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Sirius PainXM and Sirius could both lose the satellite radio wars.

By Daniel Gross
Posted Friday, Dec. 8, 2006, at 4:37 PM ET

(Continued from page 1)

The business models of expensive talent, discounted subscriptions, and heavy marketing clearly aren't sustainable for too much longer. And so it's not surprising that analysts have begun to speculate about a potential merger. A merger of equals is certainly possible, though not likely given the egos involved. More likely is a situation in which one falters significantly and the other pounces for an acquisition. A third possibility, which analysts seem unable to contemplate, is that both could fail, and somebody else could end up with both of their carcasses.

For XM and Sirius, the main challenge is probably cultural as much as it is financial. The half-life of a great idea is exceedingly short in the 21st century. In a world where radio mediocrities—the generic KISS-FMs and HOT 97s—dominated Americans' ears, the concept of paying for an advertising-free set of music channels made lots of sense. But in a world where the Internet and the iPod allow people to assemble, carry, and play vast multimedia libraries with them wherever they like, not so much.

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Daniel Gross is the Moneybox columnist for Slate and the business columnist for Newsweek. You can e-mail him at . He is the author of Pop! Why Bubbles Are Great for the Economy.
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