Mel Karmazin is Washington, DC, today to testify at the House Antitrust Task Force Hearing on: “Competition and the Future of Digital Music”. SSG posted the schedule and link to listen to the hearing. Here are the details from the House’s website:

Wednesday 02/28/2007 - 3:00 PM
2141 Rayburn House Building
Full Committee
Hearing on: “Competition and the Future of Digital Music”
Before the Antitrust Task Force, to be established by resolution on the morning of February 28, 2007.

By Direction of the Chairman

Watch after the jump for news that comes from the hearing today.

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This morning, Sirius CEO Mel Karmazin stopped by the Howard Stern show for nearly an hour. The Stern staff and callers asked him questions regarding plans for the merger.

He said that merger Talk began nearly two years ago. XM passed on it then, but talks have been ongoing since. The companies’ lower stock prices combined with greater external competition has made the deal more appealing to both sides.

Click here to listen to the interview (54 minutes)

22MB // MP3 Audio // Credit: Guins

Monthly Price

When asked if rates will increase:

Mel: Sirius charged $12.95 when they started, and still charge $12.95 after signing Howard and Nascar. They’re not in a price war with XM, they’re in a price war with free radio.

He hinted the tiered programming plan may allow some subscribers to pay less than they do now. The pricing and the subscriber packages are still vague at this point, but pointed out there have been no rate hikes since he’s been CEO.

In response to Artie’s concern about vending machine prices increasing:

Mel: I don’t know how long we can keep the current pricing on our vending machine. Our service, we’re not going to raise the prices on our service, but I never said anything about the vending machine.

Robin: If they don’t approve it [at first], could they say if you do this, this, and this…?

Mel: For example, if someone said ‘we’re concerned about pricing, is there something you can do to guarantee prices won’t increase’?. I mean, there are a number of things we’re prepared to do or trade off in this event.

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Sirius will be selling a personal wireless ‘repeater’ starting next month. The SIRWRS1 has a picture at TSS-Radio(right) and you can sign up to be notified. The price is $99.99, and it will allow you to hook up an antenna up to 75 feet away(line of sight) from where your radio is.

The repeater works on the 900 MHz band. If you want to hook up additional radios, they will sell additional wireless receivers, dubbed SIRWRR1, for $49.99. Both will be available in mid-March.

SANDY KENYON, entertainment reporter recapping the Oscars on Morning Living (Martha Stewart Living Radio, Feb. 26 @ 7:00 am ET
JARET WIESELMAN from In Touch Weekly on Morning Living (Martha Stewart Living Radio, Feb. 26 @ 7:00 am ET
AUGUSTANA, interview (The Pulse, channel 9 Feb 26 @ 9am ET and will be rebroadcast Feb. 27 @ 2 pm ET and Feb. 28 @ 10pm ET.
COLD WAR KIDS, World Café performance and interview (SIRIUS Disorder, channel 32, Feb. 26 @ 6pm ET)
DR. DOG, World Café performance and interview (SIRIUS Disorder, channel 32, Feb. 26 @ 6pm ET)
LORRIE MORGAN, interview on Branson Coast to Coast (Prime Country, channel 61, Feb. 27 @ 12 am ET)
TYPE O NEGATIVE, interview (BBC Radio 1, channel 11, Feb. 27 @ 12am ET)
DAVID BROMBERG, World Café performance and interview (SIRIUS Disorder, channel 32, Feb. 27 @ 6pm ET)
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While there is no concrete answer, we have found a couple pieces of evidence that Sirius and XM may be able to keep the current radios of today and still offer all of their content to both sides. First, at Select Satellite Radio, the group that is in charge of making a dual-radio in order to ensure the FCC stipulation that they develop one, states this:

“It is acknowledged that SIRIUS, XM and their manufacturing partners already produce receivers that permit end users to access all Satellite Digital Audio Radio systems in compliance with FCC interoperability obligations.”

It appears that this implies radios today can receive the entire satellite digital audio radio services(SDARS, the technical term for satellite radio) spectrum.

Sirius, in their merger Q&A, mentions this:

“Will the radio I have now be compatible with new services?

Your current radio will allow you to enjoy all SIRIUS programming. And in the future you will be able to receive enhanced programming.”

What this means is not clarified, but it could be that you will receive XM programming down the road with your Sirius radio. Both sides seem to be stating that you won’t need a new radio to receive their programming with this so called enhanced programming after the merger takes place.

Furthermore, for the first 6 months or so, XM used the same codec that Sirius does, Perceptual Audio Coder(PAC), before they switched over to AACplus in April, 2002.

So, right now we have two questions that need to be answered:

1) Do XM’s newer radios still decode PAC?

2) If so, does it mesh with the evolved version of PAC that Sirius uses?

If the answer to both is yes, then it looks like there is a strong chance radios will be able to pick up both services down the road. This of course assumes that the merged company broadcasts solely in the PAC codec.

This also lends itself to how this enhanced programming may be setup and what the companies mean by offering tiered programming. Imagine the situation where you have a radio that is capable of receiving programming from the full spectrum. You like more of what “Sirius” is offering, so you sign up with a “Sirius” radio paying your $12.95. However, you really want MLB, Fungus 53, and Air America from “XM”. You can now pay an additional $6.99 as a secondary subscription rate to receive all this and more on the “XM” tier. This is an approximately $6.00 savings for those who already subscribe to both services.

