Liberty Media Corp and Liberty Interactive Corp at Deutsche Bank Media, Internet and Telecom Conference

Mar 09, 2015 AM EDT
FWONA - Liberty Media Corp
Liberty Media Corp and Liberty Interactive Corp at Deutsche Bank Media, Internet and Telecom Conference
Mar 09, 2015 / 10:00PM GMT 

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Corporate Participants
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   *  Greg Maffei
      Liberty Media Corp & Liberty Interactive Corp - President & CEO

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Presentation
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Unidentified Participant Deutsche Bank - Analyst   [1]
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 All right. I think we're live here. So we want to get started with the dinner keynote presentation. And afterwards, there will be plenty of time for conversation. So we'll probably go for about 45 minutes or so.

 So I want to welcome Greg Maffei. Thanks for coming, Greg. Greg is President and CEO of Liberty Media and Liberty Interactive, Chairman of Live Nation, SiriusXM, Starz, and Trip Advisor, and Director of Charter and Zillow, oh, and Liberty Broadband, I forgot, too. Did I miss any?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [2]
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 Liberty Trip.

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Unidentified Participant Deutsche Bank - Analyst   [3]
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 Liberty Trip. Thank you.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [4]
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 We keep spinning things. That's the problem.

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Unidentified Participant Deutsche Bank - Analyst   [5]
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 What's next? What's the next spin?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [6]
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 Out of control spin. I don't know.

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Unidentified Participant Deutsche Bank - Analyst   [7]
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 All right. So you restarted the buyback at Liberty Media late last year.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [8]
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 Yes.

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Unidentified Participant Deutsche Bank - Analyst   [9]
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 I think you've got about $700 million in cash on the balance sheet. Do you see getting more aggressive with the share repurchases here, and along those lines, what do you think the right amount of cash to be held on Liberty's balance sheet is?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [10]
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 We did a transaction with Liberty Broadband where a certain amount of money came across, so they had to buy their freedom. And as a part of that, that money got allocated. I think it was $300 million we allocated to do buyback over the next 12 months beginning in November. So we pretty much told the marketplace we're going to spend at least that $300 million.

 Above that, really Liberty Media doesn't have a huge amount of capital relative to all the days--for the first 8.5 years I was at Liberty we always had too much cash, not too little--or eight years. Now it's a little bit the opposite. I think we're a little light. So I'd--it probably means there's not going to be as much buyback going forward as in the past.

 And the other problem is even though our discount has widened a little bit, our discount to net asset value compared to say a year ago when it sort of bottomed out at about 2%, it's also not at the numbers we had at one point. It's been as high as 30% or 35%. So the absolute cheapness relative to the underlying components has come down quite a bit over the long term.

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Unidentified Participant Deutsche Bank - Analyst   [11]
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 I agree with your observation that the winding and the discount seems illogical given how streamlined the portfolio has become post the spin. When you think about what to do about it, one option is to just wait, right? And I think as the share--as the Sirius share repurchase reduces the trading liquidity in Sirius, over time Liberty Media becomes the more liquid way to invest in Sirius, which could result in Liberty even trading at a premium to NAV at some point. Is that a plausible option for you or--?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [12]
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 --Well, I think you'll have to talk to your corporate finance gurus. I think before that's likely to happen, I suspect--and this is not my problem. It's the independents at SiriusXM are going to ask what amount of float do we want to allow to be limited to? Right? If you look, you've got a model, that says if they keep buying back $2 billion, $2.5 billion, $3 billion a year--whatever the number ends up being, you significantly reduce the float. And at some point I think the independent directors of SiriusXM might question whether that's a good idea.

 The idea that we might trade at a premium to them, oh, that's a nice thought. I'm not sure we actually get there. We'll see.

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Unidentified Participant Deutsche Bank - Analyst   [13]
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 So what would you do if the liquidity became an issue or the independent directors decided liquidity wasn't an op at some point, what are the options that you see going forward?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [14]
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 It could be an ongoing dividend. It could be a one-time dividend. It could be some case where they find an acquisition which is attractive. I think first and foremost we're on the same page. If they could find a company that would make sense to buy, Liberty would be a big endorser of that. But it's not clear what incrementally would be helpful at this point for SiriusXM.

