Liberty Broadband Corp (LBRDK) 2017 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Liberty Media Corporation 2017 First Quarter Earnings Call.

(Operator Instructions) As a reminder, this conference is being recorded, May 9, 2017.

I would now like to turn the conference over to Courtnee Chun, Senior Vice President of Investor Relations.

Please go ahead.

Thank you.

Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995, including statements about business strategy, market potential, new service and product launches; the repurchase activity of SiriusXM, the expected benefits and financial performance of the new ballpark for the Atlanta Braves and the associated mixed-use development, the expected benefits of the acquisition of F1, the future financial performance of [F1] business, future Formula One races and other matters that are not historical facts.

Forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including without limitation, possible changes in market acceptance of new products or services, the ability of our businesses to attract or retain customers, competitive issues, regulatory issues and the availability of capital on terms acceptable for Liberty Media.

These forward-looking statements speak only as of the date of this call, and Liberty Media expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Media's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA of Liberty Media and adjusted EBITDA of SiriusXM.

Required definitions and reconciliations, schedules 1 and 2 can be found at the end of the earnings press release issued today, which is available on our website.

This call also may include certain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995 regarding Liberty Broadband.

These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

These forward-looking statements speak only as of the date of this call, and Liberty Broadband expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Broadband's expectations with regard thereto or any change in events, conditions or circumstances on, which any such statement is based.

Now, I'd like to turn the call over to Greg Maffei, Liberty's President and CEO.

Thank you, Courtney.

Good morning to all of you.

Today, speaking on the call, we'll have Liberty's CFO, Mark Carleton, and we are pleased to welcome Formula One's Chairman and CEO, Chase Carey.

During the Q&A, we'll be available to answer questions related to Liberty Broadband as well.

So starting with the Formula One group, we were very excited to close this acquisition in January and aboard Chase Carey, CEO of Formula One.

This season began in March in Melbourne, and we're now 4 races in and having a great competitive start with 3 winners in 2 teams in those 4 races.

We do plan to release the Q4 '16 numbers shortly.

They should be coming to you soon.

Regarding the potential sale -- share sale of the Formula One teams, we have no update now but once we have some news, we will let you know.

On to the operational highlights.

At SiriusXM, they had a very solid quarter.

Q1 revenue was up 8% to $1.3 billion, and Q1 net income rose 20% to $207 million.

Adjusted EBITDA grew 14% to $502 million.

Liberty's ownership as of April 25 stood at just under 68%.

Live Nation had an outstanding quarter.

Revenue was up 19%, operating income was up 20%, and adjusted operating income was up 25% at constant currency during their first quarter.

They booked over 4,000 shows for 2017, up 10% from last year as of the end of April.

Concert sales for 2017 were up -- for shows were up 25% through April to 46 million tickets.

All leading indicators point to another record year in each of Live Nation's businesses.

And finally, looking at the Braves.

SunTrust Park and the Battery opened April 14.

The team put on a hugely successful opening day.

The Battery restaurants were packed, both before the game and well into the night, as the Braves celebrated their victory over the Padres.

All revenue fronts exceeded expectations.

We saw World Series-type retail in concession numbers.

We have now hosted 6 events at the Roxy stage theater, managed by Live Nation, all of which have been a great success.

Approximately 150 apartments have been leased out at the Battery as of today, and the performance of our young team is improving on the field.

Over at Liberty Broadband, Charter continues the integration of Time Warner and Bright House.

This is a massive operational undertaking, and we will always have a few bumps in the road along the way with onetime impacts as we near the first year anniversary of the transaction, but there are many, many positive in our view.

We launched Spectrum pricing, packaging and brand to residenters in approximately 98% of the legacy Time Warner and Bright House footprints and that process will be complete by the end of the second quarter.

We are confident that the Spectrum rollout will result in revenue and sub growth.

We are realizing meaningful cost synergies, leverage is constant at 4x and Charter repurchased nearly $826 million of stock in common units in the first quarter.

With that, let me turn over to Mark for a little more on our financial results.

Thanks, Greg.

Quarter-end, Liberty SiriusXM group had attributed cash and liquid investments of $100 million, excluding $230 million of cash held directly at SiriusXM.

Sirius spent around $300 million during the first quarter, buying back 62 million share of their common stock, and they remain committed to their capital return program of approximately $2 billion a year.

The value of the SiriusXM common stock held at Liberty SiriusXM as of May 8 was around $15.5 billion and there is about $250 million in debt against these holdings.

Braves Group had attributed cash and liquid investments of $115 million, and the Formula One Group had attributed cash and liquid investments of $194 million, excluding $432 million of cash on hand at F1.

