There’s been a lot of talk this week about the role of the iPod and portable media with respect to the proposed merger of XM and Sirius Satellite Radio. Much of the talk has focused on the role of portable media players (particularly iPods) as a catalyst for change. We agree with this analysis and so do the satellite players involved in this proposed deal. But the major media is only reporting part of the story.
The shift that is driving the necessity for XM and Sirius to merge isn’t just about a particular device. It isn’t just about the programming either, because satellite radio offers a much wider variety of programming than traditional radio. And the battle that the satellite radio players is not against iTunes or other music services even though these are the reasons stated and widely reported.
The two major issues in this situation are cost and lifestyle. XM and Sirius have spent huge amounts of money to get their businesses rolling. Satellites cost hundreds of millions of dollars. And they’ve each paid hundreds of millions of dollars to retain top programming. So in order to make a profit these companies need to reach a critical mass of media consumers. And in order to do that they need to cater to people who increasing lead a portable digital lifestyle.