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Unidentified Participant Deutsche Bank - Analyst   [15]
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 Okay. With the strength of the dollar and the international investments would be done at more attractive valuations than a year ago, given some of the comments you've made about frothy asset prices, have you increased your focus on the international side? I mean, is that a more interesting opportunity?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [16]
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 We certainly have been looking in Europe. The reality is Europe is in a tough position. So you sort of have to look for companies in Europe that perhaps are exporters who are going to benefit from a reduced euro. I don't think that's an original thought. Unfortunately, most media companies are not enormously exporters. That's to some degree content, but it's not as big a cycle. So more content is still localized, particularly out of European venues. So it's not perfect.

 If you look at the domestic markets only, they are somewhat challenged. Not--again, it depends on what country you're in. But overall, Europe as a whole has still got a lot of challenges. So it seems appropriate that it's lower because it deserves to be lower.

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Unidentified Participant Deutsche Bank - Analyst   [17]
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 So some of your stocks have done well recently, Sirius and Starz, specifically. As an investor in and Chairman--.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [18]
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 --Wait a minute. Liberty Broadband's had a pretty good run. Liberty Media's had a decent run. I don't want you to be dissing those guys.

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Unidentified Participant Deutsche Bank - Analyst   [19]
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 Absolutely. How do you think about--so you can include those in this question, too? Because really it's a conceptual question of how do you think about at what price or valuation level companies should start to maybe think about pulling back on their share repurchases and keep it--keep some dry powder for a later time when maybe valuations are lower.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [20]
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 We've seen massive run up in valuation. Take one that is probably a little more indicative. Right? Liberty Media is not in the buyback mode of scale, other than the $300 I talked about. Liberty Broadband isn't really in a buyback mode, though it could because it trades at somewhat of a discount to NAV on Charter. Starz has been in a pretty healthy buyback mode. They had some slowdown due to market restrictions on their trading, various discussions and the like, over parts of the year. And--but they're not enormously expensive on a free cash flow multiple. And Liberty Interactive, we get grief that that's a high free cash flow generator. We get grief we're not buying back more.

 So there is this problem where our shareholders are all yelling buyback more even though we've seen multiples grow dramatically and you've got to weigh how much they're correct and how much they're not, or how much they're being more short term oriented.

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Unidentified Participant Deutsche Bank - Analyst   [21]
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 Interesting answer. What do you think the two biggest opportunities are for Sirius over the next five years - to either build new revenue streams or improve the trajectory of the current core business?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [22]
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 Well, I think the--I'd pick a couple or three actually. Because you've got not only the growth in the used car market that they continue to take advantage of, or I should say the used car market already is there and they're increasingly penetrating it well. I would also note their ability to make hay in the connected car space. I think SiriusXM has a very interesting strategic position in the connected car space, the business model for which is completely unclear. How that will play out, how we will make money, is unclear to me.

 That having been said, I think the fact that they have the relationships they have with the OEMs, the platforms that they have with the OEMs in terms of having an embedded product I think will be very useful. There are a certain number of services which will clearly be tethered and your phone will be the driver for that. But there are also a certain number that are going to be embedded in my judgment. How exactly that platform plays out, how exactly Sirius profits still to be--remains to be seen. But I think it could be a quite interesting business.

 And the last one is, if you roll forward two or three years, they're going to have nearly 100 million cars which are SiriusXM enabled. If you look today--let's somewhere make a number--30 million subscribers then, you're still talking about a 70 million market that there are products and services you would hope you'd be able to find a way to sell to those people. You're already preinstalled. You see a way to reach them with something that's interesting.