The Formula One Group holds public market securities with a market value of around $3.1 billion as of May 8, with $2.3 billion of attributed debt against those.

At quarter end, Liberty SiriusXM Group had an attributed principle amount of debt of $6.3 billion, includes $6 billion of debt directly at Sirius.

The Braves had about $420 million of debt, and Formula One Group had around $6.5 billion, which includes $4.2 billion directly at F1.

And F1's total net debt to covenant OIBDA ratio as defined in their credit agreements was approximately 7.4x as of March 31 as compared to a maximum of allowable leverage ratio of around 8.5x.

Now while we are comfortable with a 7.5x, we have set a target of total net leverage ratio of around 5x to 6x the covenant OIBDA.

And in the near term, we will certainly focus our excess cash flows on getting us in the direction of that target leverage ratio.

Note, these are the leverage ratios for the Formula One business itself, not the Formula One Group.

In the first quarter, the Formula One Group incurred around $20 million of SG&A expense, including stock-based comp, which excludes amounts allocated to each of the Liberty SiriusXM and the Braves Group.

For the quarter, approximately $9 million of SG&A expense, including stock-based comp, was allocated to Liberty SiriusXM group, and around $1 million was allocated to the Braves Group.

Now I'm happy to turn it over to Chase Carey to talk specifically about Formula One.

Thanks, Mark.

It's been about bit over 3 months since the change in ownership and management at Formula One.

Our primary focus during this time has been on launching the key initiatives that will enable Formula One to begin to realize its true potential value.

Our first priority was to build a management team to execute our strategic vision.

Ross Brawn and Sean Bratches were hired day 1 to lead the sporting and commercial sides of our business respectively.

Ross and Sean should have their key executives largely in place by the end of June, with supporting stuff in place by the end of the year.

We will remain lean and agile, however the prior organization was essentially finance and legal teams with no commercial or sporting organization.

We believe the addition of these organizations will significantly aid in growing and managing the business.

We expect to double our London-based team from about 75 to 150 individuals.

Support groups outside London, such as broadcast operations and freight will continue largely as they are.

On the commercial side of our business, we've engaged with the majority of our key existing promoters, sponsors and television partners about ways to expand our relationships.

We're discussing ways to make about events bigger, broader and more exciting; to provide sponsors a broader range of opportunities to engage and activate their relationships; and enable fans a broader ability to connect with Formula One across the full spectrum of video platforms available with on-screen innovations to create a much richer experience.

We've also been actively engaged with potential new promoters or sponsors and media partners.

We've been surprised with the breadth and depth of the excitement from potential new partners who seem truly energized by the changes in Formula One.

We've announced a few agreements, for example, next year we'll go to 21 races when we add Germany and France and drop Malaysia, and last week we announced a new television agreement with Canal+ in France.

There are also many important areas of growth and profits for us beyond the big 3 tent poles of TV, sponsors, and races.

These other areas include hospitality, merchandising, special events, gaming and specially produced content for third-party platforms.

We're particularly excited about the potential growth of an over-the-top subscription digital platform over the next few years for our most passionate fans.

We're also building tools that did not previously exist like research, databases, digital platforms and marketing capabilities to provide the necessary insights and information to grow and deepen our fan base around the world.

We unleashed our drivers, teams, promoters and more on social media, which resulted in 3- to 4- fold growth in areas like video engagement on social media.

On the motor side of our business, we've also begun to work with the FIA, our regulator, and the teams to take steps to ensure our competition on the track delivers the best fan experience possible.

We are addressing the engine, the cost, the rules and other key issues, all with the goal of making the sport the best it can be.

As part of the process, we're also revealing the broader race weekend in areas like support races to enhance and improve the experience for fans.

It's been a busy few months.

The majority of time has been spent engaging with the key partners of Formula One: the FIA teams, promoters, sponsors, broadcasters and, as much as possible, the fans.

We feel great about the excitement and support we've received.

Without question, Formula One is the pinnacle of global motor sports with a truly unique, enormous, global, passionate fan base.

In many ways, it is a sport just waiting to be taken to the next level.

We have a lot to do and we're off to a good start with 4 races under our belt, attendance up, and strong results in TV viewership and digital engagement.

We move into the European portion of our season in Barcelona this weekend, where we'll launch a few more things to engage fans.

It should be fun.

We hope you all tune in.

And with that I'll turn it back to Greg.

Thanks, Chase and Mark, and to the listening audience.

We appreciate your continued interest in Liberty Media and look forward to seeing you at -- many of you at the upcoming conferences.

