Liberty Media Corp at MoffettNathanson Media & Communications Summit

May 14, 2014 AM EDT
FWONA - Liberty Media Corp
Liberty Media Corp at MoffettNathanson Media & Communications Summit
May 14, 2014 / 06:00PM GMT 

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Corporate Participants
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   *  Greg Maffei
      Liberty Media Corporation - President & CEO

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Conference Call Participants
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   *  Craig Moffett
      MoffettNathanson LLC - Analyst

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Presentation
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 Craig Moffett,  MoffettNathanson LLC - Analyst   [1]
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 Good afternoon, everyone. Thank you for joining us and, for those of you on the webcast, thank you for joining us for the first-ever MoffettNathanson Media and Communications Summit. And special thanks to Greg today for joining us as well. Greg, thank you for being here.

 Greg is the CEO of Liberty Media, Liberty Interactive, and I got to tell you I am really thrilled that you are here. There's no shortage of stuff going on and stuff to talk about, and I'm going to --.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [2]
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 Congrats on your first conference.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [3]
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 Thank you very much, thank you very much.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [4]
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 Are you going to be taking over the Deutsche Bank slot at Palm Beach? (multiple speakers) It seems like it's open for grabs and I figured you'd be swooping in. The Breakers and you have got a future.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [5]
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 Don't think we haven't thought of it. Let me start with the latest news, obviously, from you is the intention to spin off Liberty Broadband including the Charter assets and being a separately-traded public company. That supersedes the prior tracker plan.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [6]
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 I was the training wheels.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [7]
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 The training wheels. Talk a little bit more about the specifics of the spinoff. You will end up, I think, with 26%-and-change of Charter. What catalyzed the decision and -- so where do we go from here?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [8]
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 So we have had a history of trying to provide more choice, more transparency to investors. And the tracker was an intermediate step at the time because we weren't sure of exactly what funds would be required, what form Charter would eventually take given the uncertainties around the Time Warner transaction.

 Now that there is some more clarity, at least for the moment, about where Charter is -- and I suspect it is an evolving animal as well -- it seemed to make more sense to have our asset, our investment, the rights we have in Charter sit in a separate company, have it be capitalized separately on a fully differentiated basis. Spinning it out there are tax free to our shareholders allows different alternatives in the future for how we might interact with Charter.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [9]
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 This was presumably structured in response to Charter's plan to purchase or possibly to purchase SpinCo. And you've got -- there's a lot of options out there I guess.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [10]
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 We can't purchase SpinCo, as you know.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [11]
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 Well, eventually you could purchase SpinCo.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [12]
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 After two years.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [13]
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 For the first two years neither Charter nor Liberty, but initially it's the divested Time Warner Cable businesses.

 Talk about precisely what's the benefit over the preferred -- the tracking stock that you had previously proposed? Was there an accounting benefit?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [14]
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 No, I think there is -- if subsequently we combine the Holdco and Charter, our gain can go tax-free to our shareholders. There's more flexibility around some of those sort of issues.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [15]
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 And the impetus behind the decision to add subscription rights?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [16]
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 I think it gives us more flexibility to maintain a larger share of Charter if that's what we seek to do. As you know, we bought I think it was just over another point of Charter in the last week for a bunch of reasons, but primarily because we think it's an attractive investment. But it also gives us more flexibility to have Charter Liberty Broadband or Charter Holdings as a company that owns more than 25% of Charter.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [17]
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 What happens if you drop below? For a long time you've said pretty categorically you wanted to keep above the 25% range. Now it sounds like you've softened that up a bit. So if you go below --

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [18]
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 Well, there is no bright line on a day if you go below. If over time you don't have remedies and a path to being above the 25%, you could be moved into a non-operating company status that we find less attractive. We may decide that's where we want to go. It's not a bright line that we won't go there, but having flexibility around not being an investment company clearly is probably preferable.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [19]
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 I want to zoom out to some of the more strategic questions around cable M&A for a second, because a big part of the logic for why Charter was initially interested in TWC was a programming cost objective. It was get lower cost contracts; not so much to bend the curve but get lower cost contracts. That's out of the picture. Does that affect your --?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [20]
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 I am not sure I agree that's out of the picture. I think you're right, you don't necessarily step in to inherit the existing contracts in the same way that you might have if you've been able to apply that to your subs. But let's be clear, you were talking about Time Warner with 11 -- we will see what 11-plus means, million subs. Charter with 4 million, so it couldn't be that that was the driver since almost three-quarters of the combined entity really would've had that benefit.