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Unidentified Participant Deutsche Bank - Analyst   [23]
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 Another question that's come up in the past, but I wanted to revisit it, are there any ways that Sirius and Live Nation either are working together or might begin working together in the near future that could be meaningful for either or both of them?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [24]
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 I think using Live Nation to differentiate Sirius and using Sirius to promote Live Nation is very logical. And I think there's more dialog on that, but I remain somewhat disappointed that more things haven't happened there. Live Nation has a huge amount of unique elements, and you've seen some of that demonstrated in what they've been able to do. Things like their partnership with Yahoo. I think Sirius has an enormous funnel of high value customers, high income customers, high demographics, and you would think that they would be larger ticket buyers that potentially Live Nation could tap. I'd say honestly we haven't done as well together on that. That's probably my fault.

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Unidentified Participant Deutsche Bank - Analyst   [25]
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 What--so what is your outlook for Live Nation and what do you think the biggest opportunities are over the next couple of years for the company?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [26]
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 I think first and foremost, Michael and his team are doing a great job. Their share of large concerts--if you looked back five years ago, the 25 largest concerts in the world, they probably had 13 or 14. This past year they had something like 21. So their ability to gain strength in large concerts is enormous and all the ancillary revenue streams that come off of that - sponsorship, ticketing, e-commerce. Those are all driving their business. They've controlled costs well and they've invested in new platforms, including Ticketmaster Plus in the used market, the--rather the secondary market, for tickets.

 I think all of those opportunities are still growing and exciting. The other pieces that seem obvious are growing overall sponsorship, growing overall e-commerce, and adding international elements. You've seen them do some acquisitions in the accessible space, you've seen them do some partnerships. And look, there are more acquisitions potentially out there internationally. So I think there's a lot of runway for Live to keep driving.

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Unidentified Participant Deutsche Bank - Analyst   [27]
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 Switching to pay TV, so you've spoken in the past about the bundle--pay TV bundle being chipped away at. As the owner of the Braves--.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [28]
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 --The New York Times seemed to be pretty enthused about that (inaudible).

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Unidentified Participant Deutsche Bank - Analyst   [29]
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 As the owner of the Braves--and Liberty has made a lot of money on this asset--.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [30]
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 --Yes--.

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Unidentified Participant Deutsche Bank - Analyst   [31]
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 --Based on sports rights--sports broadcasting rights increasing. So if your prognostication is correct, are you worried about the value of the Braves long term? Because sports rights could be at a peak based on what happens to RSNs and the model.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [32]
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 It's kind of funny because the Braves have probably profited less than most teams because of the nature of the deal we inherited from Time Warner, which was I think at the time the longest deal ever done. My friend Chris Albrecht's laughing in the front. I think it's actually true, Chris. I think it was either a 21 or 27--he wasn't--it wasn't his fault at Time Warner. It was the longest deal done. And so, we have until--a long runway until we can actually utilize those rights and take advantage of the rising sports thing. So in a way, we're somewhat protected from that. Ultimately, I think there is value.

 The bundle is--you can see the bundle fraying on the edges already. I mean, that just seems to me is self-evident proposition. Part of it's technology driven, and the usage, particularly among younger demographic customers, partly it's the plethora of choices, partly it's pricing, partly it's the--some of the cable nets pursuing their own strategies, which fray the bundle because they're using their own over the top services and offerings.

 I think saying the bundle is fraying is one of the least risky propositions and prognostications one can make right now.

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Unidentified Participant Deutsche Bank - Analyst   [33]
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 Related to Starz, the strategy of bringing Lionsgate and Starz closer together seems to make a lot of sense.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [34]
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 Yes.

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Unidentified Participant Deutsche Bank - Analyst   [35]
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 What do you think prompted John to swap part of his Starz stake for Lionsgate stock?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [36]
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 I think John, who has been a keen observer of trends in the media business, is of the belief--and I think we would all agree at Liberty and at Starz--that content creators are getting new power through new platforms. And the opportunity, particularly to scale there, to build incremental international distribution, have more leverage on these new platforms, is interesting. And both being able to find news ways to push the content through incremental channels or incremental services the way that Starz has. And being able to take Starz programming and Lionsgate programming and pushing them broader internationally and on some of these new platforms is interesting.

