On whether Sirius and XM are in trouble:
Sallie Hofmeister: There were a lot of people who made the argument that without the merger, both of you would go out of business. Is that part of your argument?
Mel Karmazin: No, because I, I mean I can't make that argument. If I, if I could make that argument I would make that argument, and we'd get the merger approved. Because the...
Sallie: There's no...
Mel: ...the government would say... There's not an argument in there... As a matter of fact the reverse is true, because I can't make an argument that I can't back up, is that if in fact we believe... So let's assume, an epiphany came to us because we suddenly realized our cost structures were just crazy, then we would file comment, and we would be a troubled company, you know, and we'd sit there and say, "The reason you should approve this merger is that if you don't approve the merger -- right? -- the country would be without any satellite, and isn't it better to have one than..."
David Hiller: Are both companies profitable now?
Mel: Neither company has made a dime.
Mel: Neither company's made a dime. You know, it's, we are unable to make the failing-company argument so, you know, some people have said, you know, it's ailing but not failing. And I believe it's not failing. And, and I bought personally a whole bunch of our stock, you know, I mean a lot, you know. And um, I believe that the company will be successful without the merger or with the merger. I just don't know why...
Sallie: You have to say that because if the merger's not approved, your stock would sink I guess.
Mel: Well it's not, it's a real issue but if you take a look at the equity the companies have right now, there's a substantial amount of equity, so below the deck, I mean, you know...
David: What is the equity?
Mel: $10 billion.
David: Combined, of the two?
Mel: Yeah. So I mean how do you, you know, look at, you know, an equity value of $10 billion -- you can sit there and go, Wall Street... It's hard to make the argument that you're failing because you're growing. Our number of subscribers is growing. You know, we're going to have a billion dollars, Sirius will have a billion dollars of revenue this year. Now, you know, I mean in my opinion that's substantial. Now our costs are, we're at high fixed costs. It costs us three hundred thousand -- three hundred million dollars for each of the three satellites we have up in the air today.
Tim Cavanaugh: $300 million per year per...
Mel: Per satellite, no. To buy them. Right? You buy a satellite, it costs you $300 million; satellite life is 12-13 years. So if you looked at the investments the company has made: we've invested $5 billion, right? We've spent $5 billion in cash, and we're still not making money. Now, I wasn't here then. I would not ever have gotten into this business, OK? I mean, I came in at the end of 2004, as I saw profitability on the horizon. The reason I'm not expanding into Europe... I mean, just think about it, look: You know, if satellite radio's a good thing in the United States, why aren't you doing it in Asia and China? Because it's going to take you 12 or 13 years of losses before you make money.
On why the satellite radio giants might be able to win: