Terrestrial Radio Broadcast Service"
http://www.epa.gov/fedrgstr/EPA-IMPACT/2007/August/Day-15/i15922.htm
Posted by: Greg | December 23, 2007 at 03:46 PM
I have XM and an in-dash and home HDRadio system. What I don't understand from my listening post in Oceanside, California, is the reception of HDRadio from San Diego. It is poor at best -- and not made for the car at least to hear here. XM is solid, not matter where I have been: California, Arizona, Colorado -- including the mountains around I-70 west of Denver. HDRadio, for me, is a disappointment as the stations-within-a-stations are recycled music sans commercials. No real hook worthy of the investment. Talk radio on AM is still talk radio in HD. For iBiquity wanting to ride the coattails of satellite radio is bizarre. Of course, with Washington in a standoff mode with the current administration, anything is possible -- including that every satellite radio must include a cheese-in-a-can to satisfy the dairy industry.
Merry Christmas!
Posted by: Chris Carmichael | December 24, 2007 at 08:48 AM
ibiquty knows HD arrived DOA and is hoping it will be shocked back to life by trying to force the FCC to force Satellite radio to include their half-baked jamming technology into Satellite receivers. While I wouldn't put anything past Boy Dullard Kevy Martin, I hope this hoped for force-play actually causes him to realize just what is happening and why for once.
Nothing will cause consumers to buy IBOC receivers as it is already old fashioned and doesn't work. Even if this ploy works the IBOC radio section would be like including an 8 track player in a Satellite radio and the 8 track player would probably get more use.
Posted by: Bob Young | December 25, 2007 at 05:22 PM
The only way for HD to succeed is to get the FCC to require manufacturers to install the chip.
What might entice the FCC to agree would be:
1) The Alliance agree to the FCC's agenda of minority ownership, localism, and diversity.
2) iBiquity to eliminate the royalty on the chip.
3) Agreements to use a large number of the HD channels to serve FCC agendas (see above).
I think a deal is possible. Even Michael Copps agreed to the BellSouth-AT&T merger once he got what he wanted.
Posted by: George | December 26, 2007 at 07:54 AM
"I think a deal is possible. Even Michael Copps agreed to the BellSouth-AT&T merger once he got what he wanted."
"Mergers fail to lift media stocks"
"Despite consolidation in the sector, media stocks underperformed the broader market in the first half of 2007. The worst media stocks of 2007: XM Satellite Radio -20.0%, Sirius Satellite Radio -14.7%"
http://money.cnn.com/2007/06/29/news/companies/media_firsthalf/index.htm
"How Sirius & XM Would Look As a Merged Company (Revision)"
"The balance sheets represent a huge problem. Sirius has almost $1.1 billion in long-term debt. At XM that number is over $1.3 billion. Sirius has cash and securities of $350 million. XM has $285 million. So, combined debt would be $2.4 billion against about $600 million in cash. Payables and accrued expenses of the combined company would be over $500 million. To have a significant value to shareholders, the combined business would have to pay down at least $200 million in debt per year. None of the debt is due until 2009, but the majority is due by 2013. The combined company would be able to partially use cash on hand and could go to the capital markets with a new debt issue with the sole purpose of refinancing that amount due in 2009 (and with convertible debt if they were smart and/or able)."
http://www.247wallst.com/2007/02/how_sirius_xm_w.html
In five years, it won't matter much either way.
Posted by: Greg | December 26, 2007 at 01:31 PM
"Regarding the Technical Aspects of the SDARS Providers XM and Sirius"
"There are significant differences in certain technical aspects of the two SDARS systems as deployed by XM and Sirius. The systems as currently deployed are not interoperable. That is to say, an XM receiver cannot receive the Sirius signal and vice versa. Thus, as is true today, if the proposed merger of XM and Sirius were consummated, consumers would still need to purchase a new interoperable receiver in order to receive the signals of both providers. These differences in system operation, function, and structure make the design and implementation of a single unified and interoperable receiver both complex and expensive. In fact, both XM and Sirius have been working in a joint venture to develop an interoperable radio since 2000. At this time, no interoperable radios have been introduced into commercial production."
http://tinyurl.com/2kek8t
iBiquity's request is not only ridiculous, but technically impractical.
Posted by: Greg | December 27, 2007 at 03:51 AM