Liberty Interactive Corp, Liberty Media Corp and Liberty Broadband Corp at Goldman Sachs Communacopia Conference

Sep 22, 2016 AM EDT
FWONA - Liberty Media Corp
Liberty Interactive Corp, Liberty Media Corp and Liberty Broadband Corp at Goldman Sachs Communacopia Conference
Sep 22, 2016 / 03:20PM GMT 

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Corporate Participants
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   *  Greg Maffei
      Liberty Interactive Corporation - President and CEO

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Conference Call Participants
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   *  Drew Borst
      Goldman Sachs - Analyst

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Presentation
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 Drew Borst,  Goldman Sachs - Analyst   [1]
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 Great, we'll get started with the next session. I'm pleased to welcome to the stage Greg Maffei, CEO of Liberty Media. Actually, Greg has a bunch of titles: CEO of Liberty Media, Liberty Interactive, Liberty Broadband, Liberty Trip Advisor -- I think I got them all, close.

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [2]
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 Trying to justify my compensation?

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 Drew Borst,  Goldman Sachs - Analyst   [3]
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 We're very lucky to have him. Thanks for being here. Before we get into the questions, I just need to make a brief disclosure that Liberty Media is not covered by Goldman Sachs global investment research, so --.

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [4]
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 Don't you think that's wrong? Don't you tell them?

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 Drew Borst,  Goldman Sachs - Analyst   [5]
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 Yes, I was really pleased when I learned I had to start making this disclosure. It's not too awkward. So very much thank you for being here.

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [6]
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 Well, I'm a lot happier this year because we got a bigger room. Last year I was in -- or two years ago, I was in such a closet I decided -- not covered, in a closet, maybe they were trying to tell us something; I shouldn't come. But this year I got a nice big room; thank you, Drew. Maybe next year we will even get coverage.

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 Drew Borst,  Goldman Sachs - Analyst   [7]
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 We're working on it, we're working on it. Let me ask you a question about the portfolio. Let's kind of start at a high level and maybe you could just tell us what you're most excited about within the portfolio. What are you focused on? Tough questions.

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [8]
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 This is the -- which of your children do you like best? I think we've got a lot of interesting businesses. Charter continues to power on. Obviously, Formula One is exciting right now. There's a great transition going in Trip with a lot of upside if we can pull it off, and obviously I believe we can.

 Continue to have good progress at SIRIUS, continue to have great execution at Live. A lot of businesses are performing well.

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 Drew Borst,  Goldman Sachs - Analyst   [9]
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 Earlier this year, Liberty Media was recapitalized by issuing three tracking stocks: the Liberty SIRIUS XM, Liberty Braves, and Liberty Media. And what are some of the benefits of this recapitalization, and why do you think the discount to the NAV still exists across the trackers? Maybe you can talk about each in sort of turn.

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [10]
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 Yes, so I think it gives an opportunity for investors to choose which stock or which part of Liberty they were focused on. And most of them are performing pretty darn well. If you look, all three in the Liberty Media space are up. The Braves has traded up to over $17. We did a rights offering there that's proved to be very successful.

 We have a -- on field team performance is much improved in the 61 games since -- not including last night -- since the All-Star break. We have the highest batting average in Major League baseball. We're like second in singles and third in doubles. I mean performance is very good on the team.

 I think we -- we've got a young team, not invested a lot, opportunity to improve it and excited about where we can go with the team. And the valuation reflects that. I think there's more upside when we bring the new stadium online, when we complete the battery, the retail mixed use development that we have next door to the stadium. I think there's upside.

 Looking at SIRIUS and Liberty SIRIUS, there's a discount there that is somewhat perplexing. You can see some reasons why it exists, some of which I think are incorrect and some of which are logical. I'd pick the three reasons. One, there's about a $7 billion-ish market cap, $7.5 billion in SIRIUS, and they're buying back or announced they're buying back $2 billion a year; creates a fair amount of upward pressure.

 In contrast, we have Liberty SIRIUS with about a $13 billion market cap in which we're buying back zero. So you can see why there might be some imbalance there. And then the perception that we might issue stock of Liberty SIRIUS to buy SIRIUS in and pay a big premium. I don't think that's our history; I don't think that's what we would tend to do. And if you watch that share shrink go on, I think you can look and say, why would we do that. But maybe that's what the market thinks. So that explains perhaps the discount.

