News is not getting any better for Sirius XM Radio. The satellite radio company could find itself in bankruptcy as early as this Tuesday if the cards don’t fall right.

The company has been negotiating with its debtors, and has successfully postponed $172 million in debt from December into 2011. But there is another $175 million coming due Sunday. If Sirius cannot arrange to put that debt off as well, the company said on Friday, it would be forced to file for bankruptcy as soon as Tuesday, Feb. 17.

Were Sirius to file for bankruptcy, it would have the right to terminate contracts with on-air talent, such as Martha Stewart and Howard Stern, who has a five-year, $500 million contract. Of course, it is also true that a Chapter 11 filing  could damage Sirius’ growth potential because subscribers might not want to sign up with a company already in bankruptcy. Currently, Sirius has about 20 million subscribers and provides them with a variety of music, sports and talk radio.

Sirius XM has been struggling against attempts to take control of the company by Charlie Ergen, the chief executive of Dish Network Corp and EchoStar Corp. Ergen purchased a significant amount of the $300 million batch of discounted Sirius bonds that become due during the next week, according to an AP article. Sirius had previously rejected a direct offer by Ergen for control of the company. At this moment, Liberty Media Corp. is talking to Sirius about investing in the company, a move that could help Sirius continue to fend off Ergen.

It was thought that the merger last year of Sirius and XM, the two rival satellite radio companies, would result in a single company that would be able to succeed because of it’s drastically lower costs, especially in previously duplicated operations. But the current economic climate, and the short credit it caused, has cut deeply into new auto sales, which was Sirius XM’s primary marketing channel.

If it cannot save itself any other way, and with bankruptcy a two-edged sword, the future is very unclear for satellite radio, which was clearly an idea that attracted many people and their dollars. Without the early competition between Sirius and XM, overpriced talent, and today’s difficult economy, success would almost have been guaranteed. Now, though, all that can be said is that the end game for this industry should be very interesting to watch.

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Entry was posted on Saturday, February 14th, 2009 at 4:17 pm under Music, Technology.

Read more entries by Michael W. Jones.
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