Thursday, January 7, 2016

Liberty-company related notes: CEO Greg Maffei on SiriusXM (SIRI), Liberty Media (LMCA), Liberty Ventures (LVTNA) at Citi Conf. (01/06/2016)

Liberty-company related notes: SiriusXM (SIRI),  Liberty Media (LMCA), Liberty Ventures (LVTNA), Charter Communications (CHTR)
Citi Global Internet, Media and Telecommunication Conference
January 6, 2016

Liberty Media (LMCA)
Speaker: Greg Maffei (CEO)

Goals for 2016:
  • Close CHTR merger with TWC/BHN
  • Complete the transactions announced at Investor Day
  • Narrow the discount at Liberty Media (LMCA)

 Businesses tied to economy?
  • Most seemingly less tied to pure GDP growth
  • High-yield markets impact somewhat because of financing
  • Debt markets can create opportunities, look at CHTR low financings
  • Most of big assets we have are U.S. – focused
  • TripAdvisor, QVC has some big foreign currency risk elements
  • Zulily and CHTR – currency less a factor
  • Liberty businesses are mostly dominated by the microeconomic environment
  • We spend a lot of time thinking about the impact of digital and mobile

 Charter (CHTR):
  • When we originally invested we thought it was not as fully valued as we thought
  • Thought cable was well-positioned, CHTR in particular
  • Today, think radio has probably been discounted
  • Problem is they all have screwed up capital structures and there’s no way to invest in some

 Linear video marketplace – market is bearish – is this rational?
  • Most of the time these cash flows last longer than people think – been our experience, see DirecTV (DTV)
  • Is there great growth prospects – less clear on this.

 Liberty Media (LMCA)
  • 3 trackers – SiriusXM + Braves (and real estate) + remaining assets inside LMCA
  • Trackers will trade probably in second quarter, early second Qtr

 Atlanta Braves:
  • Thought the presence of the stadium create unique opportunity for real estate to generate attractive RoR
  • Tenants have signed up, hotel, major office complex, number of retailers
  • New field will cost $650 - $670m, we are paying about $220m
  • Mixed-use facility - $550m in cost and paying 80% preleverage
  • Hope to see revenues and CF for Braves
  • Think investors will value the Braves in two ways – Braves team value + mixed-use real estate
  • S-4 – team generates about $250m revenues and very little net income
  • Revenues from Braves come from rights fees (TV is majority, less so radio), ticket sales and sponsorships
  • Redid the TV deal 14-15 months ago, has a series of escalating rate, real kicker is in 2027
  • In 2027 rates will likely be well below market, we inherited this contract when purchased Braves from Time Warner; in addition, we will own more of the parking and ancillary revenue streams, the SunTrust, etc.
  • Been many transactions lately where teams sold at valuations as multiples of revenues – look at the CF for the Braves, add it big bump in 2027
  • Teams have expanded dramatically in price -  look at the Dodgers (note: sold for $2.15 billion in 2012-- Link)
  • If someone wanted to buy the Braves, for tax reasons, unlikely to sell for cash

 Liberty Media (LMCA) – tracker
  • 34% stake in Live Nation (LYV) + 20% Braves asset + venture portfolio assets like Tastemade, etc.
  • Put the 20% Braves assets to have a potential source of funding, to raise capital, can sell that stock on a tax-free basis
  • We like writing big checks, and having more capital is good (look at CHTR)
  • Not that many people that can write a $3b  - $5b check into a non-control situation. Warren Buffett can do it, but he doesn’t play much in TMT.
  • Would want to inject a lot of capital if there’s another downturn, that’s the kind of deal we like to do

 Live Nation (LYV)
  • 34.4% stake in LYV
  • Very strong management team, built a true leadership position in the promotion business
  • Opportunities to, on the biggest global tours, to fill their portfolio where we may own the global tour, but we still need to outsource portions of it
  • Continue to  buy either new promoters or buy new companies – concert co’s to help us in different markets
  • Bought a bunch of festivals last few years
  • Opportunities to use that scale and grow over time and increase stake in secondary market
  • Bunch of ancillary benefits that come from e-commerce and sponsorship
  • Goals: consolidate global concerts and festivals, consolidate global ticketing, organic growth in secondary ticketing and sponsorship, emerging content offers like Vice, Yahoo
  • Strength in global concert promotion is what enables us to have strength in ticketing
  • Key to other components is that LYV has strength in concerts
  • Don’t think the 2016 concert slate will be a disaster, but we have a long-term view
  • Added to LYV at price we thought was attractive at the time
  • Relationship with Vivendi is complicated; keep in mind we have a $1.1 billion judgment against them

 Other Notes:
  • Continue to look to aim towards tax-efficiency I non-core assets like Viacom
  • We don’t like to pay taxes
  • If we saw an opportunity to utilize some cash in a better fashion, we might choke and generate cash and just pay the taxes
  • Think there are synergies between LYV and SIRI, but the rate probably won’t make me happy
  • Disruption of Expedia by Airbnb? Question is has Airbnb generated incremental demand – probably. But it’s some sort of substitution. Probably have some demand shifted to Airbnb, no doubt.
  • Hearing on Vivendi litigation – March 2016
  • We want to build some liquidity to write big checks
  • Businesses that we like, probably won’t change: subscription, free cash flow oriented businesses, try to stay away from ad-based businesses due to comfort
  • LYV is not a subscription business but there were other reasons we liked it

  • Tried to combine tracker and a company before and didn’t work, maybe will in the future
  • Ultimately, longer-term perspective is that it’s likely Sirius ends up being 100% controlled by Liberty; we are at 61% or so now
  • The connected car is actually a positive for SiriusXM, not a negative like the market thinks
  • Advantage could be the use of satellite, but could get reduced when cars get connected
  • Other advantages: content, exclusivity, differentiation, etc.
  • Also could be a hedge where is cars are connected and we don’t need the spectrum, could monetize it – so it’s a hedge on value
  • SIRI bought back about $2b in stock last year; had FCF for only about 60% of that, had to borrow remaining 40%
  • Leverage at <4.0x, looking to move it up slowly

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