Business Case Studies, Mergers, Acquisitions and Takeovers Case Study, Sirius and XM,Merge

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Mergers, Acquisitions and Takeovers Case Study

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Case Title:

Sirius and XM: Should They Merge to Perform Better?

Publication Year : 2007

Authors: Dileep Warrier, Saravanan. I.B

Industry: Entertainment

Region:US

Case Code: MAA0096C

Teaching Note: Available

Structured Assignment: Not Available

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Abstract:
The Federal Communication Commission allowed use of S band for satellite radio broadcast in 1997. Out of 8 companies which applied in 1997, only XM and Sirius were granted permission. XM was launched on September 25th 2001, in San Diego and Dallas. Sirius, headquartered in New York, began its operations officially in 2002. Both of these services had more than 130 channels which hosted programs varying from music, talk shows, sports and weather. More than 200 million US citizens still listened to territorial radio, where as combine subscriber base of the satellite radio companies was just 14 million as of 2006. In order to attract more subscribers, Sirius agreed to pay $100 million a year to Howard Stern for hosting shows. XM made agreements with celebrity talk show hosts like Oprah Winfrey and Ellen DeGeneres. As of 2006, the content spending and other expenses resulted in huge loss for both the companies. In the wake of internet radio, HD radio and alternate digital services becoming popular in US, according to them, merger option was a tool for survival. On February 19th 2007, the companies agreed to merge together to avoid losses and to differentiate their radio services from other budding technologies. FCC in the US, which gave licences, was not forthcoming in approving the merger because they were doubtful of formation of monopoly, even though they had many alternate competitors.

Pedagogical Objectives:

  • To discuss US Radio Industry and changes in radio entertainment
  • Different forms of radio services in US
  • Role of XM and Sirius in the satellite radio industry
  • A duopoly looking for consolidation for survival.

Keywords : Mergers,Acquisitions,Alliances Case Study;Sirius; XM; satellite Radio; HD Radio; Howard Stern; Oprah Winfrey; Sports Channels; Music Channels; Mel Karmazin; Gary Parsons; Federal Communications Commission; Consumer Federation of America

Contents : 
US Radio Industry
Sirius and XM: Growth & Competition
XM- Sirius Merger
FCC and Other Challenges
Territorial Radio Audience Composition of in US
Territorial Radio Audience Composition According to Listening Locations
Territorial Radio Audience by Education
XM and Sirius: A Comparison

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