Recent News: Satellite Radio: Cowen Says
70%-Plus Chance Deal Closes
In a brief note previewing the upcoming
earnings announcements for XM Satellite Radio and Sirius
Satellite Radio, Cowen analyst Tom Watts asserts that there
is a “70%-plus chance” that the proposed merger of the two
companies wins government approval.
Watts says a Department of Justice decision
on the deal should come “relatively soon,” with the two
companies in full compliance with the DoJ’s information
requests. He says a ruling from the FCC should follow soon
Watts has Outperform ratings on both stocks,
“even without M&A potential.” He thinks both companies can
beat the market on free cash flow potential alone. He thinks
both companies low-balled subscriber growth estimates for
2007, “setting the stage for outperformance in the second
half.” If you have to pick just one, Watts prefers XM, based
on stronger OEM relationships with automakers, and a better
XM reports earnings on October 25; Sirius on
So why do I bring this up?
Maybe the Champ Car World Series and Indy Racing League
should again take a look at what the two satellite radio
companies are doing. There are a lot of things that
are common in both cases;
1. SIRIUS Satellite Radio and XM Radio both provide
radio, entertainment, sports, news/talk content.
Champ Car and IRL both provide great open wheel racing at
2. Both Satellite Radio companies spend millions on
advertising, marketing and satellite hardware.
Champ Car and IRL do advertise, however very little.
3. Again, both Satellite Radio companies spend money on
personnel, talent and Corporate offices.
Both Open Wheel series have the same type of personnel,
driver talent and separate Corporate offices.
4. SIRIUS Satellite Radio and XM both have personalities
and or content that have helped sell their services. (SIRIUS
has Howard Stern, NFL, NBA, NASCAR and 100% commercial free
music). (XM has MLB, Oprah, Opie and Anthony, the Golf
Channel, IRL and NHL).
Champ Car and IRL have premier events. (CCWS; Australia,
Long Beach, Cleveland, All Canadian/European Races, Mexico,
Vegas. Tracy, Rahal, Wilson, Servia, Junqueira, Power, Tag
and Legge). (IRL; Indy 500, Detroit, St. Pete, Mid Ohio.
Kanaan, Castroneves, Dixon, Andretti and Patrick). Just to
name a few.
5. SIRIUS and XM compete with other things, not just with
each other. (Terrestrial radio, MP3/iPod players, CD, HD
Champ Car and IRL compete against NASCAR, ALMS and F1.
So if you take a look at the whole picture.
Open wheel racing can capture their fans back if both sides
can put their “egos” away and make racing Champ Cars/Indy
Cars what it once used to be. Both series if combined would
save millions of dollars on personnel (sales, marketing,
communication etc), marketing and advertising coverage in
print and/or television.
You would have the absolute best drivers in
both series competing against each other and a larger car
count. Sure, you’ll lose some teams and drivers, but haven’t
both sides already experienced this already?
Look at what IRL started with in the
beginning…..and look at the teams that bailed on Champ Car
and went with the IRL. Then you have the top teams at CCWS
that have stayed and teams that have come and gone.
Open wheel racing is being dominated by the
NASCAR folks. Why continue to have the open wheel series
compete with each other when it can and should dominate
Look again at what each open wheel series
has; Indy 500, Long Beach, Australia, Canadian races, Belle
Isle. We’re already going overseas for races right? You want
Corporate Sponsorships to come back to support 1 series.
Australians get it here (in Surfers)….they’ve done this
event right since day 1. The Canadians still love their
racing. Long Beach is always a Southern California party.
You can’t tell me guys like Kanaan, Castroneves and Dixon
miss coming to these Champ Car events. And I know that Champ
Car drivers would love to have another shot at winning the
For those fans who have never experienced
the Lexmark Indy 300 here in Surfers Paradise….you don’t
know what you’re missing. Four days of racing, fan
events, etc. This country gets what this event is all
about……Paul Tracy said it best at Thursday’s press
conference when asked about the state of Champ Car “maybe
this series is taking on a little bit of water, but I’ll be
here and the last one with the pail emptying the ship”.
Tracy is Champ Car’s best spokesperson…..maybe they should
try utilizing him to their full potential.
Maybe everyone should take a huge step back
and look at the state of open wheel racing and see where
both sides can “compromise” to save open wheel racing. It
won’t happen overnight…..but this has to be looked at again.
Sure cars will have to change, engines will have to be
changed, people will lose jobs, new people will come in and
the right people will stay and make open wheel racing
The split has been all about control of the
sport. Well guess what guys, you soon won't have
anything to control because there won't be anything left.
It's time to put the control issue aside.
One phrase I like to use is "When in doubt,
follow the money." A similar one is "When in doubt,
just do what's right."
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