

The Sirius and XM satellite radio companies may have succeeded in merging, but their combined company could declare bankruptcy within the year. The New York Times reports that Sirius XM has hired lawyers to prepare a possible bankruptcy filing, and its CEO Mel Karmazin has been in talks with television satellite company EchoStar about a potential acquisition of his company.

The company's main obstacle is that floating satellites high above the earth is an expensive and increasingly unnecessary means of distributing music, which could be one reason the company has been using its satellites for other purposes since at least last year.

The problem is not that satellite radio sucks – far from it. This technology delivers great-sounding music to places the internet mostly can't reach – most importantly, highways. And it features real live DJs who program a decent mix of music at a time when many fans have tired of administering their own music experiences (research, download, transfer, listen, repeat). But the window of opportunity for satellite radio is closing fast as inexpensive internet and cellphone streaming services threaten to extend to the car – and that's even if the economy were in great shape. Given the current outlook, Sirius XM's demise could come sooner than expected.

I'm pretty well acquainted with satellite radio's charms, having tested a few units over the years and enjoyed it in the occasional rental car. For hardcore commuters, it's been a godsend. But with internet radio already appearing in cellphones, plans to install cellular modems in car dashboards already underway, and earthbound 3G (and later WiMax) signals able to provide ever-increasing audio quality, satellite radio will soon face competitors that offer interactivity and more channels while delivering equivalent sound quality – all at a far cheaper price, or even for free.

Then, there's the economy. As households trim budgets, cutting monthly satellite subscription fees – especially when there are so many free music options (FM, HD Radio, cellphone streaming, free music downloading, etc.) – is going to be an attractive option to many.

As Bloomberg points out, Sirius XM had $360 million in cash on September 30 and $120

million in an escrow account related to a deal with Major League Baseball. But its stock has traded under $1 on the Nasdaq stock market since September, and in November, Karmazin revised his figures for 2009 subscriber growth downward by one million subscribers. He's also staring down $175

million in bonds due next Tuesday, $350 million in bank debt due in

May, and $400 million of convertible bonds due in December. Plus, Howard Stern's $500 million contract is up for renewal next year. (An acquisition by EchoStar could result in that deal being renegotiated sooner.)

"[Karmazin is] a little bit like Captain Kirk in Star Trek – always finding his way out of situations no matter how implausible," Radio-Info executive editor Tom Taylor told Bloomberg. "He now needs to pull a very big rabbit out of a hat."

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