 However, doubling the size of Charter, which effectively -- if you have the ability to treat that as being managed as one entity, which it's going to be managed by the Charter management team -- that should have an ability to bend the cost curve at least. As you reapply and renegotiate rather some of those rates over time, you should be able to do better. So where there might have been a one-time drop by bringing the Charter subs into the Time Warner contract, I do think this will have the impact of giving us more heft over time on negotiating with content providers.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [21]
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 But in the near term, Charter has a programming cost problem. And --

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [22]
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 I think all MSOs in the near term have a programming cost problem.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [23]
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 Does a more challenging ramp to get to a solution to the program, that is you can't buy your way into lower cost contracts and so you've got to wait for and hope for bending the curve as a solution, does that reduce your appetite for US cable?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [24]
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 No, I think if you look at this deal, I think it's enormously attractive. Before you get to bending the cost curve, we are buying in at 7 1/8 or 7 1/4 times. When you combine in the management contracts that we're going to get from SpinCo it's more like 7 times.

 When you look at how we've gone from a relatively diffused non-clustered set of systems to a quite clustered set of systems, how we've taken an asset which had low FiOS risk, low FiOS competition, something like 4% to something that is going to be like 2% or 3%; when you look at our lack of exposure to RFN risk attractively; when you look at being able to finance this thing at 5 times roughly, both the purchase that we make which will bring probably Charter on a pro forma basis from buying those Time Warner subs up to about 4.9 times and SpinCo coming out of roughly 5 times both with attractive low-cost financing, I think that's quite appealing when you look against that purchase price.

 When you look to SpinCo and how we put our foot on the one-third share we will own of SpinCo, issuing Charter stock, which, all things being equal, is likely to be trading at 9, 9.5 times, to put on something that we are effectively buying in at 7 times, I think there are a lot of very attractive elements to this deal. Bending that cost curve on programming --

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [25]
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 Is one of them.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [26]
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 -- is gravy.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [27]
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 When I think back to some of the things you originally talked about when you were looking at the cable industry, you seem to have a strong appetite for moving the industry toward usage-based pricing and monetizing consumption. You have talked a lot about the broadband advantage in general.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [28]
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 I saw the numbers for Q1; cable share was 80%-plus of all --

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [29]
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 80%-plus.

 Greg Maffei -- of all of the -- so I think those advantages are continuing.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [30]
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 What has changed, I think, is the regulatory landscape. At least, there's certainly more regulatory scrutiny and question marks around cable now than there were --.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [31]
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 Really? I mean, you look at some of the recent pronouncements, which may have been walked back a little at least verbally, on net neutrality I think they are pretty favorable for cable. The environment, perhaps, is better and crisper and clearer than it was.

 Is there some risk around what happens in the Comcast/Time Warner transaction? I think David Cohen probably could have been far more articulate on those risks than I can when you heard him this morning, but I think a lot of --.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [32]
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 We were able to listen to that?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [33]
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 I was not, unfortunately. I was otherwise engaged. Did he give away any secrets that I need?

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [34]
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 No, I would say David is usually pretty good at not saying anything he doesn't want to say.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [35]
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 Okay. I think there are a lot of things you could point to in the regulatory environment that are more favorable other than, I will acknowledge, some risk around what happens. And we are hoping when the government -- I think as Tom Rutledge would probably again more accurately describe when the government -- whatever they do that they don't tie up the wrong person, i.e., us. Because we are not a vertically integrated player, we don't have the scale in either cable assets and certainly not in Internet dominance or Internet strength that Comcast is going to have.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [36]
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 And so, bottom line, it does not sound like your appetite or interest in the US cable market has diminished at all.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [37]
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 To the degree we are able to get deals like the deal I believe that Charter has cut in -- coming out of the Comcast transaction, I think that's a good deal.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [38]
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 If I were going to play Monday morning quarterback, what would you have done differently? Because this is not obviously what was originally on the whiteboard, which was an acquisition of TWC.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [39]
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 Sure, let's step back. Just a year ago we had sat here at the prime zero, your first conference which didn't yet occur and said Charter is going to more than double its size -- or roughly, excuse me, double its size -- and come in at 7 times recluster, reduce its FiOS exposure, reduce its RSN exposure, finance at 5 times, issue stock at 9, 9.5 times, and be in this position I think you would have been suggesting that was about as good as you could possibly hope.

 Now did we attempt a long ball, Hail Mary type play on Time Warner? Yes. In fact, it was quite successful because Time Warner is not going to be an independent entity and we are going to be, as I said, nearly doubling the size of Charter.

 As I look out there, there's only one other way to have gotten that big and I don't think Cox is -- you can ask Pat Esser, but I don't think they are putting themselves up for sale. So that was really the only path to double the size of Charter, so I would argue that that's a pretty good result.

 You're not going to give us any props on that? You're just going to sit there (multiple speakers) just going to sit there and not acknowledge any of that? Jesus, Craig, I thought I was pretty compelling. (laughter)

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [40]
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 Tom said --

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [41]
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 How did I do? I didn't hear (multiple speakers)

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [42]
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 You did well. Tom said that the end of the day it was this process that shook loose Time Warner Cable. And in fact, without this process it would not have been shaken loose, ergo all's well that ends well.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [43]
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 I think those are factual statements. Tom is a heck of a CEO.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [44]
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 Fair enough. I'm going to move to Sirius for a second. We had David Frear in this morning.

