Mel Karmazin, CEO of SIRIUS Satellite Radio, announced today that parents who are offended by programming such as Howard Stern will recieve a decrease in programming costs after the XM-SIRIUS merger.

“There would be a cost reduction to their bill in a more a la carte way,” said Karmazin. “If somebody doesn’t want it, not only are they not getting it, but they’re not subsidizing it either.”

This announcement comes after FCC Chairman Kevin Martin has publicly expressed interest in having of an a la carte programming system. Previously, Karmazin has said that Satellite technology will not allow for such programming choices but it seems that instead of customers paying more for the Howard Stern service(a la carte style), customers will have the choice to remove Stern from their radios and recieve a price cut in the monthly price of the service. Karmazin also noted that these details were included with the FCC merger notice filed on Tuesday.

This decision by the merger corporations could not only influence the FCC to approve the merger, but could influence other services such as cable television to do the same type of program discounting.

Dan Isett, a spokesperson for the Parents Television Council, who also supports such a la carte programming said, “This is good news, but we want to see the details. The problem they face is why should consumers be forced to subsidize Howard Stern if they want Major League Baseball?”

How do you think this will affect the FCC decision to approve or dissaprove the XM-SIRIUS merger?

Source: Dow Jones Newswire

Here are some of the special guests who will be at Sirius next week. Note, as always, that all times are subject to change.

SCOTT “WINO” WEINRICH, from The Hidden Hand, interview on Contact High (Hard Attack, channel 27, Mar. 19 @ 12am ET)

DR. LARRY DOOSEY, discusses the Power of Optimism and the merging of spirit and medicine on Morning Living (Martha Stewart Living Radio, channel 112, Mar. 19 @ 7am ET)

RICK SPRINGFIELD, hosts Random Access (Big ’80s, channel 8, Mar. 19-23 @ 12pm ET)

ROB DERHEK, guest DJ every Monday on moe. on Jam_ON in March (Jam_ON, channel 17, Mar. 19 @ 12pm ET)

PATTY GRIFFIN, World Café performance and interview (SIRIUS Disorder, channel 32, Mar. 19 @ 6pm ET)

THE WHO in concert, recorded July 15, 2006 in Monte Carlo (The Who Channel, channel 29, Mar. 19 @ 9pm ET)

SOLOMON BURKE, interview (SIRIUS Blues, channel 74, Mar. 19 @ 8pm ET)

METROPOLITAN OPERA RADIO, live broadcast, Strauss’s Die Ägyptische Helena (Metropolitan Opera Radio, channel 85, Mar. 19 @ 8pm ET)

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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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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.

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.

Forbes.com has a video news story that claims that Sirius and XM could be having their earnings reports on Monday. They say their source is Lucas Binder of UBS, but I’m not sure where Lucas got that information. Neither company has announced when they will release their 4th quarter and full year financial numbers(even though it is generally around this time), but odds are they wouldn’t release them without notice, especially together.

The only way that either one of them will be releasing numbers on Monday is either because they are filing for bankruptcy, which is very unlikely due to the large amount of financing each can easily acquire, or the M-word, which would be a surprise joint announcement from both with their fourth quarter numbers. Neither of these options are very likely, so let’s file this rumor away for now. Usually when they announce earnings, they give at least a week’s notice of when it is happening.

Earlier today, Steve Jobs wrote a long open-letter on apple.com that he titled “Thoughts on Music”. The letter details his thoughts on encrypting music with DRM and why Apple does not want to license out its FairPlay DRM.

One point that he addresses at the end is that it would not only be very beneficial for the record companies to get rid of DRM, but that “Apple would embrace it in a heartbeat”. It would mean that all downloads would be unprotected, could be played on virtually any MP3 player and bought from any music store. As Steve Jobs notes: “2 billion DRM-protected songs were sold worldwide by online stores, while over 20 billion songs were sold completely DRM-free and unprotected on CDs by the music companies themselves”. Doing this would only make online music the same type that you get on a CD: unprotected.

This could easily benefit Sirius, as well as XM. With this happening suddenly people can buy music in iTunes, then load it onto their Stiletto or S50. Suddenly those who don’t want a portable satellite radio player because they want something that can play iTunes will have a choice. It will also make the satellite radio companies and their hardware partners step up even more, as they will want to market their devices to more than just the people who are actively interested in satellite radio. Instead of having an MP3 player be a side benefit to the satellite radio, they can make satellite radio a side benefit to unlocked MP3 players.