I've written a few articles in the past discussing satellite radio and my thoughts having been a subscriber to both Sirius (formerly, and probably soon in the future) and XM (currently though likely dropping as a subscriber there in the near term).

Both share similar problems as their broadcast competitors -- short play lists and too much repetition.  The one big advantage that both offer though (normally) is NO COMMERCIAL interruptions.  Their programming isn't without breaks in the flow, but typically the breaks are short intros from the jockeys and program hosts that offer a few comments about some coming album, or tells the listener a bit more about this history of a song or where the artist(s) will show up on tour next.  Generally much more brief than the incessant chatter of over-the-air DJs that will bore you to tears and have you screaming "shut up already" at your radio.

XM used to be commercial free music, but they have a few channels that are programmed by Clear Channel and those channels are NOT commercial free.  I've not listened to them since Clear Channel took complete control of the channels, so I can't speak as to how much commercial content they have, but C.C. (Clear Channel) isn't known for it's lack of commercials on radio, so I suspect it's not an insignificant amount.

Anyway, there have been rumors for quite some time that neither of these companies would be able to survive on their own and that their business models weren't not conducive to long term profitability.  I dispute those forecasts as I think the people that make such predictions are looking too hard at subscriber acquisition costs (typically costs involved in subsidizing radio purchases for the customers) and are not seeing the longer term pile of cash at the end of the rainbow (assuming a subscriber sticks with their choice of providers for 2 - 3 years or longer).

Some folks have used the word "merger" and have suggested that only a merger would save these companies.  Even the CEO of Sirius, himself a former higher up in the CBS Radio world, has suggested that a merger might be the answer and that it could certainly bring cost savings, and help bring on profitability sooner.  See this (very recent Washington Post article): Sirius Sees Benefits in Potential Merger With XM for more details on the "M" word regarding these companies.

I'm gonna say flat out here and now that a merger is most definitely the answer.  First, I would hope that the regulatory agencies wouldn't permit it.  It would (I hope) be stopped by the FCC and/or the FTC and should never get approved by either.  Sorry, but I just don't see a merger as being in the best interest of customers and in the best interest of competition to broadcast radio.  While the current administration, and perhaps the current FCC might allow a merger (I really don't believe they would),  I'd have a hard time buying any argument justifying allowing one.

Meanwhile I think there are other ways to achieve profitability that make a lot more sense and should be possible.

First, both companies need to cooperate on equipment manufacturing.  This is something that the FCC supposedly ordered in the past and which both companies have apparently dragged feet on. There's some discussion about this issue here: Sirius and XM make excuses ... As the discussion there notes, and as some fan-boyz (and galz) of the two companies note, both companies use excuses such as "they don't make the receivers, third parties do, etc."

Seriously (not Sirius-ly), both companies need to get crackin' on making real concerted efforts to get compatible hardware out there. Customers shouldn't be forced to be locked into either provider based on what hardware came in their new car, or what radio they bought because of a certain feature set, etc. It should be as easy as signing up (subscribing) to either provider and as long as there is a valid subscription the radio should be able to tune to XM-100, or SI-125 or whatever is necessary to get the receiption that is desired.

Perhaps the fault here is the FCCs for dragging their tails in enforcing their policies, or perhaps it even goes back to Congress for not giving the FCC the ability, authority and requirements to enforce such things. I'm not sure which, but regardless this is something that is still (in my mind) hurting both companies.

While XM seems to have the better choices in radios and features, Sirius is piling up more exclusive programming that may perhaps attract more subscribers. Especially sports programming such as the NFL, and coming in 2007 NASCAR. This is the other area that I think both providers have hurt themselves (and their competitors) with.

Both providers have paid very large sums of money to sports leagues for exclusive rights to broadcasts on Sat-Rad (Satellite Radio). Sorry, but I think both have been foolish in this area and both should perhaps discuss between themselves the idea that neither should be paying any of the major sports leagues (NFL, MLB, NBA, NASCAR, the NCAA and the NHL) for any exclusive deals.  While I try to hold true to my normally Laisse-faire roots, this is perhaps an area where the government should step in (via the FCC or FTC) to disallow these exclusive contracts as being against the best interests of the public and their spectrum that has been granted to these providers.

Anyway, if both providers were to stop over-paying for the exclusive rights to these sports leagues, they could greatly improve their profitability chances and very significantly cut their programming costs.  Rather than handing the bulk of the $12.95 per month subscription fees over these sports leagues, the providers could keep most of the money themselves and help pay down the subscriber acquisition costs and even perhaps reduce their monthly subscription fees to a point that makes them much more attractive to people that want to explore alternatives to broadcast radio.

Just my $.02

See the comments area for a few quick clips quoted from the original Washington Post article that helped inspire this article.