"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.