 Then the discount to NAV perception at what was Liberty Media Group will become F1. Hard to argue that now. When we normally talk about discounts, we talk -- we can look and say identifiable assets and valuations compared to the valuation of the tracking stock. That's now kind of blown up because there isn't another valuation available for F1. We are the valuation. And obviously it has performed very well.

 When we struck the deal with CVC, I think the reference price on the deal was $21.40 something, below $21.50, and I think the stack was over $29 yesterday for the LMCKs, and we issued $3.3 billion that they reference priced in. LMCKs have traded up nicely since, but we will be issuing that.

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 Drew Borst,  Goldman Sachs - Analyst   [11]
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 Let's talk about Formula One a little bit. Two weeks ago, you announced the acquisition, the business model that has very strong free cash flow generation which allows for high leverage, which are two hallmarks of Liberty assets.

 Could you elaborate a little bit on the opportunity you see at Formula One and the strategic and financial plan for the next couple years?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [12]
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 Yes. I think you're right, strong cash flows; a high degree of it committed, either through venues are broadcast deals or sponsorship deals which are multiyear. So I think it allows a fair amount of leverage. Whether that leverage stays at this level is a public entity; we'll see. There might be some movement downward.

 I think there's some ability to find more attractive pricing on the debt structure, even at this leverage level. Opportunities to grow the business, I think there are a bunch starting with broadcast revenue, the largest source of revenue. Chase Carey, pretty experienced, hard to think of a better guy who has opportunity to manage sports properties or media properties and the intersection of the two. And I think there's an opportunity to grow that broadcast stream.

 Much of it comes from moving potentially free to air to competitive pay services. That's, for example, what happened in the UK when BSkyB recently bought the rights.

 Next source of revenue is sponsorship. I think we have 19 or 17 sponsors, and we have three people working in sponsorship in Formula One. In contrast, at MLB, a business we have some familiarity with through the Braves, there are 75 sponsors just in the US. So I think there's an opportunity to grow -- invest in the sponsorship organization and grow sponsors.

 Venues, we're sitting at 21 races. I think there's an opportunity potentially to grow that over time. But particularly while we've maximized some of those venue races, venue opportunities with relatively high venue fees, I think there's an opportunity to grow in a number of venues and in venues that are potentially more attractive to longer-term broadcast revenues and longer-term sponsorship revenues.

 The obvious optionality case, to some degree Asia in the short term, potentially Latin America; and longer term North America, particularly the US, where we really are well underviewed, undermonetized, under everything. I don't think that gets solved in a week, but I think that's an interesting long-term opportunity.

 And then lastly and something that intersects all of these is less than 1% of the revenue is from digital. They really have no organized digital effort. I think there are a lot of things that could be done around gaming, VR and AR. There's an enormous amount of video feed and data that we have about the races that we are already capturing that we are not in any way processing incrementally for the dedicated fan, or opportunities around things like gambling.

 Remember, outside the United States huge gambling opportunity in this sport, none of which we capitalize on. So I think there are a bunch of ways in which digital can play through this from a service to augmenting other things to providing data that are interesting that we're not capitalizing on that I think will be a part of the future growth.

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 Drew Borst,  Goldman Sachs - Analyst   [13]
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 You mentioned expansion in the US, because I think that's something Formula One has worked on. I believe they still have a race down in Austin.

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [14]
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 They do.

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 Drew Borst,  Goldman Sachs - Analyst   [15]
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 I think at one point, they were trying to do a race in the New York area, but that never came to fruition. What is sort of the lesson learned on their sort of first take on that attempt? And what gives you the confidence that you might be able to take another bite of that apple?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [16]
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 Well, there have been actually 65 Grand Prix races in the US for Formula One. And I think it's actually -- on the list of all the places where there have been races, the United States is actually 4th or 5th. So it's not as if it's never had races here; it's just it's been in and out. There were races in Long Beach, there were races in Denver.

 You think about places where it would have natural appeal, I would argue Miami, Las Vegas are very interesting places for the long term. But that isn't going to get solved in a week. I'd like to hope that being Americans, Chase, Liberty, that we can help with that process. I don't think, as I said, this is a quick fix. But for the longer term, it's a large untapped market with upside.

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 Drew Borst,  Goldman Sachs - Analyst   [17]
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 In terms of -- there's not many opportunities to own the lead so-to-speak, which you are doing with --.

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [18]
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 Yes. It's the largest commercial revenue sport in the United -- that you can own commercialized in the world. You can't own the Olympics. You can't own FIFA.