 You withdrew your offer for Sirius, but said that you were going to maintain a dialogue. Sirius repurchased shares; that leaves them with a significant repurchase authorization and leaves you as still the majority shareholder.

 So if Sirius ramps up its purchase program again, or as it ramps up its repurchase program again, talk to me about where Liberty is in that. Are you selling shares into those purchases?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [45]
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 Well, you would know if we changed our -- shareholders would know if we changed because obviously we'd have a 13B filing fairly quickly. I think what I said in earnings call last week was we had done the one transaction which over two tranches netted us $500 million and that we were effectively done for the time being. It wasn't our intent to sell anymore.

 I couldn't envision any scenario in which we sold more than pro rata going forward, but I don't -- at the moment I have expressed that we were not going to sell anything. If you look at the leverage at SIRI, given that they didn't buy for period of time, it got -- and they continue to grow and generate free cash, it got down to 2.8 times, which is well below their targeted 4 times.

 Then I think two weeks ago they went out and raised the $1.5 billion of 6% 10-year money, which has really fueled their balance sheet and capability. And they have expressed their desire to do buybacks. So there's an awful lot of pent-up capacity there and a lot of capability and we don't intend to participate for the moment.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [46]
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 I think it's fair to say, though, you are certainly giving no indication of -- at one time you wanted to buy all of it and buy it all in, gain access to all of that cash flow. Was that really to help fund Time Warner Cable? And was it opportunistic or was that just this is a great business and it's still undervalued and we want to buy more?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [47]
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 So when you look what we were paying with, we were paying with our own stock so it's a little bit of just consolidating the levels. We already control the business, that hasn't changed. We already can drive and determine what happens to the cash flow.

 There is some tax advantage to owning more than 80%. If we tax consolidate to the degree that we dividend or bring capital up in any way shape or form, we do it without any friction. The friction is not enormous because of the dividend received deduction, but it is more efficient if we own over 80%. If we owned 100%, it would be completely efficient in terms of that tax.

 So there is a slight benefit to owning over 80%. It's not something, in our judgment, that is worth chasing in terms of overpaying to bring the asset in to that level. So within the future the stars align appropriately and we could try it again, but it's not something we feel compelled to do because we already control the asset and that remains unchanged.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [48]
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 You have talked about them doing more acquisitions also. After Agero, there's presumably more that could be done to consolidate, either to clear up their telematics and data business or on the entertainment side. Would you like to see Sirius doing more deals or would you rather see them buying back stock?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [49]
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 Well, I don't think it's a binary choice in that sense that they can do only one or the other, and I also don't think -- it really depends. I don't feel they have a compelling need to be buying anything in the telematics space. I think there could be some interesting tuck-ins but none of them are enormous.

 I think they are making great progress in that business, not only with their own efforts but as they integrate Agero it's being accelerated. There are some large contract out there that are likely to get decided and we will see where we stand in the telematics space, but I think we feel pretty good about our entry.

 As far as other kind of things, I think content is less likely. The market has seemingly convinced itself that the streaming business is going to take Sirius XM down in the next week or two. I think that is probably not the case.

 I think you'll see some kind of efforts in that space where we either accelerate our own efforts, we do more partnerships, or potentially even acquisitions. So that's an area we certainly are paying attention to and figuring out the best entry for Sirius or the best way to ramp our efforts. But all of those against the size of the cash flow, the fact that Sirius' cash flow continues to accelerate, shielded by the NOL, accelerated by a relatively low CapEx program and growing EBITDA, I think all of the above is manageable. Lots of opportunities.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [50]
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 We heard from David today -- having covered that business once before, it's a really good business.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [51]
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 Unbelievably good business. You've got compression on content costs. Compare that to the cable model -- we just talked about rising programming costs -- where you have a much more differentiated content offering. You don't have, unfortunately -- like as in cable, you do have video and telephony offerings, which have a lot of similarity if not a commodity aspect.

 We are very differentiated. We have a lot of leverage on the cost side. We still have growth in terms of new subscribers, both from SAAR and penetration, but also in the used or aftermarket. A lot of positive things happening.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [52]
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 I want to go back to cable for a second. With the deal now done with Comcast (multiple speakers) and regulatory process now for another year, you mentioned Cox's name. There are presumably others -- Suddenlink, Mediacom -- smaller cable operators out there.

 My guess is -- I don't want to put words in your mouth. My guess is you would like to see now a rollup of the cable industry?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [53]
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 Well, I think Tom Rutledge, John Malone, I'd like to think Guy (inaudible) -- there's benefit to that consolidation. I think there's benefit to the industry. I think there's benefit to Charter.

 I think the Charter management team has shown their ability to execute on those kind of transactions. So, at the right prices, I think Charter is well-positioned, particularly given that Comcast is less likely to be able to be able to buy more stuff from here. Charter is well-positioned to buy other pieces as they become available.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [54]
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 Now, it was interesting; you pointed out the FiOS overlap and how the FiOS overlap is coming down. Is that a big part of the way you evaluate the attractiveness of cable systems? It certainly is something that came up a lot when -- in the beginning when we were talking about Time Warner Cable in phase one.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [55]
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 Well, I think you recognized that they're -- whether it's FiOS or U-verse, they are likely to be stronger competitors than other potential smaller RLECs, so we are certainly aware of that.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [56]
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 I'm fascinated to hear your thoughts on AT&T DirecTV as somebody who had for a time some interest in the satellite business and know that business very well.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [57]
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 I am a very happy shareholder of DirecTV watching this. I think we will see whether that really gets done or not. There's some reasons that both sides might find it attractive. I can certainly come up with those. It probably is not the game changer that it might have been five years ago for AT&T, but will see.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [58]
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 Do you think, if that deal happens, that -- what's your expectation for whether it would hurt or help the Comcast transaction in Washington, which obviously has an important backend for you?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [59]
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 I think David Cohen would probably be more articulate on that. It certainly strikes me that it is harder deal to get done than the Comcast-Time Warner deal. Obviously you're talking about kind of an (inaudible) power in the Internet versus straight up reduction of competition in video. That seems to be a lot harder sell.

 So on a continuum -- and I don't think it's a great insight -- Time Warner looks like a lot -- Comcast looks like a lot easier deal than an AT&T Direct, which looks like it's an easier deal than a Dish Direct. I think just looking at the -- forgetting the political arguments, looking just at the traditional definitions, production of competition is the hardest bar to carry. And those deals are in order. Leased reduction, if any; some quite a lot.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [60]
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 By the way, please pass questions to the center and Rona will come through and pick them up.

 Let's turn to international for a second. Post your TripAdvisor spin, your international exposure now is considerably lower. Is that something you want to take back up? And if so, what kinds of businesses or geographies are the most attractive?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [61]
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 You know, the history is Liberty, in some ways, was the most international media company of the US companies. We have spun off over time between Liberty Media International, which became Liberty Global; our interest in Discovery, which obviously has a large interest in international businesses; our interest in DirecTV, which obviously has a big Latin America business.

 As the more mature businesses get spun, those are the ones that tend to have the greater international exposure. So if you look, our shareholders have quite a lot of international exposure to the degree they've held those assets, but we at the corpus have reduced it.

 I think we look at opportunities -- certainly if you look at QVC as it has expanded into China, Italy, now France over the last few years, we certainly see the appeal in less penetrated video markets, less penetrated e-commerce markets. The reasons why to go ahead and invest more of our capital over there, but it's not always as easy as you would like it to be for regulatory reasons or just finding the right assets.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [62]
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 As somebody who is a pretty savvy asset buyer, with the recent route in some of the higher beta stocks and with all the M&A that's going on among the big names, it would seem like there's an awful lot of turmoil at least. That seems to be a market you usually do pretty well in, when there's -- in that it creates some opportunity.

 Are you seeing more opportunity, or are the valuations still at the point where it's hard to find attractive options?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [63]
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 I still think a lot of things are pretty pricey and you still have the problem where a short-term route doesn't usually mean price adjustments, expectations, and anything larger.

 You may be able to, if you're lucky enough to be in the business that you are all in, buy 0.5%, 1%, 2% of a company. Trying to buy 100% of it or a majority of it just because they have had a short-term drop that usually proves to be very difficult. These problems have to sink in a lot further before you are able to get that done.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [64]
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 Are there markets that are more attractive than others? I'm not necessarily just thinking about sectors as much as I am geographies. Are there --?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [65]
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 We've looked hard at challenges in Brazil causing opportunities. We've look hard at challenges in some of the -- Spain and the like causing opportunities, but really haven't found anything yet to pull the big trigger on.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [66]
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 Before we leave Charter, I want to come back to Charter because there's a question here about how do you evaluate success at Charter, operating success? Are you looking for free cash flow per share? Are you looking for driving EBITDA in the short term, even if it comes with high CapEx?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [67]
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 I think you're seeing the beginning fruits of a CapEx program with the move to all-digital that are beginning to bear fruit, and I think you will see increases in free cash flow from that. But at the moment we are mostly looking at the operating metrics.

 You can see the rise in triple play. You can see the rise in ARPU as you move from basic to expanded basic. As you get higher tiers you can see the increase in number of video customers. Again, Comcast and Charter both experienced positive video subscriber growth, a shocking change from where the cable industry has been.

 So I think there are a lot of operating metrics which are going to lead ultimately that free cash flow and to some degree that CapEx burst is somewhat coming down. Now I think you're going to see some change in that when we complete the Time Warner acquisition, there will be another probably move to all-digital investment in those systems. But in the systems that we currently own, you are already beginning to see the fruits of that investment.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [68]
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 What's the metric you use when you are looking at systems you don't own yet? So if you are looking at making an acquisition, people will often think about very simplistic EBITDA multiples or, worse, cost per subscriber, but it seems like those are not terribly sophisticated ways to look at an acquisition.