 So the opportunities and scale I think are additive. Whether that's in the form of partnership or whether that's in the form of acquisitions, we've always thought that working together is the most attractive part.

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Unidentified Participant Deutsche Bank - Analyst   [37]
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 Do you think that Starz would be better off integrated with a content player like Lionsgate? Or do you think just having these alliances is the way to go? I mean, how do you think about that?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [38]
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 What I think we've said is, look, you need to have partnerships, you need to do more. Whether that ultimately leads to acquisitions being the attractive way or whether you can make a partnership successful, you need to be able to do more with bigger people and fuel some of the ways, as I said, both across new platforms and in international.

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Unidentified Participant Deutsche Bank - Analyst   [39]
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 So Title II, obviously a big issue for one of your assets. How do you think the next chapters of Title II play out? What do you think the ultimate outcome will be?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [40]
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 Look, it seems like you used a nuclear weapon to get rid of a potential fly. If your fear was net neutrality and people favoring content in some unfair manner, you used massive weapons, including potentially the ability to do price regulation or rate of return regulation. Those are all forebeared now, at least theoretically. That seems to be a heavy regulatory hand. We'll see what holds up in the courts. We'll see gets allowed.

 I suspect a lot of it will actually be affirmed would be my guess. But I also think a lot of it will set the tone for that forbearance--there's legislation around forbearance and the like on some of these elements. We'll see. This is going to take a lot of years to play out.

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Unidentified Participant Deutsche Bank - Analyst   [41]
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 And once the cable transactions have closed and given the changes in the industry we've seen in the last--.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [42]
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 --So you're predicting they're going to close, Brian? Just want to make sure that's--.

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Unidentified Participant Deutsche Bank - Analyst   [43]
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 --Actually, I'm not allowed to make any predictions on that.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [44]
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 Because it seemed like implicit. You said once they're closed. I just wanted to make sure. Some people are speculating it might not close.

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Unidentified Participant Deutsche Bank - Analyst   [45]
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 No. In case our compliance people are listening, I'm not making a prediction. So--but my question to you is will we see--do you think we'll see a lot of cable M&A activity in the following year or two, or do you think this is something that's going to be a more gradual process?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [46]
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 I suspect it's more gradual just because there are not that many scale assets left. There are some. And I think Charter is particularly well positioned to be a natural acquirer and natural consolidator of some of the pieces. But there are just not--there are not dozens left. They're a handful that are interesting and of scale.

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Unidentified Participant Deutsche Bank - Analyst   [47]
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 Yes. Do you feel that there's a need to kind of wait and focus on integrating the Time Warner Cable properties before moving ahead with something else, or--?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [48]
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 --I'm lucky. I get to come in and make these prognostications, and Tom Rutledge and the team actually have to do that hard work about putting them all together. I suspect it's a very large job. It's--you look at the swaps, you look at the purchase, you look at the management of great land that they're going to have to do, it's not an insignificant task. It's a major remaking of Charter.

 That having been said, it falls in pretty well with the things that they have proven they can do well - bringing the networks together, bringing the marketing together, simplifying the pricing structure, upgrading the networks. Tom and his team have done an excellent job and shown a pretty clear ability to do it. You've seen the results. They have happened over the last several quarters. They've generated well above cable average returns or cable average growth. And I have no reason to suspect they won't be able to do it in those new properties.

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Unidentified Participant Deutsche Bank - Analyst   [49]
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 Moving to QVC. So it looks like they had a strong year, excluding the currency impact. What's the outlook for the business this year? And also, if you could comment on China and how that's tracking relative to your business plan.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [50]
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 So I think they've done a great job in the U.S. You've seen margin expansion. You've seen continued growth of the internet capabilities, the continued growth of the mobile capabilities. And I think you've seen continued freshness in the offering to consumers. So I think full credit to Mike and his team. The challenges in some of these markets, particularly Japan, is tough. Obviously, the European markets, we talked earlier about the decline of the euro. That's--in U.S. dollars that is not going to be a very attractive number. Local currency, I think it's going to be pretty good.

