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Edited Transcript of FWONA earnings conference call or presentation 28-Feb-19 3:00pm GMT

Q4 2018 Liberty Media Corp and Liberty Tripadvisor Holdings Inc Earnings Call

ENGLEWOOD Mar 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Liberty Media Corp earnings conference call or presentation Thursday, February 28, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Brian J. Wendling

Liberty TripAdvisor Holdings, Inc. - Senior VP & CFO

* Charles Carey

Formula One Group - CEO

* Courtnee Alice Chun

Liberty Media Corporation - IR

* Gregory B. Maffei

Liberty Media Corporation - Director, President & CEO

* Mark David Carleton

Liberty Media Corporation - CFO

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Conference Call Participants

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* Amy Yong

Macquarie Research - Analyst

* Benjamin Daniel Swinburne

Morgan Stanley, Research Division - MD

* Bryan D. Kraft

Deutsche Bank AG, Research Division - Senior Analyst

* David Karnovsky

JP Morgan Chase & Co, Research Division - Analyst

* James Maxwell Ratcliffe

Evercore ISI Institutional Equities, Research Division - MD & Senior Analyst

* Jason B Bazinet

Citigroup Inc, Research Division - MD and U.S. Cable and Satellite Analyst

* Jeffrey Duncan Wlodarczak

Pivotal Research Group LLC - Principal and Entertainment &Interactive Subscription Services Analyst

* John Philip Tinker

G. Research, LLC - Senior Research Analyst

* Barton Crockett

DCFStocks LLC - Analyst

* Vijay A. Jayant

Evercore ISI Institutional Equities, Research Division - Senior MD and Head of Media, Entertainment, Cable, Satellite & Telecommunication

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. Welcome to the Liberty Media Corporation 2018 Q4 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded, February 28.

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

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Courtnee Alice Chun, Liberty Media Corporation - IR [2]

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Thank you. Before we begin, we would like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent Form 10-K and 10-Q filed with the SEC. 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. The required definitions and reconciliations, Schedules 1 and 2 can be found on the end of the earnings press release issued today, which is available on our website.

This call also includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding Liberty TripAdvisor Holdings. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent Form 10-K and 10-Q filed with the SEC. These forward-looking statements speak only as of the date of this call, and Liberty TripAdvisor Holdings expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty TripAdvisor Holdings' 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.

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [3]

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Thank you, Courtnee. Good morning. Today, speaking on the call besides myself, we'll have Liberty's CFO, Mark Carleton; and Formula One's Chairman and CEO, Chase Carey. During the Q&A, we'll also be available to answer questions related to Liberty TripAdvisor.

So starting with Liberty SiriusXM. During the quarter, we continued our repurchases of Liberty SiriusXM stock, and from the period November 1 through January 31, we bought additional $159 million worth. When you look through the discount, we effectively bought SiriusXM stock at a price of $4.09. Consider that pretty attractive. I would note that the discount to NAV between Liberty SiriusXM and SiriusXM, the underlying stock has tightened a few points but remains stubbornly high. We will continue to take advantage of it. Pro forma for the Pandora transaction and Sirius' actions, our ownership of SiriusXM stands at about 67%.

Just a moment on iHeartCommunications, the bankruptcy plan is -- has been confirmed by the courts and we expect it will emerge in the second quarter. Once that happens, Liberty is expected to own just under 5% of the iHeartRADIO equity, about $284 million of iHeartRADIO debt, which is designed to trade at the face. And just a little less, Clear Channel Outdoor equity as there's already a public stub in the Clear Channel Outdoor equity, so that much dilution.

Looking at the underlying SiriusXM's operating results, it had strong full year results. Record revenue of $5.8 billion, adjusted EBITDA up 6% to $2.2 billion despite a number of catch-up payments for content and other issues, and we completed the Pandora transaction on February 1.

Turning to Formula One Group. We continued to make great progress in 2018 with fans and other constituents. 490 million unique visitors saw the product across all forms of Formula One programming. We had 4.1 million total spectators at races physically, and we are the fastest-growing major sports brand on social media for the second consecutive year. Note, as we've mentioned several times, this business is hard to compare on a quarterly basis. In the fourth quarter of 2018, we had 5 races versus 6 races in the similar period in 2017. We are very excited to the start of the 2019 season in Melbourne on March 17.

Turning, for a moment, on Live Nation, we're going to not talk about it yet on this call because they report later today so I encourage you to listen to that call.