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 Drew Borst,  Goldman Sachs - Analyst   [19]
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 Do you see opportunities to take the product more directly to the consumer as opposed to using sort of the traditional third-party media, television networks and cable networks, etc.?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [20]
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 Yes, I think absolutely, and that's -- I think I touched on it a little in the digital opportunity. Part of that is much more direct to consumer, DTC kind of experiences. And how that augments and how we work that in with the traditional broadcasters, that's what needs to be worked through. But I think there's a lot of material to work with there.

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 Drew Borst,  Goldman Sachs - Analyst   [21]
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 Let's transition over to SIRIUS. In the US, new vehicle sales are running about 1% this year, although the pace of US auto sales has decelerated most recently. But we're kind of plateauing it seems on vehicle sales at this point. Can you talk about your outlook for the vehicle sales and how that plays through on SIRI?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [22]
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 I think the SAR is going to be in the low 17s. That's not going to be massive growth; I don't [discourage] you. SIRI's opportunity to grow faster and that originates from several things. First, an enormous amount of our new adds are the used market where we have made enormous penetration over the last few years.

 Second owner, cars that were traded that never had a first owner who was a user. Lots of places we can touch, and that's been an enormous part of the growth of the new adds, the net adds, and that continues unabated.

 There are 17 million-ish new-car sales in the United States. There are 39 million used car sales. And we keep adding to the base that are already preinstalled of -- that have SIRIUS XM that we have an opportunity to just turn on.

 And we have lots of ways now; we've reached that with dealers and other kinds of organizations to make those sales more effective and give a free trial and convert those. And the conversion has been very attractive.

 Secondly, we have experienced some price increases which have grown revenue faster than unit sales, incremental to unit sales, and obviously even better on free cash flow. So SIRIUS has raised its initial new net adds number, I think twice already this year, at least once. It started out at [1.2 million]; I think Mark is looking at [1.6 million]. We'll see, maybe there's ups to that.

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 Drew Borst,  Goldman Sachs - Analyst   [23]
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 On the used car and the secondary market, you could talk a little bit about strategy that SIRI is using to try to capture those folks. I mean how difficult is it to find those people and market them and convert them?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [24]
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 I think SIRIUS is -- first of all, SIRIUS is a great execution machine. They are a company that measures and has metrics on lots of things, including -- and this is the great kind of market they have been after. There is no simple way. It's not like going to the OEMs and saying, oh, I talked to the 10 or 15 OEMs who dominate the car market. You need to reach out. And there are certainly big dealers like in AutoNation or the like, but you need to reach out to many, many dealers.

 And I think SIRIUS has been very aggressive, thoughtful, methodical, but also creative in coming with new ways to reach people; whether it be insurance companies that they're trying some comarketing with or other sources. Because there isn't one uniform database of all the used car sales in the United States. It's not a simple process.

 And today I think we are running in the context with 17,000, some kind of number like that, used car dealers. So SIRIUS has been very aggressive and thoughtful about how to invest to capture those.

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 Drew Borst,  Goldman Sachs - Analyst   [25]
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 There has been some reports about Liberty Media being interested in acquiring Pandora. I was wondering if you could share your thoughts about the streaming music space.

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [26]
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 I think the pay -- the subscription streaming music space is an unbelievable battlefield, very difficult. You've got three or four major players who have big strategic aims who have deep pockets, and in some cases have monetization schemes that are outside of the streaming service itself.

 So the largest, Spotify, clearly is going to try and make its money through streaming, challenged to date. The other is like Apple, Google, and Amazon have incremental ways to get paid which make them fearsome competitors on top of the scale that Spotify has because they've got, as I said, deep pockets and incremental ways to get paid.

 That's the revenue challenge side. On the cost side, you've got no regulations or protections on what the performer, the groups, the record companies representing performers or the people who own the publishing rights can charge you. So the cost side is also very high. So I look at it as a very tough market.

 I think Pandora's more traditional business around the ad market is actually an easier market. There are CRB limitations on what you can charge for them, and there is a $17 billion opportunity in Terrestrial Radio who as a competitor, I think you have strategic and technology advantages over. So I think Pandora -- my observation would be Pandora is moving in the wrong direction, that they're moving deeper into a market that is more competitive rather than the market where they exist, which is less competitive.