 Italy has finally turned profitable. Germany has continued strength--or U.K. has done--has been on a great tear. So in general the business I think is performing pretty well in local currency.

 China is probably not behind plan, but China's proving to be a fast grower, but not necessarily easy. A lot of challenges in terms of getting it out there. There is nothing like QVC in the marketplace, so they're really building their own marketplace now. That having been said, the top line growth, the number of homes passed, is pretty impressive. It's obviously an off balance sheet asset with our 49% stake that I think is probably not being fully valued in the stock. It's hard to do. But over the long term, somewhere down the road it actually will be an interesting asset with a lot of upside. And maybe we'll do a tracker or something, find a way to--.

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Unidentified Participant Deutsche Bank - Analyst   [51]
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 --CQVC?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [52]
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 CQVC. That will fit.

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Unidentified Participant Deutsche Bank - Analyst   [53]
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 So the entry into France this summer is using a more capital efficient model.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [54]
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 Right.

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Unidentified Participant Deutsche Bank - Analyst   [55]
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 What are the pros and cons of doing it this way versus how you operate in other markets? And is this something you think will result in more market entries over the next few years, maybe at a more accelerated pace than you would otherwise do?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [56]
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 Well, I think with 20-20 hindsight, we probably invested more capital--somebody's emphasizing the point.

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Unidentified Participant Deutsche Bank - Analyst   [57]
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 It's the CFO.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [58]
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 We probably put more capital into Italy than we optimally would have liked. And it's taken a longer time to probably--or to generate--will take a longer time to generate the returns in that market. Partly that's the strength of the European economies. Partly it's been the transition to the--digital has been longer there than we anticipated. And partly they just weren't attuned to the kind of services and offerings that QVC had. That having been said, I think it's going to be a fine return on capital, but not as good as initially predicted. I think France is an interesting opportunity to test a more asset light model. And if that works, either go in deeper in France over time, but also pursue that asset light model into other countries and other venues where maybe the scale isn't as big or maybe the growth isn't as good, and still generate adequate--or better than adequate returns.

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Unidentified Participant Deutsche Bank - Analyst   [59]
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 How does the model work? I mean, what is it that makes it capital lighter? Are you outsourcing distribution or something there?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [60]
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 Yes. You're not necessarily buying as much distribution. You're going to be leasing more distribution. You're not necessarily stepping into as big a distribution system. You maybe are leasing and using 3PL. It's just a question of how much you're willing to invest early.

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Unidentified Participant Deutsche Bank - Analyst   [61]
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 And shifting gears to the Vivendi lawsuit, can you just go through maybe where the lawsuit stands and the expected timeline for reaching a conclusion?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [62]
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 So reliance on the courts always has an element of variability. But in general we expect a resolution sometime in '16 unless it gets to the Supreme Court, which seems unlikely that they'll hear certiorari on that. The--we are appealing the interest rates that we were granted in the judgment. We believe they should have looked at New York contract law, which gives us a higher rate, more like 9%, rather than the treasury rate we received. Vivendi is appealing the whole judgment that was wrongly determined. We shall see.

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Unidentified Participant Deutsche Bank - Analyst   [63]
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 What's the value at 9% versus the treasury rate? How much of an award difference is that?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [64]
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 It could be several hundred million dollars after you net out lawyers' fees and some--we have some contingencies in there. But it could still be $700 million if we got all of it.

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Unidentified Participant Deutsche Bank - Analyst   [65]
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 And a couple of questions on Ventures. So first, as Trip moves further down the final with its instant book product, do you think that they're in more competition with Expedia? And if you think that's a conflict--or how do you think about that conflict if you feel there is one?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [66]
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 Yes. I think there are both cooperative and competitive elements between Expedia and Trip. They are looking to have customer relationships. But to the degree that Trip has unique content and has people who come to them and they're able to hand those off to Expedia for a final booking, that's obviously an attractive relationship for both. But Expedia is clearly looking with Trivago and other means to find those customers without Trip's help. And Trip with instant booking is looking for ways to handle a larger percentage of the transaction value. By nature--by the nature it's going to be a coopetition.

