How would a combined SiriusXM / Clear Channel work?

And add in Pandora…

First, it helps to know who John Malone is, since he would be making the decisions.

(The Wikipedia article is very incomplete)

John Malone’s education was in industrial and electrical engineering, and he got a PhD in the then expanding field of Operations Research. OR is based on applying mathematics to business operations rather than operating based on instinct. The concepts of OR became prominent in the United States when Robert McNamara took what he learned working in the Air Force in World War II and applying it to the Whiz Kids at Ford. Decisions are based on data and mathematics. This is roughly what today I call “management by Spreadsheet”

Malone initially worked for Bell Labs, then for 23 years worked for and ran the Jerrold division of General Instruments. Jerrold was founded by former Pennsylvania Governor Milton Shapp – the company pioneered making cable TV gear. He then moved to run TCI, the cable TV company. He acquired a large stake in News Corp as a result, a stake big enough that Rupert Murdoch thought he would lose control of his company – and gave Malone control of DirecTV so he would go away.

TCI was acquired by AT&T in 1999, and Malone’s investment in Sprint had to be divested. At that point Malone’s Liberty Media had about $5.5 billion in cash to go “buy stuff” and was merged into AT&T. Liberty Media was spun back off from AT&T in 2001.

In 2009, Malone’s company bailed out SiriusXM, which was facing bankruptcy due to overspending on talent (see: Howard Stern) and its entanglement with Clear Channel, which had been a cofounder of XM, that had been merged into Sirius. Under Malone’s control, Sirius Founder Mel Karmazin was forced out, and Clear Channel sold its interest in XM – freeing up the Clear Channel channels. As of the end of 2017, SiriusXM has over 32 million subscribers, of which 27 million are paying subscribers. That is up from about 18 million in 2009.

SiriusXM carries the legacy of the two incompatible technologies from Sirius and XM. It would seem an obvious possibility to convert the XM Satellite license to carry the iHeartRadio content as a paid subscription service. After moving the terrestrial users to IHeart Satellite Radio, the terrestrial radio business becomes expendable. I could see the stations spun off and the behemoth collection of stations sold off piecemeal. K-Love would love to acquire a few dozen major market FM stations. Mexican interests and China would gladly buy up the AM stations.

There is less than a week until the lenders have to decide if they pull the plug on the proposed pre-packaged bankruptcy. If I was a betting man, I think this is going to happen. Bringing in a competent third party will break the current deadlock.

John Malone’s history is that he operates as a minority owner, not running operations himself Day to Day, but looking for ways to organize the operations more efficiently, and spin off non-core businesses. His entire career weaves in and out of deals with AT&T. He’ll figure out a way get AT&T into the Radio business.

The single biggest clue about Malone’s politics is that he previously sat on the board of directors at the libertarian Cato Institute, along with David Koch

Cato is currently run by the retired head of BB&T bank.

Malone also sits on the board of Bank of New York Mellon, which has deep pockets to invest in projects. Malone donated $250,000 to the Trump inauguration and plays golf with Rush Limbaugh.

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6 Responses to How would a combined SiriusXM / Clear Channel work?

  1. Fred Stiening says:

    A second 24 hour extension

  2. Fred Stiening says:

    Another extension of 24 hours and a new SEC filing

    It is looking more probable that this will be a normal bankruptcy (like the one Cumulus is doing) rather than a prepackaged bankruptcy. There is just too much debt and too much distrust among the parties. John Malone as Debtor-in-possession would take this mess out of the hands of those that created it.

    When Citadel declared bankruptcy in a quickie pre-packaged bankruptcy, the man who drove it into the ground not only kept his job but gave himself a big bonus. The stockholders forced the company to be sold, and Cumulus was the “winner”.

  3. Fred Stiening says:

    IHeart and the lenders have agreed to not go to bankruptcy court until next Monday

  4. Fred Stiening says:

    The lenders have agreed to wait until Wednesday to file the bankruptcy plan. It would wipe out $14 billion in debt, replaced by an equity swap and a spinoff of Clear Channel Outdoors. The bankruptcy will be filed in Federal Court in Houston.

  5. CC1s121LrBGT says:

    Really good article, Fred. Insightful, great background info and well written. [Countess should consider awarding you an honorary journalism degree. 😉 ]

    The Sirius and XM technologies are not really “incompatible” any more than AM and FM were incompatible yet combined into a single radio. They each have their own satellites and frequencies and with few exceptions, each repeats the others programming.

    I think they will continue to offer “free” advertizer supported programming over the web and over the air as “teasers” to the paid content.

    Regarding the paid content, I expect they will offer multiple groups of channels but with groupings that encourage you to subscribe to all. As a simple example of just two packages, one package could be all the commercial free music channels and one ad sponsored channel for news/weather/sports. The other package could be all the commercial free sports / weather and news with one channel for ad sponsored oldies and/or top 40. Few people with be 100% with only one of those two packages.

    • Fred Stiening says:

      At this point, redundant is probably more descriptive. I am not on top of when the existing satellites reach “end of life”. As I understand it, the radios actually rely on terrestrial repeaters if they are available. All that matters is the stream is in the correct format and the device is authorized.

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