Cramer on the XM/Sirius merger

[AmpedNow]

Roughly 6 minutes. Lots to chew on here.


http://www.cnbc.com/id/15840232?video=628513517


Cliffs:
-Merger has a 75% chance of approval
-It will be within 2 months
-It is unreasonable to think that this is a true monopoly, since satrad comprises >5% of total listening and both companies are still losing money
-Merger has been stalled mainly due to terrestrial radio's friends in high places
-Terrestrial radio is dead as a business
-Whether or not the merger is approved, SIRI is still the better stock of the two because of faster sub growth


With some minor reservations, I think he's spot on.

[AmpedNow]

He's pissed...

He was on Kimmel last night. Go to 6:30 on the video.

http://www.youtube.com/watch?v=xA7uNWTE06c



He also revisited the issue on Mad Money. For 12 minutes.

http://www.cnbc.com/id/23338039

[Arp2]

Cramer said Thursday that he would name Congressmen who have been "bought and paid for by local radio stations" by name Friday and name -- again by name -- the broadcasters he believes are holding the merger back....


My frustration:

Each satcaster now has 4-5 times as many subscribers as they, themselves, said it would take to get into the black. Now, they "need" a merger, and a slow anti-monopoly regulatory process is their problem?? Naw, baby, naw....ya both paid too much for sports, and one of ya probably paid too much for morning talent.....

[Ace Purple]

I doubt that Sirius would have survived to this point without signing the Howard Stern deal.

Other deals, such as the highly questionable Oprah deal by XM and the also highly questionable counter by Sirius of bringing in Martha Stewart, were terrible.

While I can see problems that would come with a merger, at least I could get SEC sports back on my Sirius radio again. It sucked when XM stole them away (there may be one or two schools left, but I think they're going to get them all).

[AmpedNow]

*This is long. ADDers go on to the next thread.*

My frustration:

Each satcaster now has 4-5 times as many subscribers as they, themselves, said it would take to get into the black. Now, they "need" a merger, and a slow anti-monopoly regulatory process is their problem?? Naw, baby, naw....ya both paid too much for sports, and one of ya probably paid too much for morning talent.....

Fair enough. Those were some pretty big dollar figures being thrown around for content.

However, there were only a handful of content "carrots" out there to make the masses take notice. MLB, NFL, and Stern being of that few. In hindsight, both companies probably would've been fine had they opted for much slower but steady subscriber growth through OEM channels rather than retail.

Maybe fewer channels with higher bandwidth streams for better sound quality wouldn't be so bad, either. I hope future codec technologies can eventually help this, though.

It will be interesting to watch how Stern's contract renegotiations go in a couple years, esp if the merger doesn't go through... Although it's a safe bet that the sports won't go anywhere.

In the beginning, I was somewhat indifferent towards the merger. But now, I fully support it for several reasons:


1. The way the NAB has went about this is completely crazy. In the name of "competition" and being "pro-consumer", their tactics and demands have been anything but--going so far as to demand SDARS to be prohibited from having their traffic/weather and emergency channels, and even airing Amber Alerts, because it qualifies as "local programming".

To me, that very notion is just downright disgusting... Who wouldn't want news of an abducted child on as many outlets as possible, local or not?


2. As a dual sub, I would save almost $10 per month under their al la carte programming plan. Hardy "anti-consumer" to my wallet...


3. This "competition to local radio" diatribe is just overblown. Less than 5% of the total radio audience ever use SDARS, and in many markets, it's probably less than that.

They also forget that several studies have shown that over half of people with SDARS also flip back and forth between it and local radio.

I still do, even though I no longer "have" to with all of the choices I have.

It's possible that in any given market, local stations have at least twice that amount of audience who listen to their iPods and CD players 100% of the time without ever turning on radio.

And of course, the future "X" factor of internet radio has yet to be determined. Slacker just recently released a portable. Pandora is next.

In fact, Slacker's goal is to be the source of everyone's music, narrowed down to everyone's specific tastes, and to integrate itself everywhere people are--home, car, office--wherever.