 How do you --? What are the things you look at when you evaluate cable?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [69]
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 I do think we pay attention certainly to EBITDA multiples. We do pay attention to what is the current status of that plant? What is the current status of that?

 You've seen in a lot of those Time Warner systems it's going to take investment to bring them up to the highest quality. It's going to take time to probably reorganize how their marketing operates the offerings that they have. They've been selling in many cases relatively discounted amounts of DSL competition with relatively low amounts of capabilities.

 I think you are going to need to reorient those. But we do look at how they have been operated, what they have been doing, and what the potential is for them, undoubtedly.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [70]
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 Tom used to use what I thought was always the most interesting metric, and that was --

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [71]
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 Dollars per home past?

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [72]
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 Well, he had an even more interesting one, which was cost per home not served. Which I always thought was really interesting because it sort of it also belied his mindset which was (multiple speakers)

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [73]
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 It's the other side of the (multiple speakers). It's the complement.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [74]
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 Right. And the implication was I'm going to get them eventually.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [75]
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 Yes, my market share should be 100%. Anything I'm losing is a mistake.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [76]
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 That's exactly right. One of the things I loved about him.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [77]
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 Tom is impressive in his ability to rattle off EBITDA per home past, EBITDA per -- not just per sub, but EBITDA per home past to understand that what the benefits of scale are, what the benefits of achieving higher penetrations. And obviously he did that quite well during his tenure at Cablevision.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [78]
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 I asked him this morning about the RSN business. That's a business that Comcast is now knee-deep in and Charter is not, and yet Charter now, for the first time, has real concentration in a single part of the country.

 There's two ways to view RSNs. One is to view them as a significant risk that they can hold you hostage. Another is to say I want to view them as an opportunity and try to enter that business. How do you think about the regional sports business?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [79]
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 You know, I think it can be a very attractive business and it can be a scary business, as you point out. I am a little bit of the mindset -- and Liberty has owned them over time. As you may recall, Liberty, going back a long way, helped set up quite a number of them with News Corp. Some of the very early ones.

 When we did the swap with News Corp we ended up owning the RSNs in Pittsburgh and Denver and Seattle that became part of DirecTV and Root Sports. We have some visibility on this side by owning a baseball team, the Atlanta Braves, so we watch them all with interest.

 And you point out them being knee-deep. I think my friend Mike Angelakis would suggest that being knee-deep in Houston would be the best description. It might be neck deep or higher.

 They are a tough business because you're basically trying to cut as long-term a contract as --. Historical method has been cut the best long-term contract you can with the sports franchise, usually a baseball team, and then turn around and cut the shortest term deals you can with the MSO, the telephony company, the satellite company, because you're going to get a re-rate every time you come back to them.

 I think that game is somewhat suspect and it's a little bit like playing musical chairs. You keep running around; when is that chair going to end. When you own a long-term contract to a baseball team and you don't have an ability to re-rate because the cable company has rejected it.

 If I were a betting man, I think that's one of the appeals of the deal we did with Comcast, is the consolidation of the LA market to give them so that they have the full complement there and they don't have a bunch of MSOs holding out against the satellite guys.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [80]
------------------------------
 Is it safe to guess you're not all that sorry to not have to worry about the Dodgers, though?

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [81]
------------------------------
 I think it's a much more attractive asset for Mike Angelakis to think about (multiple speakers) holding all those pieces together. And it makes a lot more sense to have the consolidated market for them. Fragmenting that market wasn't in anybody's interest in terms of the RSN strategy.

 I think they are a little bit scary. Is there an opportunity you are going to -- I would say we will proceed cautiously. I assume Tom said the same thing.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [82]
------------------------------
 He said -- I think he described it as no immediate plans.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [83]
------------------------------
 Because I think it's a hard -- it's not the same business it was 10 years ago.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [84]
------------------------------
 Let's talk about one of the assets we haven't talked about yet in Live Nation. Now that Barnes & Noble is gone that's really the other biggest asset. Is that -- I think you've described it -- is it sort of a flyer? Is it just a pure investment or is that something that is integral to your long-term vision?

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [85]
------------------------------
 You know, I think you're giving us probably more credit than we deserve, suggesting we have a long-term vision. But we inherited the asset first as owning 30% of Ticketmaster and then as Live Nation and Ticketmaster merged, I think we were diluted down to about 14%, which we inherited when Barry Diller broke up the IAC pieces.

 Since that time, we have learned a lot more about the business, learned a lot more about the strength of the management team, led by Michael Rapino. We've taken our stake up from 14% to 27%-and-change. That has turned out to be a pretty effective investment.

 And I think there are a lot of things that they can do -- are doing, but can do more. And there are things you can dream that synergy value or pieces that might fold in between Sirius and Live Nation that would connect the two better mean our music portfolio, our exposure to the music business is only strengthened. So I consider it a great company that is moving in the right direction. It has a lot of interesting potential and the potential it becomes a lot more meaningful as a part of the whole.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [86]
------------------------------
 You just did the Yahoo deal, the live streaming. Is that -- I presume that is a monetized through advertising model.