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 Drew Borst,  Goldman Sachs - Analyst   [27]
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 Is that something that you think could fit inside of SIRI? Is that something that would make sense or is that --?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [28]
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 I think SIRI could be additive to that business, there's no doubt. If you look at car relationships, how SIRI runs, it could be a positive for SIRI, and SIRI could be a positive for it.

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 Drew Borst,  Goldman Sachs - Analyst   [29]
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 Does the combination of SIRI's large installed radio subscriber base combined with its hybrid satellite and streaming service, 360L, plus its connected car platform, would it make it a strategic asset for anybody else in the universe?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [30]
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 Well, I think there are a lot of people who would find a strategic asset -- people who want to have incremental touches with customers, people in the music space, people with connected car vehicles, the connected vehicle, as you pointed out. I think large telcos and the like, there are a bunch of people who could find it strategic.

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 Drew Borst,  Goldman Sachs - Analyst   [31]
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 Let's move over to the Braves for a second. Could you help investors think about the trajectory of the Liberty Braves Group and what you see as the biggest opportunity here?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [32]
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 Well, I think the catalysts of value there are first we have the new stadium opening in April of 2017, SunTrust Park. We will have incremental revenue streams coming out of that from better luxury suites, a lot of ancillary services like parking and restaurants that we don't get at Turner. So I think we'll get a nice bump on revenues there.

 I think longer term, and this is quite long term, somewhere down the road we will get the rights back; 2027 we will get the rights back on what we inherited from Time Warner when we bought the team and the relatively long [load] cost or low revenue to us; TV rates that we got that were given to the RSN down there, Sports South, and to Turner and to Fox. We got some of that upticked about two years ago; there's more to come down the road. Those are obvious.

 And then the reality is on-field performance has some correlation with market perception. People think a hot team trades better. We're kind of at the low now, been improving in the last -- since the All-Star break, and I think we'll do better in 2017. So all those are catalysts on value, I suspect. But the most near-term real one is building out the new stadium.

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 Drew Borst,  Goldman Sachs - Analyst   [33]
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 And I guess you mentioned there's some ancillary revenue opportunities at the stadium besides just the team itself and the ticket sales. I wanted to get your view on the RSN business, I guess sort of as a business model since you own the team. I think investors debate sort of the health of that business model.

 It's typically why we carried, even though we know not everybody is a real sports fan in a market, has a relatively high affiliate fee, somewhere in the, depending on the market, [250] to maybe [450], something like that, per subscriber. Do you think that this is a healthy business? Is it a sustainable business, or do you think it is sort of ripe for disruption? I think out in Los Angeles there's been a lot of disruption for a couple years now.

 There's rumors that the Clippers may at some point want to go more of a direct model, take their rights -- keep the rights themselves and do sort of a direct-to-consumer type of approach. But I'd love to get your perspective on it.

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [34]
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 Yes, I mean Liberty has been around the RSN business for a long time. We created a bunch with Fox. We bought back a bunch and owned the RSN in Seattle, Denver, and Pittsburgh, and then merged it in -- when we had DIRECTV and sent it out and got merged into DIRECTV.

 We know as a holder of rights that are -- the relatively low rates out to some RSNs in the Atlanta area, what that does. And then as a Charter board member, understanding the high rates being charged are being caught, paid -- that we have to pay -- Charter must pay the Dodgers in the LA market and the lack of penetration therefore, but we've seen all sides of this.

 I think it's a very tough business, one that, yes, might very well be disrupted. I've described it as the musical chair business. Historically, your goal was to cut the longest rights deal you could with the team because you wanted to have the shortest deal with the MSO to re-rate and try and get upticks. I think that has a lot of risk that eventually you end up where you owe the teams a lot of money and you don't get the re-rates from the MSOs because either you get too high and they can't pass on the market or they decide that can go without it. You've watched that happened in places like Houston; Portland, obviously, has had some challenges; LA is maybe the worst example of challenges. So I think it's a very difficult business model for the long term.

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 Drew Borst,  Goldman Sachs - Analyst   [35]
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 Let's move to Live Nation. You previously stated that LIV is one of your core Liberty Media holdings. What are you most excited about with Live Nation over the next few years?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [36]
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 Well, I think Michael has done a great job -- Rapino -- at executing on that business and growing their share of the global large event ticket market. Also done a great job of growing the secondary ticketing business and investing in new technologies to improve the consumer experience, all three of those. I think the things that they can do going forward are to continue to leverage that scale and improve their sponsorship and e-commerce experience, and e-commerce revenue and sponsorship revenue.