With that, operator, I'd like to open it up for questions.

(Operator Instructions) Your first question comes from the line of Jeff Wlodarczak with Pivotal Research.

One for Greg and 1 for Chase.

Greg, I'd love to get your opinion on Charter's decision to sign that wireless deal with Comcast yesterday.

And as a part of that, do you think signing this deal opens up the possibility of working with Comcast more in the future?

And I know that you and John in the past have talked about creating a national business brand, maybe an alternative to Netflix.

And then I've got 1 for Chase.

Thanks, Jeff.

I think that Comcast and Charter working together is as natural as peanut butter and jelly.

It is absolutely the case that putting the 2 largest cable operators to attack consumer opportunities like wireless is going to create meaningful synergies, meaningful opportunities.

And I think you can rightly point out that if you have success in that area, it opens up other things like business services.

There are surely challenges around brand and around how you go at the -- attack the problem.

But with our combined footprints, we have an enormous amounts of scale, enormous amounts of strength and a marginal opportunity, meaning on the margin opportunity to leverage our networks in an interesting way.

So I'm very excited about that and I think it's very positive.

And you're right, it sets the tone for other potential combinations and other potential opportunities of working together.

Chase, I think the next 1 is for you.

Yes.

Chase, your predecessors made a number of changes to the cars in the season, increased speeds materially, made the cars more difficult to drive.

I mean, in some ways it's a lot more exciting but it was at the expense of more [dirty air] and limited passing.

Do you have an opinion yet on the importance of speed versus encouraging more passing in regards to improving the excitement of the sport?

And as part of that, are the -- I mean, you're obviously going to make more changes to the cars, Are the track owners amenable to also investing in track changes to improve the racing?

I mean, to some degree, a lot of what you're addressing there it's probably best poised to Ross Brawn.

I mean, I have views in the sport but the reason for having Ross here is to have somebody who really knows the sport much more intimately, honestly, than I do.

Yes, quite simplistically, I think action on the track is incredibly important.

So I think having the ability to pass is certainly something that we are looking to increase.

I think the speed -- I think actually having the drivers fight the car has gotten really positive responses.

But I think we want to sort of try and have all things.

We want to create that speed, we want to create that power, we want the drivers fighting the cars.

But we want as much as action as we can get on the track and we are certainly pursuing initiatives to try and enhance that activity and action on the track.

I think that -- I don't think that improving the tracks to make them more exciting for fans is really that significant an investment.

And I think the driver -- I think teams recognize the importance of making the sport the best it can be.

So I don't actually think cost is a significant deterrent to try and to pursue things to make sure we're doing everything we can to make the racing as exciting as possible.

Your next question comes from the line of Bryan Kraft with Deutsche Bank.

I think a couple on Formula One.

One, I was wondering if you could provide any color on the broadcast rights renewal with Vivendi Canal+ in France, as far as how much of an increase you secured there?

And how many years the deal is?

And also, just curious about how do you think we should think about the future of the sport in Asia.

If I understand it correctly, both the Malaysia and the Singapore race, I think, are going to away.

Is there a big push to replace those races with other more attractive locations in Asia?

And do you see that as the -- a big part of the growth opportunity in the sport?

I mean, first, we are actively engaged on renewing Singapore.

So we don't expect Singapore to go away.

We've got to reach -- we got to reach deal but we are actively engaged there and our goal is to continue the race in Singapore.

So, I guess, second question, first.

We have a lot of interest and -- beyond Singapore and Malaysia, really across the world, it's not just Asia.

We have a list of locations that want to add races.

And in many ways, we're trying to engage with as many of them as possible.

Valuating there in -- both in markets like Europe that are obviously much more historical markets as well as opportunities in the Americas and Asia.

We want to make sure we understand what each of those opportunities means to us as we go forward.

Although, in many ways priority 1 is to make sure we're doing everything we can to make the 21 races we'll have next year as successful as possible.

Asia is as like the Americas, they're important growth markets for us.

We've got -- I mean, Singapore race has been a very successful race for us.

The -- we started off in Asia this year and really had record -- had crowds that were up significantly in China and Australia.

So good crowds there.

I think we've got some momentum, but Asia clearly is a market in general that we expect to grow significantly over time as we go forward.

What was the first question?

It was on the renewal with Canal+ and if you could give us some sense of?

Yes, I don't think we get into specific -- I've given commenting on specific agreements with parties.

We feel good about the renewal, and we think it'll actually achieve a number of our goals, but it is -- that is goals, both reach and the growth we were looking to achieve on the revenue side.

But I don't think we'd get into specific comments on individual agreements.

But I -- can I echo?

