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Wall St. is after Sirius (SIR) and XM Satellite (XMSR) again. Investors are still unsure whether the two companies will merge. Subscriber growth has slowed for each. And debt levels at the companies are a combined $2.5 billion.
The argument for the merger is that it will cut costs. But, the companies do not have compatible systems, so redundant services will have to be run for some time.
Today Stifel Nicolaus threw more cold water on the deal saying that royalty rates for music are rising higher and that the costs for hosts will almost certainly go up as well.
According to Barron’s, the research firm "writes that the rates paid performers will rise from about 3.5% of XMSR’s adjusted gross revenues over the past five years to 6% in 2008 and 8% by 2012."
XMSR and SIRI are both down on the news.
Douglas A. McIntyre
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