 But in addition, I think I mentioned in one of the sessions before, when you do a big global tour, take U2, we have an unparalleled opportunity to bid for that because we touch more places and we have more scale than anybody else. We capture a higher percentage of the revenue and do most of it internally.

 That having been said, there are a lot of places where we don't have a promoter and we need to work with a local promoter, and we give up some of that revenue. You've seen us go into markets like South Africa and buy up a local promoter, or expand in Germany where we took in one of the large promoters.

 Those opportunities let us gain a bigger share of the same concert revenue, of the tour itself. We hold more of it in. I think that's an opportunity you'll look and see -- do that potentially in Latin America, potentially in Asia; you'll see us do more of that. So those are all ways I think that Live continues to leverage the existing model.

 In addition, it's had green shoots around leveraging the video it has. The live Live video it has experiences like what it did with Yahoo, what it is doing with Vice, with Snapchat, to try and provide live content around concerts that it owns. And I think there's more that can be done with that, and that's sort of a potential next leg for the business down the road.

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 Drew Borst,  Goldman Sachs - Analyst   [37]
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 So Live Nation generates over $300 million in free cash per year. Can you talk about the priorities for allocating that excess free cash?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [38]
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 Yes. And they've just gone out and they're raising some more capital in the bond markets. I think really the first and foremost to do some of those things, to buy the promoters in some of those markets that I talked about, to buy the ticketing; some of those markets that I talked about, there are some ancillary businesses around that that we can invest in. And then to continue to invest on the video side. I think those are some of the priorities.

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 Drew Borst,  Goldman Sachs - Analyst   [39]
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 Let's move over to Charter and sort of the pay TV universe. Liberty has obviously been a central actor in the cable consolidation that has taken place, and you have been fairly vocal about the benefits that come with that consolidation in terms of getting the programming costs down. And we're beginning to see that sort of come across the P&Ls of a lot of companies in the space, both on the positive side for cable and also the negative side for some of the cable network owners.

 The other thing we hear a lot about is sort of acquiring additional rights to sort of reposition the cable product for more on demand, which I think has been a net benefit to a lot of the content owners. But I guess I'd love to get your perspective on the programming, the content cost side of cable, and sort of where you see it going over the next couple of years.

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [40]
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 Well, I think you've seen the distributors scale up and do things to give them leverage. And I think that we use that to try and contain costs. Now whether that be AT&T Direct or whether that be Charter, that's sort of the obvious opportunity. I mean, you're seeing that tug-of-war go on; it's gone on for years. But probably right now, you've seen more consolidation on the distribution side than on the content side. And I think that has caused some of the opportunity.

 And the content owners have some large players and then a bunch which are not as large, and they are probably going to get pressured.

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 Drew Borst,  Goldman Sachs - Analyst   [41]
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 Do you expect to see the content companies consolidate? There's kind of two sides to the debate. You have sort of the skinny bundle and the narrowing down, so that sort of argues against these big companies consolidating because you have even a bigger portfolio of channels where a lot of the value is probably just in a handful and you're dealing with these weaker channels.

 But the other side of the argument is people need the content, so they got bigger, you get bigger, people keep fighting fire with fire.

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [42]
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 Yes, and you pull -- there's no question there's a pull-through on some of your lesser channels if you have the bigger, stronger channels. I think there will be a push for consolidation. The challenge in a lot of these cases is either owners who have -- don't want to give it up, managers who don't want to give it up, don't see the benefits for them and they don't act on it.

 There is enormous amount of synergies for them on the cost side, as well as market power side, I think, to some of this consolidation. And I think you'll see some pressure for it, but whether it will actually get done, we'll see.

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 Drew Borst,  Goldman Sachs - Analyst   [43]
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 On the subscriber front for cable, last year down -- the universe was down about 1%. Based on what we've seen to date, it looks like we will probably be somewhere in that same neighborhood, maybe 1.5% decline. What is your outlook for the pace of universe?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [44]
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 I don't see that happening in Charter. I think Charter has got an opportunity to grow subs, video subs over the next couple years. Clearly, Tom Rutledge believes he can, and success at Charter has been to go from a declining to starting to grow again.

 And not only is it just the number of video subs, it's really moving from basic to extended basic to higher-quality video rates and revenue, because it's both. And I'm bullish on moving to an all-digital experience at Time Warner just as it was done at Charter. We will improve the quality of the video product. Moving to a better UI in a cloud-based experience that Charter has done will help improve the video product, and you're more likely to continue to hold or gain video subs from here.