Chase, I think that I totally agree, we don't want to disclose specific terms.

But I would say, in general, the strategy is not to do the longest deals, because we're very bullish on our ability to increase the excitement level, the fan interest and the broadcaster interest, therefore, in the sport.

So having actually shorter-term agreements with an opportunity to increase our relative position over the next few years is something that is a strategy.

Chase, I don't know if you want to add on that.

No.

I think that's completely accurate.

I don't -- I think it is a sport that we think has got a lot of potential.

We were just starting market it.

We're just starting to engage in fans in areas like digital platform.

So we think we can create some real momentum and energy over the next couple of years and really believe we'll be able to take advantage of that as we go forward with current renewals as well as the next round of renewals.

One quick follow-up on that.

Chase, you mentioned reach.

Is there going to be any change, not just through this deal but through few other renewals, in the mix of free-to-air versus pay?

Or are you pretty happy with how those games are being broadcast now?

I think we want to engage with everybody.

I mean it's going to vary market by market.

It's clearly not to be a one size fits all.

And digital is incredibly important, we were really a nonplayer in the digital platforms.

So whether it's free, pay or digital, we want to make sure we're engaging with them all.

And we're going to be much more analytical about trying to evaluate and the trade-off between reach and dollars.

I think in general, what has been true, you expect to gravitate towards the pay -- pay platform over time.

But we want to make sure we're maintaining the reach.

Obviously, digital will help maintain some of that reach to the degree we can find the right agreements to marry that with some free over the air.

That is something we'd clearly value.

But our goal is really going to be to engage the full spectrum of video platforms to find the right balance of reach and dollars.

Your next question comes from the line of Vijay Jayant with Evercore ISI.

For Chase again.

Given you see the whole spectrum of opportunity across the F1 portfolio, what is the low hanging fruit right now that you're sort of focused, the real monetization that was sort of completely forgotten or not really targeted?

And then, as you sort of develop your long-term business plan, in 3, 5 years from now, what do you think F1 is in terms of number of races, the opportunity on sponsorship?

I mean, sort of a open-ended question, but what are sort of building to, if you could help us think through the (inaudible)?

Yes.

I mean, I guess, first, just a mindset.

And in many ways, I think the sport has not been -- has been underserved by a perpetual very short-term focus.

So it really hasn't had a strategic plan in place or an attempt to invest to look where you could be.

And 1 of the things we've been very clear is, we care a lot more where we are going to be in 3 years than 3 month.

So that doesn't mean we're not doing things in the next 3 months, but sort of use when 2020 as a marker.

We think we can really take the business between now and 2020 to another level.

And I think that's priority 1, and obviously there'll be steps in every place as we go along.

Probably some of the lowest hanging fruit is probably an area like sponsorships, where really we've just taken sort of inbound calls.

We have a list of categories as long as your arm that we don't tell into.

I mean, some that is really actually quite surprising we are not in like technology and communications.

For a sport like ours, it's probably more identified with technology than any.

We have half of race sponsors, race title sponsorships that aren't sold.

So sponsorship is an area.

Now this year is pretty baked because we didn't really -- the transition didn't occur until less than 2 months before the season started.

But we'd expect to move pretty fast there, and there again is a lot of interest and lot of categories that we'd certainly move into.

TV, contracts don't all come up at once, but again, a little bit as Greg said, we will -- certainly some are coming up and I think we probably actually believe we got a couple of bites at this just as we continue to market the sport and create more excitement and action around it.

And there -- and then there -- it really is a list of opportunities that aren't sort of in those, what I call the big 3. Some will move fast, like hospitality.

I mean, we really today probably only achieve our goals in hospitality or take advantage of the opportunity in hospitality in really 2 or 3 of our events, gaming, betting, places we're not in, merchandising.

We still -- some merchandise like it's 15 years ago.

So there are a lot of areas that are important to us.

I think, I mentioned in the early comments, OTT.

That will probably take a little longer to develop, but I think a tremendously important area for us as we -- if you really think about the fans we have around the world, very well-educated fans, wealthy fans, in a sport that's so rich in data and information and some really great hard-core fans.

So creating a package, a subscription package for the strongest Formula One fans we think is a tremendously important opportunity.

There are geographies that -- they clearly are just upside to us, big countries like China and the U.S., we're really just scratching the surface in.

So connecting with those fans, including the digital.

Actually some of the digital connections already have indicated the opportunity that exists.

It'll take time, the U.S. and China aren't going to drive business in 1 year or 2, but I think we'll get visibility between now and sort of 2020 to really have a -- paint a better picture of that opportunity.

