Monday, October 15, 2007

Radio: War of the Satellites – the sequel!

Last week was the 50th anniversary of the Sputnik launch. Three months later, in January ’58, the U.S. responded by launching its first satellite, Explorer I. That was enough for Roger Corman, the low-budget film producer, to rush out an on-the-cheap movie,War of the Satellites. Its purpose was to make a few bucks on playing off of the cold war hysteria, which had extended into the space race. Corman allegedly finished the movie in three weeks.

Satellite radio? That’s a different time frame. Try fifteen years and counting.

Let’s travel back to the year 1992: The Redskins beat Bills, 37-24, in the Super Bowl; the Blue Jays beat the Braves 4 games to 2 in the World Series; The U.S. lifted trade sanctions against the Peoples Republic of China; Nirvana’s Nevermind hit #1 on the national charts; Bill Clinton and Al Gore defeated George H.W. Bush and Dan Quayle for the U.S. Presidency - and six companies applied for satellite radio spectrum licenses.

Now let’s swiftly move to 1997: The Packers beat the Patriots, 35-21 in the Super Bowl; The Marlins beat the Indians, 4 games to 3 in the World Series; the U.K. relinquished Hong Kong to Chinese rule; Spice by the Spice Girls was the biggest selling album of the year; Bill Clinton began his second term as President, and of the six companies that originally applied to the FCC for satellite spectrum licenses in 1993, only four remained to compete in the spectrum auction, which only two would win. Their names: Satellite CD Radio, American Mobile Satellite, Primosphere, and Digital Satellite Broadcasting Corp.

Primosphere and Digital Satellite didn’t make the cut. American Mobile Satellite’s bid for $90 million came in first and Satellite CD’s, second with $83.3 million.

Primosphere’s bid was $67.5 million, good enough for third but third place meant over and out.

Later, American Mobile Satellite wisely changed its name to the clever XM, and CD Radio, unwisely, to the utterly farcical Sirius.

But Primosphere didn’t go silently and asked for reconsideration.

What's Primosphere, you ask?

It’s a holding company for Cliff Burnstein and Peter Mensch, known for their long-term partnership in Q-Prime, an international management company. Maybe their names aren’t familiar but the acts they rep should be. How about Metallica, Shania Twain, the Red Hot Chili Peppers, and Snow Patrol, for starters.

Now, fast forward to 2001: George W. Bush begins his first term as President; the Ravens beat the Giants, 34-7, in the Super Bowl; Arizona beat the Yankees, 4 games to 3; the top selling album of the year was Hybrid Theory by Linkin Park; what happened on September 11th altered everything - and the FCC denied Primosphere’s application for review and also denied their request to reconsider their dismissal. The FCC said XM and Sirius had them locked – and, for Primosphere, the elevator’s at the end of the hall.

When the FCC refused to budge, Primosphere contributed to making wealthy lawyers wealthier by having them ask a federal appeals court to review the XM and Sirius license grants and the FCC sack of the Primosphere application.

The federal appeals court spent the following year shuffling papers, sharpening pencils, shaking the dust off of their shoes when it got too thick.

Let’s move quickly to 2003. The appeals court finally made their decision and rejected Primosphere’s challenge, stating the XM and Sirus license grants were legit.

In 2004, the can't-catch-a-break Primosphere told the FCC that it wanted to withdraw its 2001 review.

Confused? You ain’t read nothin’ yet.

Now, were back in 2007.

Primosphere, which refuses to die, claims that since the FCC had failed to act on its 2001 request, its satellite radio license application is still pending and wants it to be considered in conjunction with its merger application for XM and Sirius.

There goes the monopoly, dammit!

To prove their point, Primosphere introduced a statement made by the FCC in 1997, which read: (I)f the winning bidder fails to submit the balance of the winning bid or the license is otherwise denied, we will assess a default payment and reauction the license among other existing applicants. Translation: They are still an existing applicant for the right to launch and operate a rival satellite service. If granted, they will launch their own satellites and market its own service. The company added that, in addition to their bid, the FCC was still holding and banking their $140 million in satellite launch fees.


Kevin Martin’s accidentally-on-purpose poor clandestine FCC filing system and follow-through just may keep Primosphere’s plans alive. That wasn’t supposed to happen. Then again, a lot of things that aren’t supposed to happen that do happen at the FCC.

According to their plans, it would take Primosphere roughly five years to be up and running. But here’s their ace in the hole – they could be operational much earlier if given a portion of the spectrum used by XM and Sirius.

The company did their homework and cited a 1999 deal where the FCC gave approval for a satellite TV provider to lease a transponder from another provider on an existing satellite.

This didn’t sit well with Mel.

Sirius fired off its own complaint that Primosphere didn’t need FCC approval to withdraw its satellite radio application. When you’re out, your out – or as Sirius put it, There is no way for Primosphere to un-ring this bell.

What a dilemma. Who do you anti-trust?

If Mel had his way he and Gary Parsons would take Burnstein and Mensch for a ride and only two would come back.

XM and Sirius can’t insist on a monopoly so they’re pushing to have a review of Primosphere’s request to either be dismissed or put on hold until the XM-Sirius merger is completed.

The benefit there is that the Bush-controlled, Kevin Martin-run FCC, preferring to avoid conflict between well known entities and an unknown, would stall on a decision until the merger was complete, then revisit and squash the Primosphere request.