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 Drew Borst,  Goldman Sachs - Analyst   [45]
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 Maybe just a -- is this essentially sort of a similar playbook, basically that Comcast has already executed on in terms of get a better interface, build a platform that aggregates to VOD rights, improve the searchability, improve the consumer experience?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [46]
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 Yes, I think Comcast has done a good job, but I think it's a video playbook that Charter has already executed on. What legacy Charter has done, I would expect to see now executed Time Warner and to some degree Bright House, though they're not quite as extreme.

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 Drew Borst,  Goldman Sachs - Analyst   [47]
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 The SEC came out a couple weeks ago with I guess a revised set-top box proposal. I mean in essence, what they're trying to do is encourage more competition and allow third-party apps to get placement on things like that. If this proposal goes through, what are the ramifications for Charter and the media companies?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [48]
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 I think frankly, that is less of a challenge. I think there already is a fair amount of competition driving down -- and innovation rather, I should say, in the set-top box arena. And I think you're seeing people like Comcast and like Charter look at bringing in third-party apps that are beneficial to consumers and that consumers have appeal in putting them on the set-top box and trying to integrate the experience.

 So I don't view it as a major upheaval or change. I think it's kind of a continuing evolution.

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 Drew Borst,  Goldman Sachs - Analyst   [49]
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 I want to ask a question about Charter's balance sheet. I think over the next couple of quarters, you should be able -- Charter should be able to delever below the 4 to 4.5 target range.

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [50]
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 It's already below that, yes.

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 Drew Borst,  Goldman Sachs - Analyst   [51]
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 So that begs the question, what are the capital allocation priorities now that you're getting the balance sheet delevered?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [52]
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 So I think there is some CapEx that will be done over the next couple of years to upgrade the Time Warner networks to all-digital as was done at Charter over the last two, three, four years. But you rightly point out there will be free cash flow and delever.

 I think whether you set the target down to 4.5 down to 4 and when you can start returning capital, I think Tom would love to find more systems to buy. I'm not sure there are other systems of scale out there to buy. Just looking at what the landscape is and what the regulatory environment is, we will watch that. But I think it's quite possible, say over the next couple of years, you will see return of capital.

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 Drew Borst,  Goldman Sachs - Analyst   [53]
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 Let's move to QVC. Concerning QVC's shares are down by almost a third, and when I look at the 2017 consensus revisions, estimates have only come down by about 7%. I think investors are worried about whether Amazon and some of the e-commerce players caught up to QVC.

 What tangible evidence can you provide to refute that their case, that the decline in revenue is not the beginning of a secular downdraft?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [54]
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 Well, I think the QVC model which has been around for coming up on 30 years has been proven to be quite resilient and has absorbed many changes in the marketplace, whether it be going to multichannel or the Internet, mobile, all of which have been absorbed. I think we've seen some changes over the last quarter or so around some promotion, around some self-inflicted issues around returns and perhaps some merchandising. But we don't see any evidence of continuing declines below this level.

 In fact, we see some green shoots suggesting upside to where we've been talking. And we have no belief that we're going to have this continuing trend downward. That's not what we've seen, that's not what we expect.

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 Drew Borst,  Goldman Sachs - Analyst   [55]
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 The declines that they've spoken to recently, is that being driven more by the e-commerce side of the business which is pretty substantial? I think it's approaching half of the business. Or is it more on the traditional television model that's been around for so long?

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 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [56]
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 I think that's kind of a false dichotomy to be honest of how we look at the business. We have an enormous distribution asset in QVC that covered over 90 million plus homes that has a powerful TV viewing promotion engine. And then we have customers who come in and execute and choose whether they come to the Internet, whether they come to a voice unit or whether they call into a person.

 We do have a standalone Internet business which benefits from that large halo of that TV, powerful promotion. But I think the way we look at that is it's not a dichotomy, and to Internet versus non-Internet it's one big business.

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 Drew Borst,  Goldman Sachs - Analyst   [57]
------------------------------
 QVCA I think is trading at a mid-teens free cash flow yield the last time I checked, which is --.

------------------------------
 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [58]
------------------------------
 No, I don't think it's quite that high. A little lower than that. I think that math may not be quite right.

------------------------------
 Drew Borst,  Goldman Sachs - Analyst   [59]
------------------------------
 That's what happens when you don't cover it (laughter). But either way --.