The race calendar, again, our probably first focus is making the 21 races we have as strong as they can be.

We've talked about them being bigger events and maximizing things like hospitality.

I mean, the high-end customer is clearly more and more important at these live events.

So we are focused on that.

We have not really targeted a number of races.

We know there is an opportunity to add them, but we want to engage more with teams before we get into the specifics, but been tremendously encouraged, I think as we said a couple of minutes ago, about the breadth of interest down from around the world of locations that want to host races.

So on the one hand, probably -- the area of our business it's probably a bit more mature today is the promoter side.

But the breadth of interest from players that from locations that know what it takes to host a Formula One race.

I mean, I can fill a page with a number of locations that have asked to meet and discuss the opportunity to host a Formula One race.

So it is -- I think it speaks well to our ability to continue to take advantage of the global appetite for this sport and the excitement for this event and as we make the event better and improve the sport on the track, we think all those things just add fuel to each of those initiatives.

Your next question comes from the line of Ben Swinburne with Morgan Stanley.

One for Chase and one for Greg.

Chase, one way to maybe help us think about the time line for revenue acceleration, particularly on the TV side, would be to talk through sort of how much of your television rights are up each year.

I don't know if you -- if there's any way you can help us think about that.

Or -- I know they are typically multiyear agreements.

But any help you might want to give us on sort of how those agreements are going to roll?

I think you've got NBC up at the end of this year, for example.

I think there's a Sky renewal in a couple of years.

But any rough guidance on thinking through the timing of that business coming up for renewal to think about the top line drivers would be helpful.

I think, I mean, in general, the TV agreements, I think, are sort of 3- to 5-year type agreements.

The -- and I think in the next few years, I think, probably I'd say in 2 to 3 years, we probably have well over half of the TV agreements coming into some form of renewal.

So clearly, it doesn't all happen.

It does happen over a multiyear period, though it's not -- particularly, they're 3- and 4-year contracts.

It's not that they're not that long.

And I think we probably have a fair bit bunched in the next few years.

And between now and by the time you get to 2 years from now, you probably have over half that -- maybe a bit over half that had been -- that will be renewed.

And when you're making these agreements like, for example, the Canal+ Sport 1, and you've got some coming up here this year, what are you doing with the OTT rights for the races?

I guess, when you think about an OTT opportunity...

We are -- so we're carving out the flexibility to the claim.

And clearly -- and some of the historic agreements, there'll be issues we have to navigate around.

It doesn't mean we can't go back and talk to somebody about ways to address it in the midst of an agreement.

But as we go forward, the agreements will be structured to much more contemplate the ability to make sure we can exploit all our rights.

And in many ways, we think it's good for our television partners.

It creates a level of excitement.

It creates a level of -- a variety of experiences for fans that we think are good.

But bottom line, we will -- we are, in the agreements we're doing, creating that flexibility.

And Greg, you've been quite clear over the last several months and quarters about your view on Pandora from a valuation perspective and sort of the back and forth with the company.

I was wondering if you could talk a little bit instead about what are the opportunities with Pandora and Sirius together from a synergy perspective.

I think there's a big question in the marketplace, even if something did happen, what they really could do, what is the opportunity for the 2 of them to do something, if there is one.

If you have any thoughts.

Well, I'm not sure I want to enunciate them all on this call or have them all lined up that way.

I guess our general view has been that there's an opportunity in the free space, that $17 billion terrestrial radio market, that is Pandora actually under-monetizes on its listening hours when you could make a good case that, with geotargeting and other opportunities it has from a technology side, it should be able to over-index.

It has a superior product to many of the other free services, and it could do more to attack that opportunity.

If you look, it's in the top 10 apps around.

It's under-monetized.

That's sort of the basic opportunity.

I don't think they've captured that opportunity or done as well as they could.

They are now are attacking the subscription side.

I think we've been pretty vocal, both we and Siri, about why that's a very tough space in terms of having a series of large-fang competitors with strategic interests so they don't need to monetize in the subscription space.

So I think the opportunity is largely what they can do in free.

That's where the greatest economic value is, and that's an opportunity that I don't think they've capitalized on.

Your next question comes from the line of Tom Eagan with Telsey Advisory Group.

Just a question on cable.

As you may have seen in the first quarter of '17, MVPD has lost upwards of 650,000 subs.

I think I was curious for your thoughts on the factors there.

How much of that was impacted by the addition of more live OTT services?

And then I have a follow-up.

Well, I -- this is Greg.

I think there's clearly demand for virtual MPVDs, both for mobility, portability, in some cases, for the kind of services they have for consumers who want different kinds of bundles, skinnier bundles in general.