While this may be a lofty goal, the fact is they have directly declared war on every radio station that plays music--including SDARS. And, non-music programming is probably not to far behind.

What will the NAB do about that? Or are they even aware of this?


4. These new technologies have even caught SDARS off guard, which is why they need this merger. There is no question that iPods have taken potential customers away from them. In fact, "new tech" threatens SDARS more directly because it is a new tech itself, whereas terrestrial is still an old standby.


5. It is almost universal CW that if the merger does not go through, at least one of these companies will go bankrupt... Most likely XM. A buyout from a larger company will likey happen, even to Sirius, eventually. But if not, we will be left with one company anyway, with sub-par programming because they're broke.

How is this scenario "pro-consumer"? It isn't. It would only be good for terrestrial in hopes of regaining most of that audience once again by default, which, as I've stated before, is (a.) not going to happen, and (b.) hardly the best way of gaining audience, IMO. Who wants a passive, disgruntled audience to come back, only to leave again once another option comes down the line?


And finally, even though it might be apples to oranges, doesn't Cramer's comparison to ExxonMobil merge make sense? In the grand scheme of things, this has affected consumers far more than a "monopolistic" SDARS company ever would.

Over one year, and four hearings, and despite XM/Sirius' full compliance, there's still no end in sight...

[Tom Taggart]

The concern about terrestrial is real. Both XM and Sirius have terrestrial repeaters in most major cities. A study in Washington found that most of the XM listeners were on the repeaters rather than direct from satellite.

There is a rumor, which seems supported by those in the technical-know, that post merger only XM will continue direct audio service. The Sirius birds will be re-configured for mobile video exclusively. Apparently part of their capacity is now in use for this purpose, to feed LCD screens sold in some high-end Chrysler products, for example.

The fundamental problem with satellite is that the business model sucks. The costs of building, launching and replacing the high-powered satellites can't be covered from the revenues available under a subscription model. Most of the new subscribers coming into the system reflect those folks who bought high end automobile packages where the dealer or manufacturer threw in the satellite subscription. They don't stay on as paying subscribers. While some channels carry advertising, satellite can't offer the flexibility for regional placement that national spot can. Even network radio can beat satellite in this regard, with addressable network sat receivers.

Cramer should know better, but apparently some of his friends bought the hype and are under-water on satellite stock. They need the merger so they can bail out.

[Arp2]

Cramer tonight (Friday):

• Said he named names back on Monday and how much money each got (he did, but they were fleeting mentions)...no names mentioned tonight except.....
  
  Congressman Gene Green (D-Texas) was a remote guest....this is more of a paraphrased summary than a transcript.....
  
  GG: The agreement made at the initial licensing was that there would be two in the space
  GG: Cited disallowing of DirecTV and Echostar merger
  
  Cramer agreed those were absolutely true and relevant but then pointed out Green had received $35,000 from the NAB and $13,000 from CCU
  
  GG: The price of admission to the Democratic Caucus is $200,000, and he has to raise money...the limit for PACs is $5000 per cycle, so those amounts have come over whatever number of elections...etc, etc, etc....
  
  Cramer: True, and your record is pro-consumer...etc, etc, etc...how could there be four hearings on this and only one on Exxon/Mobil and none on Chevron/Texaco? Does that seem right?
  
  GG: I'm not the chair of either of those committees...that was Justice Dept...I am on Energy and Commerce, and we did have a whole bunch of hearings on Enron.
  
  Cramer: What if they wind up bankrupt?
  
  GG: I just read the other day they're doing better and are likely to be able to stand on their own....
  
  Cramer: Anything these companies could do to satisfy you?
  
  GG: You're still creating a monopoly, so there would have to be government regulation...(use, rates, packages, etc, etc, etc)...But satellite radio and satellite TV should be treated same way.
  
  Cramer: I'm a fan of Howard Stern...he speaks his mind....could some of the opposition be coming from some who might want to shut him up or censor him?
  
  GG: Heavens, no!

I would imagine video will become available on the CNBC website....really nothing to see, though.....

