XM-Sirius merger is satellite radio’s ‘best chance of survival,’ executives say

The future of satellite radio in Canada depends on the successful merger of the industry’s only two competitors, Sirius Canada Inc. and XM Canada, company executives told the CRTC at a hearing Monday. “Your approval of this application will provide Canadian satellite radio with its best chance of survival and of providing continued service to XM Canada and Sirius Canada subscribers,” John Bitove, executive chairman of XM’s parent company, Canadian Satellite Radio Holdings Inc. (CSR), told the commission. This week the CRTC is hearing the country’s satellite radio players’ case for the merger of Sirius and XM, two competitors that have not been profitable since their launch in 2005. The merger proposes that Sirius Canada become a wholly-owned subsidiary of CSR, with all of Sirius’ shareholder companies becoming members of CSR’s board. “The major shareholders would be CBC/Radio-Canada, Slaight Communications, Sirius XM, and me,” Bitove said. Mark Redmond, president and CEO of Sirius Canada and proposed president and CEO of CSR, told the commission that although the two companies have exceeded revenue expectations, costs have been high. “Our shareholders have subsidized our businesses and are now carrying an overall cumulative deficit of more than $400 million. And XM Canada continues to see substantial net losses every year” he said. In February experts told The Wire Report that the merger would allow the satellite radio companies to stop wasting resources competing with each other and allow them to focus on competing with other media markets. Redmond said that a merger would not affect customers of either service. “XM Canada and Sirius Canada will continue to provide service to existing and new Canadian subscribers pursuant to the terms and conditions of their respective CRTC licences. The proposed merger will have no effect on the current service coverage. No Canadian subscribers will lose service as a result of your approval of this application,” he said. Under CRTC policy, companies participating in radio broadcasting transactions traditionally contribute six per cent of the transaction's value in “tangible benefits” to support the Canadian broadcasting system. Siruis and XM have argued that because their average profit for the past three years has been negative, they qualify for an exemption under the CRTC's tangible benefits policy. At the hearing, Bitove proposed an “intangible benefits” package that included measures such as ensuring the continued service of XM and Sirius to subscribers. The failure of these companies to survive would leave up to 1.7 million Canadians with dead subscriptions and obsolete satellite radio hardware, including many devices that are installed in personal vehicles. Bitove also said another benefit of the merger would be allowing the companies to become “financially and operationally” stronger and more competitive while remaining Canadian owned and controlled. Bitove said that the company will continue with its Canadian content initiatives and that CBC/Radio-Canada content will continue to be distributed across the continent. Gary Slaight, president and CEO of Slaight Communications, said Sirius and XM contribute almost $9 million annually to Canadian content. “Between 2005 and 2009, the CRTC licensed 251 conventional radio stations and two satellite radio services. Yet the two satellite radio services contribute more in CCD than all of those 251 conventional radio services combined,” Slaight told the commission. Bitove added that following a merger “Canadians will no longer be confused” about their service providers, a problem that has arisen since the Sirius and XM satellite radio companies in the United States merged in 2008. “Consumers in Canada are confused. They hear and see ‘Sirius XM’ branding from American media, on the Internet and elsewhere. Many Canadians believe that XM Canada and Sirius Canada are already one company and that XM Canada and Sirius Canada are in fact the same service today,” he said. Michel Tremblay, senior vice-president for corporate strategy and business partnerships of CBC/Radio-Canada, told the commission that the CBC’s goal has always been to increase its reach to the widest possible audience, and that the potential results of the merger look promising. “CBC/Radio-Canada did not hesitate to become a major shareholder of Sirius, as it intends to remain in the company CSR. This has always been and continues to be a strategic investment for CBC/Radio-Canada,” he said. Andréanne Sasseville, director of Canadian content development and industry relations at Sirius Canada, said that satellite radio should remain a broadcasting entity in Canada because it provides an important service by exposing a larger audience to Canadian artists’ music. “To celebrate the launch of our company and the arrival of satellite radio in Canada, we presented a concert with artists like Feist, Ron Sexsmith, The Trews and Anik Jean,” she said. “We have always followed and supported their careers with promotional tools and airtime on Sirius. Feist is now an internationally renowned artist and Ron Sexsmith a leading Canadian author .” The CRTC hearing continues Tuesday. asmith@thewirereport.ca

XM-Sirius merger is satellite radio’s ‘best chance of survival,’ executives say

Broadcast | March 8, 2011

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