And for -- in some cases, if you're a satellite operator and you can't afford, from a credit perspective, to truck roll, install a dish, et cetera, it offers an opportunity for you to sell something to the people so you have a customer relationship.

So I think some of that's natural.

It fits the diversity of the marketplace.

And in terms of Sirius, they inked the deal with Auto Labs.

I guess I was curious for your thoughts on what you like about that deal.

And there have been so few deals over the past couple of years.

So were there any deals that the company did not make that you think maybe they should have?

I'm not sure there's a host of things we should have bought.

There's a host of things we didn't buy and I'm pretty happy we didn't, mostly in around the streaming space.

That having been said, in the telematics area, we've done now 2 deals.

They're not exactly aligned, but they're both looking at that space.

Our judgment is, and Sirius' judgment, we're together on this, is that there's an enormous opportunity in the telematics space.

Cars are going to be transformed.

How your car communicates and how it's managed is going to be transformed.

Sirius has a great platform and a great role with many of the large OEMs and expanding that into incremental services where we can add value both for those OEMs and potentially for other kinds of businesses, is attractive and, candidly, a less competitive marketplace than a lot of the things that get all the noise around music, where the monetization is poor and the competitors are strong and find other ways to get paid.

So the telematic space is something where Sirius has done really good work.

Low monetization to date, but we think it's setting the stage for future growth.

Your next question comes from the line of Amy Yong with Macquarie.

So 2 questions.

So Greg, I think a lot of investors have been concerned about the growth at SiriusXM.

You're obviously very happy owners.

What excites you?

And what do you think people are missing?

And then for LSXMA, why do you think investors are not giving you the full credit for the NAV?

And I guess following up on the Pandora question.

I know it's a sore topic, but with KKR's involvement and the 30-day window, do you think that this opens an opportunity that wasn't necessarily there?

So on -- first, on SXM, the -- Sirius continues to grow.

We hear a lot of noise about the destruction in the terminal value and all this.

The business continues to grow with secured new OEM relationships, extended OEM relationships, longer and deeper with virtually every car company.

We've got obviously the opportunity in the used car market, which is not nearly penetrated.

So we're quite bullish about future sub growth for many years to come.

It's a massive cash flow free generator -- free cash flow generator, rather.

It has a leveraged business model, unlike the subscription businesses, for example, in video and in music subscriptions, where each incremental sub gains no leverage.

Because of the nature of the content deals we have, we gain leverage on incremental subs, which is why you've seen the rising EBITDA and free cash flow margins in Siri that we expect to continue in the years going forward.

So there are a host of things to be bullish about.

We've dramatically reduced the share count, utilizing that free cash flow.

What's not to like?

Leverage -- growing leverage, free cash flow, share reduction model, our kind of business.

On the discount to LSXMA, we've talked about this a lot in the past.

Discounts exist until we do something to clean them up.

You saw us do that at Ventures.

I suspect, someday, we'll do something to clean it up at LSXMA.

And as far as an opportunity created by the KKR investment, I think you have to ask the Pandora board why they did it all.

My guess is they needed cash, and that's why they put together that pipe.

And so I'm not sure if it creates an opportunity or not.

It speaks to the cash needs of their business.

Your next question comes from the line of John Tinker with Gabelli.

Just following up on your comment on Liberty Ventures and how you neatly tied that up with General Communication.

Does that structure perhaps work with Liberty Media as you look at the 3 separate tracking stocks?

And in particular, you sort of have Live, which you highlighted is doing well, sort of hanging in Formula One, where perhaps it's not best served.

Yes.

I'm not sure that -- thanks, John.

I'm not sure that what we did at GCI fits perfectly with the same model, but we'll try and put our clever team to work on something that does with -- the hammer which fits this nail.

I think you rightly know Live is doing very well, and Live has synergies potentially with multiples of our business.

It has the synergies around Formula One potentially on the events side, but it also has synergies around -- potentially with SiriusXM around some of the music content.

So it's a high-quality problem that there may be synergies with 2 parts of the business.

If I could just ask a different question on Liberty Braves.

Did I see correctly that you actually received some cash from the proceeds of selling BAMTech?

Can you just talk a little about how we should look at your relationship with MLB, which could actually be really quite a valuable part of the team?

Yes.

I don't think we've disclosed or are allowed to disclose the amounts that were distributed by MLB for any BAMTech sale or BAMTech investment.

The -- look, there is a lot of value being created at the MLB level.

We understand the value that being the owner of a sport can create à la Formula One.

But effectively, there are 30 owners of the MLB brand, and we're a 1/30 owner through the team.

