Mel's Urge To Merge

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Frankly, I still think satellite radio is a long shot, even if the government grants its blessing to the proposed union between the medium's chief competitors, Sirius and XM. But if anyone can make it work, it's Mel Karmazin.

In the two years since Karmazin became CEO of Sirius—after four combative years under Sumner Redstone as president/COO of Viacom—the challenges of persuading consumers to pay for a medium they're accustomed to getting for free have only grown. The prospect of picking up Internet audio and video in your car is a not-too-distant threat.

But Karmazin is one of those rare media minds who sees value where others see static. You bet against him at your own peril.

Look no further than his masterful testimony before Congress last week. Noting that emerging media like wireless broadband and multichannel digital broadcast radio had dramatically altered the competitive landscape, Karmazin made a plausible case for a Sirius/XM merger that seemed to resonate with lawmakers.

A combined Sirius/XM, he argued, would not only give consumers more innovation—such as mobile video for backseat viewing—but would also provide more choice, not less. (Karmazin is nothing if not a consummate salesman.)

The National Association of Broadcasters chief David Rehr may have roared that a Sirius/XM “monopoly” would “undermine audio content competition, not enhance it.” But the irony was not lost on anyone on the Hill. After all, Karmazin's claims that new technologies had changed the competitive equation are right from the playbook of NAB, which has long fought to roll back regulatory restrictions on broadcasters.

But it isn't only the NAB that is anxious about the prospect of a Karmazin-led satellite-radio giant. No doubt, Karmazin's testimony caused many of his counterparts in the cable industry to lose sleep, too.

In a gesture aimed at legislators and regulators concerned about rampant broadcast indecency, the man who so ardently defended shock jock Howard Stern now indicated his willingness to sell Sirius/XM in tiers. A concession like that doesn't help the cable industry's resistance to offering channels à la carte.

And government approval of the merger could be a boon to cable operators' satellite rivals. DirecTV and EchoStar, whose impending nuptials were scuttled by regulators in 2002, may just get another chance and finally exchange vows, too.

From K Street to Wall Street, the morning line says it's an even bet that the Sirius/XM merger goes through. I'm amazed the odds are that good, given Karmazin's prior dealings in our nation's capital.

Whether defending Stern or Janet Jackson's Super Bowl wardrobe malfunction on CBS, Karmazin is no stranger to the Congressional hot-seat. And he has often stood alone among media barons in his willingness to call bullshit on legislators and FCC commissioners looking to grandstand on indecency instead of focusing on issues that actually matter.

Don't get me wrong: The government is right to give close scrutiny to the Sirius/XM merger. But in the end, Karmazin is right.

Given all the competing audio and video options available to consumers—as well as those on the horizon—the only option he and his would-be partners have in this business is to go forward together.

E-mail comments tobcrobins@reedbusiness.com

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