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 Greg Maffei,  Liberty Media Corporation - President & CEO   [87]
------------------------------
 Great deal. Great deal for both parties because Live Nation improved in the sense that Yahoo endorsed the value of their content. It gave them a lot of guarantees upfront.

 And my understanding is Yahoo has turned around very quickly and monetized it and gotten those guarantees back. Then they rev share off the ads going forward. So it's actually truly a case, which is rare, of a win-win where validates the Live Nation concept and Yahoo has been proven quite effective to drive traffic and drive advertisers to the site.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [88]
------------------------------
 Are there ways that you -- are there M&A ways in that business that you can add to that position and add strategic strength as well as financial just opportunities I suppose?

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [89]
------------------------------
 Yes, the Live Nation and Ticketmaster sites get an enormous amount of traffic and they have an enormous amount of content that is not necessarily crisply monetized or expected. Having more pieces there or more assets to play with there that fit in well is certainly something that I think Michael Rapino thinks about.

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 Craig Moffett,  MoffettNathanson LLC - Analyst   [90]
------------------------------
 Now I want to talk about Liberty Ventures. So I mentioned the Trip Advisor spin. One of the few assets you have still got at Liberty Ventures is actually the tax shield created by the exchangeable debentures.

 Arguably, they don't seem to be getting any value in the market, maybe just because they are so complicated. But can you take us through that little bit, the mechanics of it and your strategy for investing the cash?

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [91]
------------------------------
 Well, I think long time Liberty observers are quite familiar that we issued a series of exchangeable debentures, exchanged through a series of settlements with the IRS. A lot of them have been frozen, but the ones that are operative and most interesting are the ones that exchange into Sprint and CenturyLink and is the last piece of Motorola.

 And those have the benefit of we pay $3-and-change in interest in cash because they have an exchangeable component, which is treated effectively. [Warranted] that second into the equities. And equities which appear unlikely to convert we deduct at rates around 9% and accrete up the face value of that deduction, which is growing over time, so that when those bonds become due in 2029, 2030, and 2031, to the degree that we have not yet exchanged them into the underlying equities, we will have to pay back to the government the deductions we took in excess of cash paid.

 So effectively, we are getting a large amount of shield in the interim which grows. And to the degree that we have, as we do in QVC, an earner that takes advantage of those tax reductions that money is paid to Liberty Ventures rather than to the US government. And so Ventures has an accreting series of cash. Again, assuming everything holds true that the debentures are still outstanding, that we have taxable income at Liberty Interactive, largely QVC, to shield.

 So you can run your models. What is the IRR that we earn on that incremental cash? We have cash existing at Liberty Ventures. We will get incremental cash. You can run your model on what you think we will earn on that existing rate of cash.

 Now we have done some very attractive deals, largely tax-motivated deals around green investments like our investment in Sweden's Solana, which is the largest US solar facility in Gila Bend, Arizona. We have done other deals around [cleansing] coal. I think it's Section 58 credits.

 We've done some deals which are less tax-motivated, but still attractive, around windmills. Most of those haven't been big, strategic deals, but those have generated IRRs which are 20%-plus rates of return or considerably higher in some cases. So we think those are attractive.

 Estimating what we are going to invest that whole pile of cash at is a lot more difficult, because those are kind of on the margin relatively smaller deals and they have a negative element, which is you invest X, you get it all back quickly in deductions and you've got the cash back that you have to reinvest again. They are not -- that is a high-quality problem, I will acknowledge, but it's also not the case that you are, say, putting $500 million to work or $1 billion to work which stays at work for 15 years. So you weigh those two.

 We also need to have some cash flexibility there in the event that any of those debentures has accelerated. The way they would be accelerated is because both Sprint and CenturyLink got sold for cash. Motorola's last asset got sold for cash.

 Those bonds could be accelerated and we would not only owe the principle but owe the deductions to date taken. So there's a complicated population around how much buffer do you need to have? What do you think we can earn on the rates of return? And I think that's why Ventures is a complicated piece of paper.

 Hard to say exactly what we are going to earn on that cash given the need to buffer; the fact that we do these deals which have high IRRs but bring back the cash. We haven't yet found in this environment the great asset that we want to put $1 billion to work in and keep it to work for 15 years. We would love to find that asset.

------------------------------
 Craig Moffett,  MoffettNathanson LLC - Analyst   [92]
------------------------------
 Liberty Interactive, as we go around the horn, in the Interactive group, QVC is the largest component. The primary driver of EBITDA, I think 98% or 97% or something.

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [93]
------------------------------
 Not quite that high.

------------------------------
 Craig Moffett,  MoffettNathanson LLC - Analyst   [94]
------------------------------
 You -- QVC is now expanding into France. I think you've talked about China as an off-balance-sheet driver for QVC. You've got issues to fix in Japan and Germany as what you called the largest source of upside, but kind of update us on that set -- that constellation of issues around QVC.

