Labels weigh potential fallout of satellite merger

By Brian Garrity

NEW YORK (Billboard) - Would a merger between XM Satellite Radio and Sirius Satellite Radio be good or bad for the music business?

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 behemoth.

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 exposure platform.

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 Hellogoodbye.

"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 artists.

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.