NEW YORK (Billboard) - Would a merger between XM Satellite
Radio and Sirius Satellite Radio be good or bad for the music
That's the question industry executives have been wrestling
with since the two companies announced plans to combine in a
$13 billion deal that creates a single satellite radio
Officially, label executives are taking a wait-and-see
approach. But privately, they are debating the ramifications of
the tie-up on everything from promotion opportunities to
licensing revenue to existing litigation strategies.
Some of the biggest question marks surround the impact of
consolidation on satellite radio's role as a promotion and
XM claimed 7.6 million subscribers at the end of 2006,
while Sirius had 6 million. If the two companies are
integrated, similar channels likely will be eliminated, giving
the labels fewer outlets where they can promote new artists.
Label sources say that support from XM and Sirius in terms
of airplay for baby bands oftentimes can be a key early
component in building momentum to take budding acts to
terrestrial radio and MTV.
Such strategies have worked effectively, particularly in
the rock genre with bands like Panic! at the Disco and
"Anytime you take away airplay it hurts," said Mike
Easterlin, senior vice president of promotion for
Lava/Atlantic. "There's (fewer and fewer) places to go to break
new music, and this is one place where we had a couple outlets
that were aggressive about it. Now we're losing one."
That's not to say that a merger of the satellite radio
rivals is going to be felt immediately in terms of sales.
EFFECT ON SALES UNCLEAR
Radio promo executives note that exposure via XM and Sirius
is tough to gauge in terms of CD and download purchasing.
"When MTV is really spinning a video you see the sales,"
Easterlin said. "I don't know (that) you necessarily get a
sense from satellite radio whether it turns into sales. It is
difficult to quantify what is happening there."
But not everyone is convinced that consolidation among
satellite radio players is going to negatively affect the music
industry's ability to find early champions for developing
Edison Media Research analyst Sean Ross suggests that
airplay from the combined entity will have a greater impact on
the artists it plays due to its increased size and potential
reach of more than 13 million subscribers combined.
If a merger is allowed to go through -- far from a
certainty, according to analysts like Maurice McKenzie of
Signal Hill Capital, who calls the prospects of the deal
clearing regulatory hurdles a "low probability" -- the merger
could also hit the labels on the bottom line.
Record companies collect licensing fees of a few million
dollars each from the two satellite operators. Income the
labels take in from satellite is expected to increase
meaningfully when the Copyright Royalty Board announces new
rates for noninteractive performance rates for sound
recordings. An opinion is expected to be delivered by March 5.
Labels are also trying to determine just how a merger would
affect a copyright infringement lawsuit filed by the four major
record companies against XM last May over the Inno, a handheld
device that allows for downloading of satellite programming. A
federal judge in January denied XM's attempt to dismiss the
lawsuit. Some industry sources have suggested the merger could
force XM to settle the deal.