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [95]
------------------------------
 Well, I think some of the people in this room know that QVC is having its investor day tomorrow and Mike George and his team can be far more articulate on that and will spend half a day telling you that. But I think the business has shown great resilience, even in the face of a changing market for video commerce and e-commerce. It has shown an amazing ability to adapt to the Internet, to adapt to mobile, to continue to grow and generate high free cash flow, even despite challenges in some of the economies like Germany and Japan.

 I think you are right in terms of the short term. The biggest upside is to right those businesses and get them growing again more quickly. But over the longer term I think continuing to lay the seeds of future growth in Italy, in Germany, in France, in China, which is somewhat of an off-balance-sheet asset given our 49% interest, those are where a lot of upside is going forward.

------------------------------
 Craig Moffett,  MoffettNathanson LLC - Analyst   [96]
------------------------------
 Mike George also talked about a lot of promotional pressure and pricing pressure in the retail environment. Is there a point at which that business -- if I think about the history of that business, it has been a really good business for a lot longer than people expected it to be a really good business.

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [97]
------------------------------
 That's probably the definition of a really good business is when it's a lot better than people think for a lot longer.

------------------------------
 Craig Moffett,  MoffettNathanson LLC - Analyst   [98]
------------------------------
 But that lot longer is a relevant part of the equation. Is that a business model that you feel a high degree of confidence in over the long term? Or is that -- as somebody who is a buyer and seller of businesses, is that a long-term commitment that says I am holding this one forever type of thing because strategically? Or do you look at, say, when does this optimize and exit?

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [99]
------------------------------
 First, I think -- I'm not sure what strategic means in this case. I'm not sure it would have such a high degree of synergy value with other parts of the portfolio, but it has been, as you rightly point out, a great high free cash flow business with growth for a long time. Has absorbed a lot of changes that people didn't necessarily think it was going to be able to absorb: the move to digital, the move to the Internet, the move to mobile.

 It has absorbed them and moved on. I give a lot of credit to the management team for being a learning entity that has taken those challenges well and in some cases turning them to a benefit. It is one of the leaders in mobile. Who would've thought QVC would be one of the leaders in mobile? That doesn't seem like a natural thing, but it has done a great job of proving that it can be.

 So is it a business we expect a hold for a long time? Absolutely. Is it a business that we recommit to every -- quite frequently and, in fact, every day? We are purchasing on the order of $1 billion -- repurchasing on the order of $1 billion of stock every year as a use of cash. That reinvestment is a statement about our confidence in the business.

------------------------------
 Craig Moffett,  MoffettNathanson LLC - Analyst   [100]
------------------------------
 Last one, Liberty Digital. How do I think about the collection of assets? Bodybuilding and Evite and CommerceHub and what have you, what is the integrating thesis?

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [101]
------------------------------
 You know, I think at one time I think we really looked at these businesses as something that would provide Internet DNA to QVC. That has really happened and done well.

 At varies times we've questioned or wondered whether we could consolidate these better and find synergy value across them in terms of cost on the e-commerce platforms in terms of leads. And that has been elusive and I think we have recognized or realized in our own mind that these are more different businesses with different customer sets and different trends.

 So I think they are a portfolio of sort of interesting businesses, some of which are more interesting than others. CommerceHub is a tremendous business that has been high free cash flow generation and growth. Other ones have been proven to have a lot more exposure to commodity trends, whether it be by costumes or the like.

 It's a collection that we are sort of working through, some of which I think you will see us make changes to in how they get configured. And others of which we are going to reinvest and bet on their ability to continue to grow attractively.

------------------------------
 Craig Moffett,  MoffettNathanson LLC - Analyst   [102]
------------------------------
 On Trip Advisor, good growth of hotel traffic, good modernization, and that's been doing well. But it has been challenging to do the same with traffic on your restaurant and the flight portions of the site.

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [103]
------------------------------
 Flight monetization -- I was Chairman of Expedia back in 1999. Flight monetization has been a challenge for everybody for a long time and probably gotten worse, not better.

 Restaurant monetization is something that is fairly early in the cycle. Today Trip Advisor is primarily a site in terms of its monetization, as you rightly point out, where we are monetizing hotels. That traffic has been enormous, 260 million unique visitors in a month kind of traffic. So it's massive scale.

 The first opportunity on the table is to continue to get better at monetizing that hotel traffic. You're seeing some of that with our meta -- moving to the meta-product, driving up rates, seeing some of that with Direct Connect, with some of the hotels. All of those about serving the hotel customers' need better. In some ways, that's where the low-hanging fruit is.

 Longer term do we have opportunities to monetize better not only the restaurant, but the attraction traffic and potentially even the flight traffic? I think so, but to date the primary focus and the easy money -- not the easy money, but the easiest money -- has been daring to work on the hotel side.

