Is it kosher for Sirius XM Radio to hike its subscription prices, especially after promising regulators that prices would remain steady?
According to a recent Wall Street Journal report, Sirius will soon tack an additional $1.98 to its standard monthly subscription rate, based on internal documents. The document – an employee training manual – squarely blames the increase on royalty obligations. “As an ongoing part of our business, Sirius XM must pay copyright music royalties to music companies and music publishers,” the document starts.
But during the lengthy approval process required to merge Sirius Satellite with XM Satellite, chief Mel Karmazin promised not to gouge consumers. The upcoming increase, slated for late July, sounds like a classic monopolistic hike, though Sirius pointed to a permissible increase. “The FCC decision approving the merger between Sirius and XM allows the company to pass through to subscribers any federally mandated increases in music royalties that we must pay, since March 20, 2007,” the letter claims.
But what about the effect on consumers, already stressed by macroeconomic pressures? Sirius XM has been suffering subscription slowdowns in this climate, as consumers start paring back on the non-essentials. During the recent first quarter, the company finished with 18.6 million subscribers, down 2 percent sequentially from the fourth quarter.