As a CEO, you know you're walking into a minefield when the agency in charge of regulating your industry publicly comes out and says they won't allow you to merge with your rival—and then you announce such a merger a month later. That's the reality that Sirius CEO Mel Karmazin faced as he testified to a Senate committee this week on potential antitrust issues surrounding the proposed merger of Sirius and XM.
So how does a CEO placate a room of hostile senators? If you're Karmazin, you start by suggesting that all of you are simply neighbors. You also remind them that your combined company creates a lot of jobs. "I should point out that XM has the largest digital radio facility of its kind in the country and is headquartered right here in Washington where the combined company will continue to have a significant presence," he told the committee at the beginning of his testimony.
The main theme of the testimony was that the merger can hardly be considered an antitrust issue, since the combined company will face so many competitors—AM/FM analog radio, HD radio, Internet radio, streaming music over cell phones, and that auxiliary jack in car stereos. Okay, maybe that last one was a stretch, but Karmazin's point is that his company competes with MP3 players for a driver's aural attention, making the MP3 player, in some ways, a competitor. He even threw out WiMAX as a technology that will "make radio more pervasive." Could the kitchen sink conduct sound waves, it would no doubt have made the list as well.
Karmazin is arguing, in a nutshell, that the true market here is for digital music, however it is delivered, not simply "satellite radio." He also makes clear that "the 1997 market should not guide policy decisions in 2007," which is a wise thing to say when your company's 1997 FCC license forbids merging with the other satellite license holder.