 I would point out one thing, which is we did make an investment or an acquisition which begins to talk about that restaurant thing in La Fourchette, which is a French-based restaurant bookings service similar to an Open able that is primarily overseas. Leverages our strength in overseas traffic and you saw that where it's now currently at the worker's counsel getting approved. But we announced that on the Trip earnings call that they made that -- an agreement to buy that business.

------------------------------
 Craig Moffett,  MoffettNathanson LLC - Analyst   [104]
------------------------------
 I will take a last call for questions because we just have a couple of minutes left, so if anybody has questions pass them forward.

 Can I ask you to step out into your role for Starz for a second? Has Starz' long-term priorities changed substantially since it lost its Disney deal past the 2015 release schedule? And also, because of cable consolidation. You've talked about original content, obviously, as a big part of the strategy, but can you talk about the Starz strategy and where Starz fits?

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [105]
------------------------------
 I think Starz has done a good job of growing its stable of original content and moving towards its target of 75 hours of original programming a year. That has been a molting as they reduced their commitment in the hotel industry -- excuse me, movie space and moved towards reinvesting some of those savings into the originals space.

 On the domestic side, that has been an attractive thing. They also continue to look at alternative opportunities outside the United States where they have been so fairly more abundant. It is not been a strong paid service, but that's something they look at. Priority is to try and grow the offering more broadly from just being a bundle to the table, but thinking about outside the United States what they can do with it.

------------------------------
 Craig Moffett,  MoffettNathanson LLC - Analyst   [106]
------------------------------
 How do you think about Starz with respect to SVOD platforms? Like selling your content, one-off shows and the like?

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [107]
------------------------------
 You know, a lot of things like even DVDs have still been a way to monetize our original content. We don't generally have those rights on some of the later content. Even some of the originals are licensed in a way that we don't have all those rights.

 But in the stuff that we built, we own, lots of incremental monetization paths, digital and otherwise, that over time I think could get interesting. We have got to do it in a way that's compatible with our model and recognize our partners in the cable satellite and telco space. And that has been somewhat of a challenge buying those models, but we continue to work with those partners to think about different ways to offer that.

------------------------------
 Craig Moffett,  MoffettNathanson LLC - Analyst   [108]
------------------------------
 HBO has talked a lot about offering OTT content online. Can you say anything about Starz' strategy to do the same?

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [109]
------------------------------
 Well, I haven't seen HBO yet offer that and I don't think we will see it -- just (multiple speakers). You've got an enormous challenge. We generate quite a lot of revenue and to try creating that channel conflict you've got to be very careful about that.

 We had a strategy at one time, as you may recall, a testing deal with Netflix that didn't turn out so well.

------------------------------
 Craig Moffett,  MoffettNathanson LLC - Analyst   [110]
------------------------------
 It didn't go so well, yes.

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [111]
------------------------------
 It didn't turn out so well for making our relationship with our cable partners as good as possible.

------------------------------
 Craig Moffett,  MoffettNathanson LLC - Analyst   [112]
------------------------------
 So with just about a minute left, as I think through all the different things we have talked about -- and as I think it's always said about your collection of businesses, it's a complicated collection.

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [113]
------------------------------
 I was hoping you'd say something more positive.

------------------------------
 Craig Moffett,  MoffettNathanson LLC - Analyst   [114]
------------------------------
 Complicated doesn't necessarily --? Look, I'm an analyst; I like complicated. Complicated is good.

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [115]
------------------------------
 It employs everybody in this room, complicated.

------------------------------
 Craig Moffett,  MoffettNathanson LLC - Analyst   [116]
------------------------------
 That's right. But as I look across that collection, though, where are the parts that get you jazzed, that you say I don't think the market has figured out what a good business this is, what an undervalued asset this is, and where there is real opportunity to do more?

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [117]
------------------------------
 Well, it's a little bit like which of your children do you like best. You have to look and say Starz is a heck of a business and the market appears to have taken noise about streaming and assumed it's going to happen tomorrow and eliminate the business. And I think that is misleading.

 Live has got a lot of opportunities down the road; it strikes me as it is. Feel well-positioned about Charter that just continuing to block and tackle and execute well on the business, as Tom and his team are doing. Excited about all those.

 You can see opportunities in each of the businesses that make it appealing. We are not wedded to any business in the sense that, if we didn't think there was an opportunity to do something with them, we are happy to send that child off to our shareholders and let them make their own decision if we don't think we can do anything with it.

 So there's none that I look and say what a disaster. There are probably some of the digital commerce companies that we need to do some work on and we know that and are working on them, but there is none I sit there and say we've got to get this out of the portfolio.

------------------------------
 Craig Moffett,  MoffettNathanson LLC - Analyst   [118]
------------------------------
 Okay. It's always interesting, precisely because it's so complicated, so I really appreciate you joining us today. It's a terrific conversation and I hope we see you again next year.

------------------------------
 Greg Maffei,  Liberty Media Corporation - President & CEO   [119]
------------------------------
 Thank you. Good luck with the conference.






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