• by Erik Sass , July 23, 2007

Bank of America analyst Jonathan Jacoby is guardedly optimistic about the proposed merger of the nation's two satellite radio broadcasters, Sirius and XM. Specifically, Jacoby thinks lobbying efforts have paid off, making it more likely that the deal will be approved by regulatory authorities--the main obstacle faced by the merger. However, he still pegs the overall likelihood of a deal at worse than even odds.

Overall, BOA's unnamed Washington contacts "believe that there is still only a 35% chance of FCC approval, up from less than 30% a few months ago," according to Jacoby, who has a track record of issuing accurate predictions about the radio business. One of the main dangers: the FCC could extend the comment period for concerned organizations until after the 2008 elections, when the incoming administration could prove less amenable to perceived monopoly-building.

Much of the difficulty faced by the merger stems from a failure to convince regulators and legislators that it will not result in an abusive monopoly. Even as the proposed deal has weathered considerable criticism, Sirius CEO Mel Karmazin and other advocates were slow to outline possible benefits to consumers--a key PR issue as the FCC, FTC, and Congress decide its fate.

According to Russ Meyer--chief strategy officer for Landor Associates, a branding consultancy--the companies waited too long to explain what will happen with subscription fees, and whether subscribers will have access to programming from both broadcasters. "The majority of the coverage has mostly been business press talking about the business aspects of the merger, not the merged entities talking about what the future will look like, and how consumers will benefit."

Indeed, despite vague promises from Karmazin about creating a la carte subscriptions, where subscribers can pick and choose the content they want, it's still unclear what a merged entity would look like to consumers.