And there is a lot of value being created by the good work that Bob Bowman has done around BAM, both BAM itself and BAMTech, and BAMTech was just monetized, but all sorts of other things that are being done at the -- by Rob Manfred at the MLB level.

So I think there is value there.

How much and what time frame it gets distributed or how it's monetized, I think, are very unclear.

But there are long -- it's a long-term asset that we're a partial owner of.

Your next question comes from the line of Brandon Ross with BTIG.

A couple of follow-ups on some prior questions.

First, on Charter's wireless initiative with Comcast.

How do you like working together with Comcast, like you are on wireless, versus taking your shot at a merger while we have a Republican president now?

And then a follow-up on Pandora.

There was a $100 million left on the pipe for strategics.

Would you guys consider investing in that?

And then, one more question.

Amazon has been making a lot of noise in the music space between Echo with streaming service and its expansion into the concert business and ticketing.

How do you think about Amazon's competitive threat to both Live Nation and Sirius or conversely, the opportunities created by Amazon's focus on the space?

Well, that's a lot of questions, Brandon.

I'll try and see if I can remember them all.

Starting with Amazon.

Sorry.

That's okay.

Amazon is a ridiculously scary company, a company which has an ability, because of its scale, to invest at incredibly low or potentially negative rates of return because they can cross-subsidize and the market is willing to suspend disbelief and current profitability for future profitability and it's effectively dominated or controlled by a very smart, aggressive, long-term thinking CEO, founder in Jeff.

That's a scary formidable combination, and so we're certainly cognizant.

We've been in the e-commerce space and seen what they've able to do in that space.

We -- I think we have commented for a long time about the power that they have in music, just like others -- like Apple have in the space that make the music streaming space very scary.

So to think about them in ticketing is certainly something that needs to be watched.

That having said, both Live and Sirius have differentiating factors that we think make them competitively very strong, Live through both its promotion relationships, venue relationships, management relationships, all of the power it has that are differentiated and are a true moat around its business; and Sirius through its ease of use in the car, its position with OEMs, the exclusive content we have, the brand we have.

All of those have built a moat around its business.

Are all moats impenetrable?

Well, we'll see, but I think we have strong positions that are differentiated from what Amazon is trying to achieve.

That having been said, I'll reiterate my first comments.

Amazon is a ridiculously scary company.

On Pandora, nobody has offered us any investment opportunity.

We look at lots of investment opportunities when presented.

And if somebody presented it, we may look at that, too.

On the first question of Charter, Comcast merger, I'd go the same way.

I don't believe anyone's proposed that.

I'm not sure, even in the best of circumstances, you could imagine that being achieved.

But I think our chairman has imagined and used what would be very powerful synergies.

That's why he's the chairman.

The -- I'm not sure that gets through regulators, but again, I'm also not the regulatory lawyer.

There are a ton of things -- as I said earlier on the call to Jeff's question, there are a ton of ways in which cooperating, working together with Comcast make unbelievably good business sense and unbelievably good consumer sense, offerings that we can offer on a national basis or near-national basis for consumers.

And so I think exploring those in wireless and other areas, whether it be business services, home monitoring, all sorts of things that we should be doing together, and Liberty is a huge believer in that opportunity and has been the big encourager, as much as we can be, with both Charter and Comcast.

Your next question comes from the line of Barton Crockett with FBR Capital.

So I was intrigued a little bit about the discussion about TV renewal cycle at Formula One.

And I wanted to ask one kind of question related to that, but also a little bit bigger picture for really the pay TV ecosystem and that is this.

As you're going through the cycle of negotiating those deals, to what extent do you think it's reasonable to see an Internet player, like a Facebook, being the lead video offering in particular markets for something like a Formula One?

And then more generally, as we've seen some of these Internet guys start to step up and play around sports, over time, how much of a threat do you think that is for the TV ecosystem economics in the U.S. and globally?

It sounds like...

The Internet guys...

Chase, why don't you kick off?

Yes.

So I mean, there's no question the Internet guys are becoming more active.

I think it's probably not quite as clear how big is their appetite yet.

But certainly, the engagements are more serious than they've been.

In the very short term, it's tough to -- you don't want to rule anything out.

Tough to imagine them being the lead player in the short term.

But look, we'll engage with everybody.

I mean, they're new competitors.

So from my perspective, their interest is all good.

I mean, what you've got now is more players, more ways to package the content, in some ways, more opportunities to create content packages for different players.

And I think they'll -- I think they're only going one way.

I mean, they have -- I mean, Greg called Amazon scary, and they're not the only ones in that space that have enormous resources.