While not stating that the new name will definitely be XM, the way the merger will be structured is that Sirius will spin off a wholly-owned subsidiary, containing all of Sirius’s assets, that will be the entity that is merging with XM Satellite Radio, according to an 8-K just filed. This does buck the trend that it was Sirius that would be the surviving entity. As stated before, this does not mean they have decided on the new company’s name; it could go either way. For example, in 2005 America West Airlines bought US Airways, but retained the US Airways name because it was a stronger national brand. A similar instance could happen here.

For clarification, a wholly owned subsidiary is a company that is owned and controlled by another company. For example, Linksys is a wholly-owned subsidiary of Cisco Systems, and Nabisco is a wholly owned subsidiary of Kraft Foods.

It will also be titled a reorganization for tax purposes, rather than a merger.

It was noted by John79605 that Discovery Channel Radio had been dropped. The channel has been replaced with a loop suggesting alternative locations of where to find some of the shows that were on this channel. The discovery.com page used to say, “SIRIUS brings you 110 channels of the best commercial-free music, sports, information and entertainment with digital quality sound coast-to-coast! Discovery Channel Radio is SIRIUS 119“. Now, neither the channel page on sirius.com nor the radio page on discovery.com reference each other any longer.

UPDATE: Feb 21, 2007, 11:00am ET - Both Sirius and the Discovery Channel were contacted for comment.  Neither company has responded.

As we mentioned earlier with the merger announcement, there will be a conference call today at 8:30 with Mel Karmazin from Sirius and Gary Parsons from XM to discuss the merger. Listen to it live on channel 122 on Sirius, channel 200 on XM, or at investor.sirius.com.

We will use this post to update you throughout the call, similar to how we do it for quarterly conference calls.

You can also feel free to join us in the chat to talk about the conference call, and get information even quicker. To get to the chat, click on ‘chat’ at the top of any page on Sirius Backstage.

Update: They have added an Investor Presentation to the site(pdf format)

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Breaking…http://biz.yahoo.com/prnews/070219/nym038.html?.v=75

The two companies have announced that they are entering into a joint merger agreement worth about $13 billion, including net debt of $1.6 billion. XM shareholders will receive 4.6 shares of Sirius stock for each share they own, which will give them about 50% of the new company. As reported, Mel will stay CEO of the new company, Gary Parsons of XM will become chairman of the new company, and current XM CEO hugh panero will stay until the merger is completed. They will have a Conference Call tomorrow at 8:30a broadcast from both companies’ web pages, as well as Sirius channel 122 and XM channel 200.

They have not yet determined the new company’s name or headquarters yet. They have summarized these benefits:

    * Greater Programming and Content Choices -- The combined company is
      committed to consumer choice, including offering consumers the ability
      to pick and choose the channels and content they want on a more a la
      carte basis. The combined company will also provide consumers with a
      broader selection of content, including a wide range of commercial-free
      music channels, exclusive and non-exclusive  sports coverage, news,
      talk, and entertainment programming.  Together, XM and SIRIUS will be
      able to improve on products such as real-time traffic and rear-seat
      video and introduce new ones such as advanced data services including
      enhanced traffic, weather and infotainment offerings.

    * Accelerated Technological Innovation -- The merger will enable the
      combined company to develop and introduce a wider range of lower cost,
      easy-to-use, and multi-functional devices through efficiencies in chip
      set and radio design and procurement.  Such innovation is essential to
      remaining competitive in the consumer electronics-driven world of audio
      entertainment.

    * Benefits to OEM and Retail Partners -- The combined company will offer
      automakers and retailers the opportunity to provide a broader content
      offering to their customers.  Consumer electronics retailers, including
      Best Buy, Circuit City, RadioShack, Wal-Mart and others, will benefit
      from enhanced product offerings that should allow satellite radio to
      compete more effectively.

    * Enhanced Financial Performance -- This transaction will enhance the
      long-term financial success of satellite radio by allowing the combined
      company to better manage its costs through sales and marketing and
      subscriber acquisition efficiencies, satellite fleet synergies, combined
      R&D and other benefits from economies of scale.  Wall Street equity
      analysts have published estimates of the present value of cost synergies
      ranging from $3 billion to $7 billion.

    * More Competitive Audio Entertainment Provider -- The combination of an
      enhanced programming lineup with improved technology, distribution and
      financials will better position satellite radio to compete for
      consumers' attention and entertainment dollars against a host of
      products and services in the highly competitive and rapidly evolving
      audio entertainment marketplace.  In addition to existing competition
      from free "over-the-air" AM and FM radio as well as iPods and mobile
      phone streaming, satellite radio will face new challenges from the rapid
      growth of HD Radio, Internet radio and next generation wireless
      technologies.

In a NY Post article that was published today, SIRIUS and XM plan to announce the details of their Merger today. The Post has a picture of SIRIUS CEO Mel Karmazin with a caption “Done deal.” The two companies were in negotions during the weekend and through the time the Post article went to press and “the deal could fall apart at any time.”

It would be surprising that the two entities would announce a merger today, given that it is President’s day and the markets are closed. This is also the NY Post, a paper not known for its accurate reporting. Assuming a merger did happen, it would be much more likely to be announced when the market was open, simply because it could make the stock price jump immediately, allowing executives to pocket millions and shareholders to be happy. Announcing it now would give stockholders 24 hours to look it over and find any downsides, potentially making the stock not jump as much or be flat on the news tomorrow.

Another important point to make is that the Post has really stretched the annual savings number: “$7 billion annually”. It is amazing how they could save that much when the two companies expenses combined were barely half of that in 2006(estimate).

Please note: we are not advising people to buy or sell and our speculations are just that. The stocks could go up, down, left, right, front, back, pretty much whatever. We are just another person providing insight.