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Show Me The Money: XM And Sirius Satellite Want To Merge

Read more articles on Finance and Movies, visual media and Investing.

February 22, 2007

Posted by neillevine

About This Editor: I am a writer. Have been writing for other sites, but expect to do most of my future work HERE! My expertise extends from the esoteric such as burning hydrogen to the unpredictability of the stock market and my writing makes me a jack of all trades and exasperated master of none. I have had some influence over national wildfire and water policy and there are hints of a change in energy policy, BUT as Samuel Goldwyn once said, "A verbal promise is not worth the paper it is written on."

         

If you have read some of my most recent articles, you will easily figure out that I am focusing on stocks and to a lesser extent the national economy.  In an effort to try to stay up to the minute, although I do not usually write nearly that fast, I have set Google, Yahoo and New York Times alerts for subjects that I deem worth paying closer attention to.

I had been following the Chinese yuan and the balance of trade, but these are slow moving stories and somehow I expect to hear news about a trade delegation visiting China later on this year focusing on the job of talking the Chinese into buying American.

In the meantime, there are interesting developments in the overall entertainment business. Sales of online video were $111 million last year with the iTunes store accounting for $25 million worth of Disney films leaving less than $76 million for Movielink, CinemaNow, Vongo et al. 

However, after getting 100,000 short clips pulled from YouTube, Viacom, owner of MTV and Comedy Central, amongst other assets, has signed a deal with Joost that will begin in June.

Adams Media Research is predicting $472 million in online video sales in 2007 and $1.2 billion in 2008.

So I would look upon the proposed merger of XM, XMSR, and Sirius Satellite, SIRI, under this light. Subscriber growth was down twelve percent in the fourth quarter. A new satellite can cost $250 million. They are paying Howard Stern $725 million more than five years. Oprah Winfrey is getting $55 million over three years. Major League Baseball is getting $650 million and the NHL $100 million. No wonder they are losing money. No wonder they want to merge. The fact they want to save seven billion dollars sounds nice, too.

But when investing in stock, you have to ask are they making money and how much. Right now, XM and Sirius are priced like high flying internet stocks but that is not their game so I would be wary of them until profits start looming on the financial horizon. 

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