And I think these guys recognize video as the sweet spot.

They're all talking about getting into more long-form content, including sports content.

We actually have a lot of engagement from them on created content, scripted reality shows.

So they are, in the short term, becoming much more aggressive, much more engaged on all sorts of opportunities to create content, and I think that will just be a bigger part of our -- there's no question, they'll be a bigger part of our world as we go forward.

I guess, I think Chase has covered it.

Your next question comes from the line of Matthew Harrigan with Wunderlich.

Steve Palmer and some other people are really talking up integration of data into the live broadcast.

You watch a basketball game and you could see the stats on the jersey.

In a baseball game, I guess, a feel for the degree of difficulty of a fielding play, something like that.

And clearly, a lot of sports betting implications, to say the least.

Can you talk about that from the frame of the Braves and from Formula One?

And then with Formula One, you got a lot of guys with Intel -- like Intel and Qualcomm, are very big data-oriented, the teams like Mercedes, and that just seems like something that's never one of those -- (inaudible) alluded to briefly, another kind of really good latent opportunity for Formula One for the hardcore fans.

Well, Matthew, I think there is obviously an opportunity to integrate information with the linear video stream.

The reality is that, that is easier on digital platforms other than television, and it's one of the reasons why OTT offerings are attractive, particularly in a data-rich environment like baseball or a data-rich environment like Formula One.

So it really adds on the answer that Chase said a minute ago.

These digital platforms are going to grow.

They're going to fill in interesting opportunities for us in markets, and you will be inter-splicing those, I suspect, with traditional broadcast partners.

Yes.

And the only thing I'd add to it for us on Formula One is it's really fertile ground for us, I think, in many ways.

Our video content, I think, is professionally done, but hasn't really taken advantage of the opportunities to make it richer, but -- and -- whether it's a 2-screen or engagement in digital or realistically even on just traditional video screens, to make it a better experience for consumers.

We do a good professional job, but we haven't -- and it's such a rich sport in terms of data, and we haven't really taken advantage of the opportunities that exist for us.

And it marries to, again, a fan base that is incredibly passionate about the sport.

Your final question comes from the line of Jason Bazinet with Citi.

I just had a question for Mr. Carey.

As it relational to the OTT opportunity, I can imagine investors trying to look for analogues in the marketplace to try and size what it could be worth.

And the one that comes to mind is what WWE has done as a sport with a global brand.

Can you just compare and contrast sort of the opportunity that you see for Formula One in OTT vis-à-vis what WWE has done so far?

Yes.

I mean, I don't think WWE, I would carry the comparison too far or make it the only comparison.

I mean, in some ways, you look at what leagues like the NFL and the NBA have done outside the U.S. with their digital pass, whether it's Sunday Ticket or League Pass.

That -- and if you talk to them, they've become incredibly big part of their story and growing into new markets.

So I think there are actually many, many ways to look at this, and I do think we're different than the other sports in that we are such -- we're truly a global sport.

I mean, others distribute their content around, but we really do have a global fan base.

It's early days.

I mean, we're -- I think we are very much sort of evaluating what's the right content.

And that clearly, as Greg said, it's a much -- it is data rich, but it's video rich, too.

To what degree do you consider expanding it beyond sort of the core sport?

We are looking to develop sort of more of a feeder series, Formula 3, Formula 2, Formula One opportunity.

Obviously, at our track -- if you go to our events, we have races beyond the open-wheel, open-seat and open-cockpit race.

So there are opportunities to add even more content, make it a home.

We are the pinnacle of motor sports.

So to what degree -- how do you want to -- what do you want to let fans connect with through an over-the-top platform?

This early on, all we're doing is value.

Realistically, we're sort of dealing, at this point, with a whiteboard with 100 ideas on it, and we're getting the research.

We didn't really -- didn't have any research before.

So we're getting the tools we need to figure out what connects and what's the right sort of content experience and data experience you want on that.

So it's too early for me to sort of take -- sort of really define that package.

But I think it's something we hope, this year, to get a good handle on sort of what are the key elements of it, but it's very much a work in progress.

But it's an important work in progress because, again, as, I guess, I've said a couple of times, we think there is a sizable fan base that's passionate enough that really would relish that really high-quality, in-depth unique look at Formula 1 and related things.

I think that's enough for this morning.

Thank you to our listening audience, and as I said, we look forward to seeing you at upcoming conferences or maybe even races or baseball games.

Have a great day.

Thank you, operator.

Thanks a lot, guys.

Ladies and gentlemen, that does conclude the conference call for today.

We thank you for your participation and ask that you please disconnect your lines.