"I don't believe that's likely" Mel Karmazin

Mel has had better days. With those above quoted words from his sworn testimony before a Senate Subcommittee Mel may have helped to write the next NAB media release on the XM-Sirius merger issue. Lots happened in the hearing. Here is my take on some of it.

Mel would have us believe the pay radio combination would only be a small player: 13.6 million subs, less than 4% of the national listening, a combined business that has billed under $70 million in ad dollars over the past five years. Mel said that Sirius alone has lost $3.8 billion dollars but the proposed merger is not needed for him to survive. He's right, of course, pay radio is a small segment of today's audio marketplace. Those who believe pay radio is a big deal are in the minority including the subs, some working at the broadcasting trades and consumer press, some wall street analysts, and some number of folks holding XM and Sirius equity and debt. Mel finds himself in the position of downplaying the considerable patinas of the XM and Sirius PR efforts. The greatest consumer electronics revolution in history now becomes the little pro-consumer companies that could, if only allowed to by congress.

The honorable gentleman from Wisconsin, Senator Kohl, after saying that Mel was smart and could be on to a big and good business, a colossus, in the proposed combination then asked if Mel thought that another satellite radio company would emerge. In an intellectually honest moment Mel replied "I don't believe that's likely." In that moment of candor the gentleman who is arguably one of the greatest salesmen of his generation may have made a critical misstep. One could suggest that what he said was he believes, granted a government-sanctioned monopoly, he would remain without a direct competitor in his licensed space. Perhaps it would have served him better to have simply answered "Mr. Chairman, I don't know." After all, visibility with respect to tech today is accepted as Delphian. He later went on attempting to add some additional perspective and context to the issue of his competition. His team would be wise to respond with a further, more well reasoned and detailed response in a writing to the Chairman and to the Subcommittee.

For Mel obscenity is the issue that will not go away. It was the Senator who once "crossed swords" with Mel over Janet Jackson who renewed the good fight. Saying that Mel had come calling on him earlier in the day Senator Brownback wanted to talk about pornography. Without bringing in the record, an event certain to occur in the coming days in an attempt to establish Mel's "pattern of behavior," the gentleman from Kansas asked if Mel was willing to get out of the business of questionable content to get the deal done. Mel said that he was not. Senator Brownback's preface to the question included a variety of citations on the damage being done to society by porn. During the hearing Mel attempted to frame this as properly a first amendment issue. Cue the Supremes. Senator Hatch, the ranking member, chased the obscenity issue and asked that Mel consider doing something for the good of mankind. One of the more brilliant politic moments of the hearing - how could one possibly refuse to consider doing something for the betterment of mankind? Genius! The Chairman also agreed, obscenity is not a good thing.

David Balto a member of the club with a specialty in antitrust stuff was the wild card. He clearly understands regulatory and the legislative process. Advantaged with over twenty years spent deep in the antitrust canon, this gentleman could load the gun for members wanting to kill the deal. In fact, I'd pay real money to see a Balto-Karmazin cage match (no doubt a great ppv opportunity).

Mel's parting shot at the NAB was to ask for that level playing field, the one that included broadcasters "pay for performance rights and spectrum". A comment perhaps smacking a tat too much of Glengarry Glen Ross bravado.

My sense is the odds remain 6 to 5 against the merger. One of Mel's greatest strengths is his downfall in appearing before members - he is quick on the draw, in fact a bit too quick. Quoted as previously saying "You are dealing with two companies - it would be great if there was a monopoly, but the second best thing to a monopoly is a duopoly" he now says "There is no monopoly or duopoly. That's the most bizarre thing I've ever heard." Too clever by half. The congress, by nature, is deliberative. If he wants to win this Mel should take the advice that he once imparted to me: "ready, aim, fire...we have an urgent need to be right." Mel should make the right argument and that will require carefully measured speech. We've all got a good seat for this one. It will be very interesting to watch what may one day be called Mel's last great pitch. Unless, that is, they don't buy or they do buy. Never count this guy out.

I would have made this shorter but I didn't have the time.

"All human power is a compound of time and patience." Honore de Balzac

"It is difficult to set bounds to the price unless you first set bounds to the wish." Cicero

"It's in my office" Mel Karmazin making reference to the so-called "inter operable" satellite radio yesterday before the House Judiciary Committee's Anti-Trust Taskforce. Mel went on to say the radio would cost $700, a prohibitive price point he is not willing to subsidize. No OEM has one in production. Mel's remarks came last in the panel's opening round. Putting this post together from notes taken during the hearing (missing a lot here, there will probably be a transcript available next week along with the prepared remarks submitted for the record - FYI - Mel did not read his). Setting aside his repeated claims "I don't believe there is a duopoly" or "This is not a monopoly" and his lack of depth in responding to the honorable Maxine Waters' question with regard to his service's and the potential combination's efforts to serve "the community" ("We have Jamie Foxx doing a channel...Foxhole" and a passing reference to a collaboration with Cathy Hughes and Radio One) Mel, ever the great salesman, was on message and well spoken. While I respect and appreciate Ms Waters' line of inquiry, my personal experience with Mel related to his support of "the community" is nothing less than exemplary. In an awkward moment responding to a member's question about a services comparison page on the Sirius website (i.e., "Is brand X, XM?), Mel did not answer the question and seemed unfamiliar with the page.

