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SiriusXM’s Karmazin pretty much admits it’s good to be a monopoly

Last Thursday, on the eve of the company’s tenth anniversary celebration with Bruce Springsteen, SiriusXM CEO Mel Karmazin appeared for a thirteen minute interview on Jim Cramer’s CNBC investment show Mad Money. There are two big questions on the mind of satellite radio watchers: will John Malone’s Liberty Media buy up more of SiriusXM, and why are Karmazin and top execs selling off shares in their own company? The former question has been tugging at investors because Liberty currently owns 40% of SiriusXM from a 2009 loan deal, which as of last week permits Liberty to purchase more shares. However, the interview revealed no substantive answers to these concerns.

To me Karmazin’s most interesting–but not surprising–admission was that SiriusXM’s costs are going down because there is no longer competition in the satellite radio market; since their merger SiriusXM is the only player. In particular this means that if a content provider is interested in being on satellite radio, there’s only one game in town, and no other company to spark a bidding war with. On top of that, there’s no competition for would-be satellite radio consumers, putting aside the fact that there’s plenty of competition for radio listeners across platforms.

Of course, there’s nothing revelatory in that admission. In fact, it borders on stunningly obvious. Nevertheless, I always appreciate it when big industry players come out and admit simple truths like this. In part, that’s because it validates the criticisms of folks, like me, who see through claims that these monopoly-generating mergers are somehow in the public interest. They’re only ever about reducing competition in order to lower costs and increase revenue. Any other objective is peripheral, at best. Why else would SiriusXM wait until now to raise its monthly subscription rate? Again, Karmazin pretty much admits as much in his Mad Money appearance. A rate increase was counter-productive as long as there was another satellite provider that could compete on price.

Indeed, it’s good to be a monopoly.



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One Response to SiriusXM’s Karmazin pretty much admits it’s good to be a monopoly

  1. MJones March 14, 2012 at 8:28 am #

    As a monopoly, the only ones who get “hurt” are the subscribers. Great Product… Horrible Customer Service… Not real great marketing…. But what are you gonna do about it?

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