The 'stop us before we spend again' merger

I can't really tell you whether the proposed Sirius-XM satellite radio merger will be good for consumers or investors. I do know who it's got to be bad for: the talent. Nobody else will be getting deals like the five-year, $500 million contract Howard Stern landed with Sirius in 2005, that's for sure.

This I learned from listening to today's conference call with Mel Karmazin of Sirius and Gary Parsons of XM. Neither man talked about the big paychecks the King of All Media (funny how nobody calls him that anymore) has been getting or the huge sums XM is forking over to broadcast Major League Baseball games and Sirius the NFL and NASCAR. But they both made clear that the whole idea of the merger is to make the two companies stop hemorrhaging money.

Doing away with XM's and Sirius's duplicate sets of satellites will be a big cash-saver at some point down the road, but XM's Parsons said that will be more than a decade from now. Karmazin, meanwhile, boasted that the merger will bring "synergies on every line item of the income statement." Then he reeled off a few biggies: catering! security! legal! Yeah, that'll add up to, uh, several hundred thousand dollars right there.

Which leaves the money that the two companies have been lavishing on programming, especially since Karmazin arrived at second-place Sirius in 2004 and began shoveling billions of dollars out the door in an effort to catch up with XM. Amid the bidding wars since then, the companies have lost a combined $4.2 billion (with Sirius accounting for $2.4 billion of that), and the red ink was showing no real sign of abating.

Call it the "stop us before we spend again" merger. There are regulatory and antitrust hurdles in the way, of course, but Karmazin and Parsons wouldn't have gotten this far if their soundings in Washington hadn't told them they had a good chance of succeeding. "Consumers today have a significantly broader range of audio entertainment options from which to choose than was the case when our businesses were conceived over 10 years ago," is what Karmazin said on the conference call, rehearsing a phrase he will surely have cause to repeat ad nauseum in visits with regulators and legislators over the coming months.

He's right about that, of course. In a world of Internet radio and iPods and cell phones that play music, saying that the combined company (they haven't picked out a name yet) would have a satellite radio monopoly is sort of like saying that PepsiCo has a monopoly on Cool Ranch Doritos. One could even argue that combining the two networks will increase consumer choice, because now you'll be able to get both baseball and football on the same subscription.

Still, don't you feel bad for all those DJs and talk show hosts and sports leagues who will no longer be able negotiate extra sweet deals by pitting XM and Sirius against each other? Oh, you don't? Never mind.