------------------------------
 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [60]
------------------------------
 We keep suggesting, Drew. But you did give us a bigger room, thank you (laughter).

------------------------------
 Drew Borst,  Goldman Sachs - Analyst   [61]
------------------------------
 The question would still stand. I should stay away from the specifics. It's definitely trading at a discount to its closest peer, which is HSNI.

------------------------------
 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [62]
------------------------------
 Yes.

------------------------------
 Drew Borst,  Goldman Sachs - Analyst   [63]
------------------------------
 It's probably also trading at a discount to almost every other retailer, hard retailer out there, even though it has a sort of advantage capital model, asset-light sort of model. Why do you think -- what do you think is causing this disconnect? And would you consider being more aggressive buying back the QVC stock at these levels?

------------------------------
 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [64]
------------------------------
 We've had an enduring discount to HSN that is I think hard to explain, because we trade at a discount on both EBITDA and even more on free cash flow. And if I look at the portfolio of the two businesses - and we own 38% of HSN, so I'm not trying to crap on HSN -- but I'm looking saying that the portfolio, I think the international business that we have in addition to the US business that they have is likely to go faster than just the domestic-only business.

 And then we have on top of it zulily, which surely will grow faster. So both of those give a better growth profile and a better free cash flow yield opportunity at Q than H, yet we trade at that discount. I think that enduring disconnect has been there, whether that's because they think we're going to spend and buy H at a big number.

 We say it many times; I've been 10 years at Liberty saying we're not going to do that. If the numbers are right, we will do it, but we're not going to do it at some crazy multiple. Spend less they trade at that discount, and it's happened for a while. We'll see. Hard to explain. Maybe if you covered it, Drew (multiple speakers).

------------------------------
 Drew Borst,  Goldman Sachs - Analyst   [65]
------------------------------
 Maybe that's what the problem is. The investors are always interested in data points about the macro economies around the world, and QVC in addition to the US are in Japan, Germany, UK, Italy, France, China. Are there any observations you can share about what you've seen about the macro economies through QVC in those countries?

------------------------------
 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [66]
------------------------------
 As much as you'd love to say that you have these great insights, in some cases you do, we've seen great execution. I think the British economy feel worried about Brexit. We continue to have good success in Britain nonetheless. We've done better in Italy, even though I think the Italian economy is pretty weak.

 We continue to do well in Germany. China has had some challenges, even though the Chinese economy is weak mostly due to some lapping, some not having incremental distribution and probably some execution issues on our own relative to what we think the growth opportunity is.

 So we continue to perform pretty well overall internationally, despite what I think are relatively weak economies in, for example, in Japan or in Italy or -- nonetheless, we perform reasonably well.

------------------------------
 Drew Borst,  Goldman Sachs - Analyst   [67]
------------------------------
 Before I go to the audience to see if there's any questions, on QVC and the international what's the outlook for expanding into other markets?

------------------------------
 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [68]
------------------------------
 We just launched France in the last year. I think it's a while before we are going to go a launch again. We continue to sort of be measured on the same things: GDP, GDP per person, ability to get video households. And we look at markets where you can do those things, and that's what creates an attractive opportunity for us.

------------------------------
 Drew Borst,  Goldman Sachs - Analyst   [69]
------------------------------
 Any questions from the audience at this time?

==============================
Questions and Answers
------------------------------
Unidentified Audience Member   [1]
------------------------------
 First question is when it comes to QVC, obviously as was mentioned, it's creating a pretty attractive yield, although you are kind of constrained by S&P if you want to maintain that investment grade rating.

 So would something like a senior sub or using the various other dazzling array of financial levers at Liberty Interactive makes sense in order to keep repurchasing shares or -- I have a follow-up after that?

------------------------------
 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [2]
------------------------------
 Yes, I think you'll see us continue to purchase shares. I'm just not sure how much we can ramp it from here, given the constraints we've put to the marketplace about leverage overall and to the rating agencies, yes.

------------------------------
Unidentified Audience Member   [3]
------------------------------
 And just in terms of those [CEDs], I'm not as well-versed as I'd love to be. But in theory, if that (technical difficulty) to get signable to a different entity, would it be possible to do a deal, say, to move them to LMCA if you wanted to?

------------------------------
 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [4]
------------------------------
 You're talking about the exchangeables which have --?

------------------------------
Unidentified Audience Member   [5]
------------------------------
 The exchangeables up at (inaudible).