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Unidentified Participant Deutsche Bank - Analyst   [67]
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 Do you think Trip has a long way to go as a standalone asset, or does it make sense for it to be part of an OTA?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [68]
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 I think Trip has a long way to go as a standalone asset.

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Unidentified Participant Deutsche Bank - Analyst   [69]
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 Well, if Priceline were to show a lot of interest in acquiring Trip, how would your Expedia stake impact that?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [70]
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 I think we'd try and maximize the value of each. The last time I looked, I'm the Chairman at Trip and have a vested interest in that one. John gets to handle the Expedia problems.

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Unidentified Participant Deutsche Bank - Analyst   [71]
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 All right. So that's John's problem. You've done a lot with--you haven't done a lot with Trip's balance sheet. You have a small buyback in place.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [72]
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 Yes.

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Unidentified Participant Deutsche Bank - Analyst   [73]
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 But not much has changed since you took control. We've seen--.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [74]
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 --We bought some stock I think at like $48. It was pretty reasonable at the time.

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Unidentified Participant Deutsche Bank - Analyst   [75]
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 Yes. I mean, once or twice we've seen Liberty companies be more aggressive with leveraging share repurchases. So do you think there is room in the capital structure for more buybacks at Trip? Is that a--?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [76]
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 --I think buybacks at Trip are not first and foremost for a bunch of reasons. One is, a lot of their cash is offshore. Two, it's a pretty high multiple. It's not our usual kind of leverage free cash flow model. They've got enormous growth, which may deserve that multiple, but it's not our normal DirecTV, shrink the share count model, Starz--at a fairly reasonable free cash flow model shrink the share count. It's not that kind of a company. And incrementally, they have a lot of things they can do with that capital, some domestically and some overseas. And you can see they're a serial acquirer of relatively small businesses all the time. But the potential to do other things that are interesting is out there.

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Unidentified Participant Deutsche Bank - Analyst   [77]
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 And the margins at Trip have been coming down as they've invested in TV ads and some more nation businesses.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [78]
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 To--a little bit. But I think if you've seen when they--with their new disclosures about how much of the incremental spending is actually in new businesses and how the traditional margin--traditional business has remained, yes, slightly less because they've made these investments. But certainly not to the degree--and they've made investments in China, which have both hurt the traditional margin business. But I think the disclosure, as you saw--one of the reasons the stock has been so good over the last couple months is the disclosure incrementally that actually the margins haven't declined nearly as much as some had forecast, that a lot of the spending was in new initiatives.

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Unidentified Participant Deutsche Bank - Analyst   [79]
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 So it's investment.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [80]
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 Yes.

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Questions and Answers
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Unidentified Participant Deutsche Bank - Analyst   [1]
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 All right. Well, why don't we go to the audience for Q&A? Does anyone in the audience have any questions? No? Roomful of people.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [2]
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 It's going to be a shorter dinner.

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Unidentified Participant Deutsche Bank - Analyst   [3]
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 All right, we have one right here. Do we have a mic? It's coming. Just put your hand up. She's looking for you.

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Unidentified Audience Member   [4]
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 Obviously Ventures has about $2.8 billion in cash. How do you think about opportunities to deploy that capital, timeline? Also, in the New York Post today there was some news flow--?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [5]
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 --Wasn't that a cute picture of John?

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Unidentified Audience Member   [6]
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 Yes, it was a great picture.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [7]
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 I'll have to cut that out and bring it to him.

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Unidentified Audience Member   [8]
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 What--if that--if a similar bid were to eventuate, is it--was it implicit in that article that capital would have come from Ventures or another Liberty entity? Is that reading too much into it?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [9]
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 I think that's probably speculating. So the--we have--just to be clear, we have reasons to talk to Vivendi. We just talked about one of them. We've got a big judgment against them. So it's logical that we would talk to people like Vivendi. So I wouldn't speculate--think the article is necessarily the be all and end all. If you think about Ventures, I think we've said publicly before that $2.8 billion of cash is attractive. In fact, our general belief is that the competition for transactions is more appealing, less competitive, at the larger scale. And the more money you have, the better your prospects. The number of people that can write a $4 billion check is an awful lot less than the number of people that can write a $400 million check.