[AmpedNow]

The concern about terrestrial is real. Both XM and Sirius have terrestrial repeaters in most major cities. A study in Washington found that most of the XM listeners were on the repeaters rather than direct from satellite.

DC is their "backyard"... You could expect excellent coverage there.

But regardless, neither company is doing anything "illegal" with the repeaters. They are used for what they are licensed for: to fill in and augment satellite coverage gaps. Just because people can get the repeater signal inside their home or office because they are close to one doesn't mean anything.

As for the so-called "threat", then how about competing? Why is terrestrial radio somehow more "entitled" to audience than SDARS? This line of thinking makes me crazy...

There is a rumor, which seems supported by those in the technical-know, that post merger only XM will continue direct audio service. The Sirius birds will be re-configured for mobile video exclusively. Apparently part of their capacity is now in use for this purpose, to feed LCD screens sold in some high-end Chrysler products, for example.

Video will be a bigger part of these companies in the future. But I don't see how they can do this... This would make every Sirius radio obsolete.

Not only that, but Sirius plans to launch a geostationary bird to supplement its sats with the "figure 8" orbit, putting out 20kw. It was supposed to launch later this year, but has been pushed off to late 2009.

I just don't see it... That's a whole lot of bandwidth for video only, unless they're planning a mobile version of DirecTV.

The fundamental problem with satellite is that the business model sucks. The costs of building, launching and replacing the high-powered satellites can't be covered from the revenues available under a subscription model. Most of the new subscribers coming into the system reflect those folks who bought high end automobile packages where the dealer or manufacturer threw in the satellite subscription. They don't stay on as paying subscribers. While some channels carry advertising, satellite can't offer the flexibility for regional placement that national spot can. Even network radio can beat satellite in this regard, with addressable network sat receivers.

This I agree with. The astronomical up-front costs of SDARS is a huge problem. Distributing content via internet is much, much, much cheaper.

Unfortunately, they were just as blindsided by Apple as the rest of the broadcast world... And those astronomical up-front costs are why at least one of these companies will go belly-up if this merger isn't approved.

If this happens, everyone knows who was behind it.

[Arp2]

Cramer tonight.....


An absolutely blistering attack on broadcasters....if radio can be said to have taken a knife to its gut, Jim took that knife, pulled it back out, shoved it in the back a few times, twisted, and then carved out some triangular wounds just out of pure hatred.


No summary will accurately convey it....sooo hostile....almost has to be seen....about 11:40p tonight......


Jim's had a bad day......college buddy and possible best friend is Eliot Spitzer, you know, and there's no one better in any newsroom at telling the truth about Spitzer than fellow CNBC'er Charlie Gasparino (and Charlie ain't shy or hesitant when telling it, either).......and, shortly after talking about his friend, Jim appeared to startle folks when he said on-air earlier today that he prefers socialists over capitalists.....

....but to take it all out on li'l ol' radio???

[Big Media]

Cramer seems to be on a spell lately. That guy is one bad stock tip shy of an all out aneurysm.

I am wondering if he needs some xanax or if he is just that pissed at the world.

[The Interpreter]

It's 99.9999 percent an act. It makes money...lots of it.

And that's what is REALLY important to that guy...

Not unlike that Mr. Limbaugh guy. Or Mr. Stern.

The list could go on and on.

[AmpedNow]

I assume you're talking about this:

http://www.cnbc.com/id/23558686

Okay... That might have been a little harsh. But from a business perspective, is he really wrong?

I would definitely be pissed to be left with $20 on a $100 investment after 5 years... If I was a Street dealer, I wouldn't have anything in terrestrial radio stock presently, either.

On the merger, I'm still betting on a go, with stipulations.

But as I said before, this cat's already out of the bag. No amount of lobbying will put it back in. The listeners who have bolted because they now can will likely never come back--unless they have a good reason to.

Attempting to "keep the herd in the pen" by using these tactics will backfire, big time.

Just sayin'...

[Arp2]

I assume you're talking about this:

http://www.cnbc.com/id/23558686

Yes.