After 17 months of negotiations, the Federal Communications Commission announced in July 2008 its approval of the merger between the world’s only satellite radio broadcasters, Sirius Satellite Radio and XM Satellite Radio Holdings. With this merger, the new company, Sirius XM Holdings, controls 100 percent of the satellite broadcasting market. While critics claimed that this merger would grant the new company complete market power by eliminating competition and therefore drive up prices, proponents stated that competition would still exist in the form of substitute products, and as is stated in the text, market power depends on how much substitutability there is in a market. What are some of the substitutes for satellite radio? Do you think these substitutes are similar enough to satellite radio to justify the merger of the two companies? Explain.
After 17 months of negotiations, the Federal Communications Commission announced in July 2008 its approval of the merger between the world’s only satellite radio broadcasters, Sirius Satellite Radio and XM Satellite Radio Holdings. With this merger, the new company, Sirius XM Holdings, controls 100 percent of the satellite broadcasting market. While critics claimed that this merger would grant the new company complete market power by eliminating competition and therefore drive up prices, proponents stated that competition would still exist in the form of substitute products, and as is stated in the text, market power depends on how much substitutability there is in a market. What are some of the substitutes for satellite radio? Do you think these substitutes are similar enough to satellite radio to justify the merger of the two companies? Explain.
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