Overall, it was Mel's show. During his remarks Mel did allow that he has an obligation to make the following case: The merger is not anti-competitive. The merger is in the consumer's best interest. The merger will create more choice, lower prices, less confusion and more content. His talk and testimony came up short on specifics. How will the sat radio sets now in the market receive both services as he suggests? Is the idea to offer one channel lineup simulcast on both services? If so how is that more content? Lots of questions.

Gigi Sohn raised the concept of ala carte or tiered pricing in her opening remarks. She also suggested a "5%" set aside of spectrum for non-commercial, educational, informational programming without editorial control. Further, Sohn proposed a multi-year cap on subscription pricing as a condition of the merger's approval.

David Rehr made a good presentation as an "economist" on why monopoly is not good for consumers. Mark Cooper provided an equally good case that monopoly is just not a good idea. Charles Biggio, the witness with significant legal expertise, offered a fair-minded analysis suggesting the merger may or may not be in the public interest.

Down to the grits: Two hours and fifteen minutes later. My sense is there is not an obvious, early winner. Mel's staff did a poor job providing the boss with the content specifics needed for him to make a better appearance. He needs to give up his position that there is not now a duopoly and that the merger is not about monopoly - too clever by half - he is inviting the fight, losing ground and credibility with that suggestion. David should avoid using "San Antonio" in citing example markets, nothing to be gained, lots of lose. The almost beyond any reasonable repair CC "poster child for consolidation gone bad" image is very real political poison. The others on the panel made their cases well.

The conditions of authorization remain important. The feds said there was to be a duopoly. Further, the conditional grant plainly set forth the parties must agree to the strict prohibition of any potential merger. Mel said more than once that the merger was not necessary. He seems intent on having members believe he is not the Wall Street guy motivated by greed who will say anything to get the deal done but rather the sensitive pro-consumer capitalist working to help Joe Sixpack and family get more for less. No doubt the boldest pitch of his career.

Congrats & cheers: Chairman John Conyers, Jr and to his Anti-Trust Taskforce for conducting the session. Let the record begin. Next up FTC, DOJ and FCC. Patrick Keane on his new job, Executive Vice President and CMO of CBS Interactive. Smart, very smart. Fox on their strong debut of "Are You Smarter Than a 5th Grader?" holds 90+% of the Idol lead-in pulling a killer 10.8 rating 18-49.

Photo: Ron Fell
Beautiful shot, thank you!
(click on pic for larger image)









"In doing your project, don't wait for others; go after them and make sure it gets done." William Swanson

Swanson's Unwritten Rules of Management: unwritten rule number ten...

"This rule is about perseverance...Don't be passive, don't just react, and don't assume.

Decide and act. Make sure everybody is on the same page and moving out with you. Ask for help if you need it. Understand what it will take to keep the project moving.

Follow-up is essential and will help ensure success of the project. When done, be sure to share the credit."

They must have research (but so did New Coke): The National Association of Newspapers launches a literacy campaign, celebrity spokesperson included. Optimus Prime. You can't make this stuff up. (Thanks to Rex for the tip)

Early odds: Six to five against the XM Sirius hookup. Potentially the greatest single sale of Mel's career but can he close? This deal is pure politics. No matter the outcome it will be interesting to watch. Meanwhile, Doc opines...

"I don't care how diverse the programming becomes, it's still coming from too few companies. When the choice gets down to one, I guarantee that programming will have a homogenous quality to it. There's already a self-sameness to both Sirius and XM, and that's sure to be the case with Xirius or whatever they call the new company."

"Many listeners, which we used to call "consumers" are now also producers, for themselves and others. Where does satellite radio fit in that picture? I don't think even Mel Karmazin knows. Meanwhile, the whole system continues to leverage an understanding of How Radio Works that is, to say the least, not current — much less future-proof." Read Doc's entire post here.

Commercial radio has self-destructed: Howie Kurtz writes...

"In short, I think the appeal of satellite radio transcends Howard Stern, Oprah Winfrey, and baseball and football games. It's filling a void created by the utter sameness and existential lousiness of commercial radio. Just as the timidity of broadcast television gave rise to cable, the same thing is happening on the radio side." Read Howie's take, Satellite Synergy, here.

At Pacifica programmer Ernesto Aguilar's blog, Rolas de Aztlan, he offers up 3 Reasons Why XM/Sirius News is Good for Radio here.

As only The Onion can: Onion XM/Sirius MOS here. Bravo!

"Every great advance in science has issued from a new audacity of imagination." John Dewey

"Sometimes one pays most for the things one gets for nothing." Alfred Einstein

"Every man stamps his value on himself. The price we challenge for ourselves is given us by others. Man is made great or little by his own will." Johann Schiller

Bonus: Crazytopics

Bonus 2: "You can't swing a poodle in business without hitting a tail-wagging-the-dog scenario, where some process, policy, procedure, or program controls user happiness. Where we become slaves to the needs and demands of the IT department, efficiency, accounting, PR, legal, marketing, next-quarter's results, Upper Management, etc. We've heard all of the justifications and excuses. Worst of all, these decisions are nearly always made by people with the least amount of contact with Actual Employees, let alone actual customers." Outstanding! Well said. Read more from Kathy Sierra