------------------------------
 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [6]
------------------------------
 So the indenture for those is an indenture that is at Liberty Interactive, and it would be very hard to see how you ship those out, and the bondholders would probably not be thrilled.

 The reason those are not so attractive to them is because the warrant feature effectively exchange into Sprint or the like is so far underwater, they would love to find a reason to be able to put them back to us at par. So that probably doesn't really work.

------------------------------
Unidentified Audience Member   [7]
------------------------------
 The transition at Trip Advisor continues, and I'm just curious if you could comment about how you think about the challenges and opportunities going forward.

------------------------------
 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [8]
------------------------------
 As I think we've talked about in the past, Trip Advisor is doing its second business model change over the last four or five years, moving from multiple windows to metasearch, now to instant book. I think you're seeing the beginning of green shoots there where the real goal, obviously, is to get better revenue; not only a better consumer experience which I think is necessary, but better revenue and a more durable revenue stream than you would get from cost per click from OTAs. And I think you're beginning to see the green shoots on that make a change.

 Could it have happened faster? Perhaps. Could we invest more to make it happen? Perhaps. But I think Steve and his team, Ernst -- I think Ernst spoke here, or recently spoke at a conference, I'm not sure, the CFO -- you can see the beginnings of when we're making that change and the positive upswing. And the goal is to pour that on over the next few years.

------------------------------
Unidentified Audience Member   [9]
------------------------------
 I have two questions on ventures. First, can you provide a quick update on the spinoff of Liberty Expedia and what's causing the delay and where you stand with that? And then second, post that spin, what are the plans for ventures, given that you're going to have both Liberty Broadband shares there as well as some unencumbered Charter shares? Does it make sense to down the road at some point combine that with Broadband or with Charter? And how, if at all, does a Charter buyback, if and when that happens, affect your strategy there? Thanks.

------------------------------
 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [10]
------------------------------
 I think the [LEXPA] spin is on moving forward. I think we're going to have the shareholder vote in early November, hope to get it done in the fourth quarter. We've had issues working through with the SEC. It's a relatively complicated deal, and our friends at Yahoo have made some of these issues more complicated in and of themselves.

 What we would do with ventures, we're going to free up and have a lot of capital. We're going to look for opportunities. I'm not sure will be able to combine that with Broadband or combine that with Charter, but we have relatively high basis in those Charter shares and we will look for interesting opportunities in which to invest.

 We found things in the marketplace like Formula One. We will look for some more smart deals, hopefully.

------------------------------
Unidentified Audience Member   [11]
------------------------------
 I think when LMCA spun out Liberty SIRIUS, I think most investors expected Liberty SIRIUS to trade at the tightest discount. I guess when you look at the 12% discount versus the Braves are trading better right now, LMCA, is there anything legally or structurally or from an ownership perspective that's preventing SIRIUS doing an RMT with Liberty SIRIUS similar to DirecTV?

------------------------------
 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [12]
------------------------------
 Just so far, we haven't wanted to do an RMT. There is no reason why an RMT couldn't be done, but we're not -- I think there are reasons why ultimately over time, there's value in keeping Live Nation and SIRIUS in the same entity. I think there are more things that can be done together. I'm probably the most bullish person on that in the group, but there is no reason why that couldn't occur.

 We also, I think -- there is a large free cash flow generating engine at SIRI that I think we'll find ways to divert and use the capital in other ways that are attractive; expanding into things like telematics, other acquisitions that have been discussed. So there's more room to grow that business.

------------------------------
Unidentified Audience Member   [13]
------------------------------
 On Live, does it make sense to keep it within the Formula One Group, and you're also just coming on with your ATV (technical difficulty) Liberty Media Corporation?

------------------------------
 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [14]
------------------------------
 Yes, I don't know where that ultimately goes and where it stays. I think there are things that Live can do that are helpful to the Formula One Group. I also think there are things that Live can do that may be helpful to SIRIUS. So we'll see.

 But there's no reason they shouldn't be able to work together over time regardless. In ATB, we need -- we always -- never have enough ATBs at Liberty. You've got to grow them, kind of like hothouse flowers, so more is better. It creates more flexibility and optionality around things we can do.

------------------------------
 Drew Borst,  Goldman Sachs - Analyst   [15]
------------------------------
 We're just about out of time anyway. So thanks very much, Greg. We appreciate you being here.

------------------------------
 Greg Maffei,  Liberty Interactive Corporation - President and CEO   [16]
------------------------------
 Thank you, Drew.




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