 So scaling up the capital is interesting to us. We don't have a timeline. We are blessed to be in a business like baseball where they--unlike baseball rather, where they're not counting the balls and strikes. You can wait for the pitch you want. Our history is we've done pretty well with little deals. We've not had a terrible track record. But all the money has been made in a couple of big deals when we swung for the right pitch, whether it be DirecTV or whether it be Sirius or whether it be Charter. Those have really been the things that moved the needle.

 And Charter is a good example of something where not that many people could write a $2.6 billion check. And that's turned out to be pretty good. I'm not suggesting past is prologue. I'm just suggesting that being up there with a lot less competition can be more interesting.

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Unidentified Participant Deutsche Bank - Analyst   [10]
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 Anymore questions in the audience? Okay, we have one right over there.

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Unidentified Speaker   [11]
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 Can you raise your hand, please? Sorry.

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Unidentified Audience Member   [12]
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 Which Liberty entity do you think is most attractive in terms of creating shareholder value?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [13]
------------------------------
 It's like your kids. They're all uniquely beautiful and above average, like Lake Wobegon. I don't know. So I think you could tell a story on why each of them has got in a very different way attractive prospects. You--something like QVC is sort of a leverage equity play. Trip, as we've talked about, is a much faster grower with opportunities to not only extend its franchise into adjacent markets like restaurants and attractions in a bigger way but deepen their relationship with a customer by booking transactions.

 Consolidation at Charter - leveraging that looks pretty attractive, and Liberty Broadband profits from it. LMCA is getting the benefit of both growth at Live and growth at Sirius. I'm ducking your question as well as I can.

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Unidentified Participant Deutsche Bank - Analyst   [14]
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 Well, along those lines, Greg, which stock do you think the market is misunderstanding the most or isn't getting fair value?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [15]
------------------------------
 Look, the easy answer there is probably Liberty Media or Liberty Broadband because they're both trading at a discount to NAV. And why you would trade our stocks at discount to NAV is--maybe there you can come up with your own reasons. It seems sort of silly in the long term. Our history is we tend not to issue stock for stupid things. So the idea that we're going to overpay for Sirius with Liberty Media stock is probably unlikely. We tend not to pay extraneous or unnecessary taxes. So the idea that we're going to have a big discount or leakage on the pre-tax NAV is probably unlikely.

 And we tend to be able to move more nimbly in many cases than the underlying company. So while I'm not suggesting we deserve a huge premium, it seems to me a little onerous and unlikely that we deserve a big discount. So that's probably easy money.

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Unidentified Participant Deutsche Bank - Analyst   [16]
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 What about Interactive?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [17]
------------------------------
 Well, Interactive is not--it doesn't really exist anymore, right? It's a corporate entity with two tracking stocks. One is Ventures--.

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Unidentified Participant Deutsche Bank - Analyst   [18]
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 --QVC, I meant. Sorry.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [19]
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 Yes. So QVC, well, I could make the case that it trades at a huge discount to HSN, which seems unrealistic because we're not going to do the same thing. It's unlikely we're going to issue the stock of QVC and overpay for HSN. There's about zero chance of that. You're going to have to find the next CEO in this chair. And I just signed up for another five years, so it's probably not going to happen for a while. And on Ventures, Ventures is a highly speculative company. If you think that we're going to invest that cash wisely and you think that those exchangeable bonds are going to stay out for a long timeframe, it's probably pretty cheap.

 If you think we're not going to invest it wisely or it's going to take a while to invest it or you think those bonds could get accelerated, it's not so cheap. That's the speculation. And that one's--what's--run your Excel spreadsheet at what rate of return and for how long and you'll get the answer.

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Unidentified Participant Deutsche Bank - Analyst   [20]
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 Anyone else in the audience? We have one over here.