Then there’s the NAB.

Which side is Fumbles supposed to be on? Will the NAB insist that the FCC add another competitor to terrestrial radio to fend off threats of a steroidal merged, monopolistic XM-Sirius? This may put him in the awkward position of backing a new satellite radio start up.

Poor Fumbles. Everyone’s snickering at him – and not behind his back either.

The question must be asked. How much scratch Primosphere is willing to throw at influential lobbyists to keep themselves alive?

So, what we’re dealing with here are the ethics and truthfulness of Kevin Martin and the overall integrity of Fumbles.

This one has more twists and turns than The Departed.


Anonymous said...

John: Like your FCC blog last week you write the stories the trades must be afraid to cover. I have yet to read about the FCC scandal anywhere other than you and the LA Times. I had never heard of Primosphere ever. In all the coverage on the XM-Sirius merger I would have expected that company to be mentioned. Maybe it wasn't because Primosphere is owned by Q-Prime which manages some of the top names in rock and country. If the trades covered it would Q-Prime pull their advertising?
I enjoy your witty writing and digging out the stories others ignore.

lock stock barrell said...

You are wrong about one thing in your new blog. If Mel and Parsons take Burnstein and Mensch for a ride only one will come back. Mel Karmazin.

Anonymous said...

you neglected or overlooked that mensch & burnstein are carpetbaggers. they are used to getting their own way with labels & concert promoters that they apply the same tactics to any venture they enter in. they want something for nothing. they didn't bit high enough & that should have been that. they want something for almost nothing. i want xm-sirius to have competition. i don't like monopolies. if i want socialized media i'll move to a socialized country.
i think mensch & burnstein should stick to their metallicas and shania twains.
i think the fcc should call for a new auction to fill the competitive void of an xm-sirius merger.
i think we need fresh blood in the fcc, the nab & broadcasting in general. until then an ipod will be even better than the real thing.

Anonymous said...

Much a do about nothing. Satellite radio has peaked. There are not enough consumers to support two, let alone one. I expect the quality of the product will decline when Mel takes over both services and combines them into one. He will keep Howard Stern and sports and everything else will be fair game for cancellation.

I had Sirius and chose not to renew it. They play the same music over and over just like regular radio. I would rather listen to what I have on my iPod or listen to internet radio which I already can on my car radio.

clay said...

You said

'So, what we’re dealing with here are the ethics and truthfulness of Kevin Martin and the overall integrity of Fumbles.'

and that says it all.

Anonymous said...

This blew my mind. I remember seeing that War Of The Satellites movie when I was 13 or 14 on one of those old Saturday late night science fiction/horror shows on TV. Today you could find it in Wal-Mart or a Dollar Store for a buck.

The Q-Prime managers come off as big mouthed louts. They have plenty of money to spend with that roster of talent and I am sure they invested some of their talent roster's money in this scheme.

I am opposed to a XM/Sirius merger. As you say it will no doubt happen. It will not affect me since I subscribe to neither nor have any plans to.

Anonymous said...

Why would Primosphere want to enter a market where you are guaranteed to lose billions?

This is a scam on the part of QPrime to get a satellite license at a discounted rate which they would turn around and sell to a real jerk investor.

I am against monopolies and the XM Sirius merger BUT BUT BUT I do not want to see satellite frequencies bought sold and traded like terrestrial radio.

Anonymous said...

Those 2 are idiots trying to cash in. I am not in favor of a one satellite company ruling but I don't have to subscribe if I don't want it and I don't.

The Qprime guys would have an all Metallica station, an all Shania Twain, you get the picture?


Anonymous said...

is john gorman john morgan

Anonymous said...

I read in Tom Taylor's Radio Info this morning a piece about Opie & Anthony which referenced a comment Mel Karmazin made years back following deregulation: "Now I own across the street."

Here we go again. You know what happened to radio when Mel Karmazin and Lowry Mays ended up owning "across the street."

The best solution is for XM and Sirius subscribers not to renew if the deal goes through. Send a message to Congress, the FCC, the DOJ and every other government agency that they just can't auction away what is supposedly "owned by the people" and just leased by business.

The merger is an even bigger scam than HD radio. HD radio has all the luster of a used car salesman. Satellite if owned by one company has the ability to control that medium.

The history of Clear Channel, Infinity-Viacom-CBS, Radio One, Entercom and others should be enough for Congress to halt this merger.

As far as those other guys go. They seem like junk men. They view satellite as scrap metal and are scavengers at a junk shop. They should not be allowed to be anywhere near a satellite license.

I side with you on the NAB doing more harm than good in this matter, too.

Siriuspy said...

Mel will get his way. He always does. There is a story circulating at Sirius that John Ashcroft approached Mel first claiming to have the inside track. Mel turned him down when he charged more than Mel was willing to pay.

At least that is what is circulating around here.

D.C. Carter said...

A lot of bashing of Burnstein and Mensch here. The truth is that they a quality people and great business men (I used to work for them).

Anybody who had a few bucks could have originally applied for one of the 2 satellite licenses to be awarded. Very few people, obviously, were on the ball enough and had the vision to even apply back in the early 90's.

If you thought you had a shot to get a license worth millions of dollars, wouldn't you explore every legal angle to get that license? I sure as hell would.

That's not being "carpetbaggers" or greedy. That's just being good businessmen.