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Unidentified Audience Member   [21]
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 Great. Thanks. Could you talk about what some of the options are for the Live Nation stake within Liberty Media? It's not very often that you all take a stake in something, 35% or go up to 35%, and then just do nothing for perpetuity. And so, just thoughts on what, if anything, options wise there.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [22]
------------------------------
 We could--obviously, we could figure out some way to do a--I mean, the usual suspects, right? A 355 exchange, where we take some business in cash and get out of part of it. Something where we spin it on its own. It would not be an investment company given the scale of our position. The potential that we go for the whole thing though its multiples come up a fair amount as well. All those exist. I can't tell you that we're--any one of them is off the table or that we have a plan for any of them.

 I can tell you, as I said, I think Rapino and his team--Michael has done a great job. There's a lot more runway on the opportunities for them. Not only has the EBITDA grown nicely, more importantly, the free cash flow generation continues to improve. And I'm pretty bullish on the business.

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Unidentified Participant Deutsche Bank - Analyst   [23]
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 Next question? One over there. A little technical difficulty

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Unidentified Audience Member   [24]
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 (Inaudible)

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Unidentified Participant Deutsche Bank - Analyst   [25]
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 Barely.

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [26]
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 Now that there's some--.

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Unidentified Participant Deutsche Bank - Analyst   [27]
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 --Now I can hear you.

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Unidentified Audience Member   [28]
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 Now that there's some more details around HBO Now, what are your thoughts on the product and how do you think it impacts Starz as they start to ramp that up?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [29]
------------------------------
 So I think that--and I've been probably more vocal than I ought to be in saying I don't think there's that much upside in standalone HBO. I don't think the (inaudible) of their 10 million subscriptions out there is likely. I do think they probably attacked the market in a smart way, that Apple is a good partner, that Apple will help them on a lot of kinds of distribution that they've not historically had and a lot of presence with customers who have not necessarily been as deep into HBO. The pricing--somebody rumored as high as $19 coming in at--what they did is better and probably makes it more attractive.

 I'm not sure it's massively more attractive for them and they'll make more money than they would on a cable subscription. In fact, I bet they'll make less. Because after the cut to Apple and the cut on customer service and the like, they're going to be behind. But if it taps a new market, as long as it's not substitution, they'll be ahead. So it's probably a pretty wise way to attack the market with Apple. I still question whether it's going to be an enormous opportunity for them.

 In terms of what it does for Starz--and our CEO Chris Albrecht, who is in the first table up here probably could answer more articulately than I could. I think all of this kind of innovation, all of the ways that people test new distribution kind of go back to the first points, or one of the first points we made. Starz is a content creator. Starz' opportunity to distribute its product across more channels is a positive for Starz. In general, I think we can do it in a way that is in conjunction with our cable, telco, and satellite partners, which is attractive. That as the bundle frays or you invert the bundle where we're on top and the first thing offered rather than behind all that product is interesting. So all these kind of innovations on the margin are good things for Starz.

 I got the thumbs up from Chris.

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Unidentified Audience Member   [30]
------------------------------
 Hi. Given your earlier comments about John Malone and I guess Liberty's view on content, why was there such a small deal that was made outside of Liberty entities between John and Starz? And maybe does this portend more activity on the content front going forward?

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 Greg Maffei,  Liberty Media Corp & Liberty Interactive Corp - President & CEO   [31]
------------------------------
 Well, I think the deal that John did and Lionsgate did was probably reasonably easy. It didn't have any regulatory issues or limited regulatory issues the way it was done. It didn't involve any complications, so it was pretty clean. John going on their board is a way to--both parties to sort of get to know each other a little better in a more concrete fashion.

 I think using--I'm using a lot of Chris Albrecht tonight. He described it as moving from cousins to kissing cousins. So I think those are all positives as a starter. I suspect more may come, but obviously nothing's guaranteed.

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Unidentified Participant Deutsche Bank - Analyst   [32]
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 Anyone else in the audience? Any hands up? No? Okay.




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