Looking at the Braves. We had continued financial strength in our second season at SunTrust Park in the Battery Atlanta. I would note that 2018 included several big positives that benefited our results on the baseball side. That includes a very favorable home-game schedule with attractive teams scheduled and in Atlanta, a competitive team with meaningful games into the last month of the season, nongame day special events in the ballparks that trended up, including concerts. And importantly, winning the NL East, great team performance brought us post-season revenue, which we certainly hope will continue in 2019 but we don't necessarily budget for it.

Battery Atlanta is close to full occupancy and driving very solid returns. Looking at the performance ahead, we're super excited with the signing of Josh Donaldson along with the return of Brian McCann to the Braves. And looking -- we are very much looking forward to the start of the season on March 28. We want our team to win the World Series and believe our team has the potential and is on the right path to do so. The management team has our full backing to do what they believe is right to win.

Over at Liberty TripAdvisor, I'd note we finished a strong 2018 with great results in the fourth quarter. We achieved strong net income and adjusted EBITDA growth. We continued our focus on hotel marketing efficiency, which drove a 700 basis point expansion in the hotel segment in the adjusted EBITDA margin. We grew revenue and experiences at restaurants by 40% and remain very excited about this market opportunity. We are projecting double-digit consolidated adjusted EBITDA growth for 2019.

With that quick set of comments, I'll turn it over to Mark for more on our financial results.

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Mark David Carleton, Liberty Media Corporation - CFO [4]

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Thank you, Greg. At quarter-end Liberty SiriusXM Group had attributed cash and liquid investments of $37 million, excluding $54 million of cash held directly at SiriusXM. The value of the SiriusXM common stock held at Liberty SiriusXM as of February 27 was $19 billion, and we have $1 billion of debt against these holdings as of year-end. Total Liberty SiriusXM Group attributed principal amount of debt was $7.9 billion, which includes $6.9 billion of debt at SiriusXM.

Formula One Group had attributed cash and liquid investments of $130 million, excluding $30 million of cash at F1. Formula One Group has attributed public market securities with a market value of approximately $4.4 billion as of February 27, including the intergroup interest in the Braves Group and our stake in Live Nation, with $2 billion of attributed debt, excluding the debt at F1.

Total Formula One Group attributed principal amount of debt was $5 billion, which includes $2.9 billion of debt at F1. F1's total net debt to covenant OIBDA ratio, as defined in F1's credit facilities, was approximately 7.35x as of December 31 as compared to a maximum allowable leverage ratio of 8.7x. And again, as Greg pointed out, with the race calendar income from 21 races was captured in the trailing 12 months ended December 31, 2018, versus 22 races for the period ended September 30, 2018, and the leverage ratio increased accordingly.

We've set a target total net leverage ratio for Formula One of 5 to 6x bank covenant OIBDA. Please note these leverage ratios are for the Formula One business, not the Formula One Group. At the Braves Group, we had attributed cash and liquid investments of $107 million and attributed principal amount of debt of $494 million.

And now I'll turn it over to Chase Carey to discuss Formula One.

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Charles Carey, Formula One Group - CEO [5]

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Thanks, Mark. I'll briefly discuss our results in 2018 and then focus on our plans for 2019 and beyond. As we've mentioned numerous times, we look at this business on an annual basis, and for the full year, revenue was up 2%. Our primary revenue streams were essentially flat for the year. There were a number of one-off items that impacted these results. In particular, we had 2 rights holders experience financial issues and there were also changes in the race calendar. We also had 1 contract amendment that provided for an increase in promotion revenue, which was fully offset by a reduction in advertising and sponsorship revenue related to a particular event. Overall, this amendment was neutral to primary revenue.

And looking at adjusted OIBDA, we knew that 2018 would be a year of investment. However, we now have the right organizational structure in place and expect that the majority of future invest will be revenue generating.

Now on to the fan. Over 4 million fans attended the 21 Grands Prix in 2018, an average of 195,000 spectators for each weekend with race days averaging over 80,000. To put this into context, 70,000 fans were in attendance at the Super Bowl in Atlanta. Not to be outdone, viewers at home also increased engagement with unique global viewers up 10% to 490.2 million. Note that we changed our viewership methodology to align with industry standard, which measures 3 consecutive minutes of viewing. The viewership stats were provided for the 2018 season reflect this new methodology, including restating 2017 results for an apples-to-apples comparison. And for the second year in a row, we were the fastest-growing major sport on social media platforms. We're pleased with this heightened engagement across all platforms.

Now onto 2019. The teams are about to finish testing at Barcelona and this month was filled with exciting reveals and new cars and referees. Driver lineups have changed significantly, which should make for exciting drama on and off the track. The first winter testing session, together with the daily review show, was available on F1 TV, along with the second testing session.

Additionally, the first-ever documentary produced by Formula One entitled Michael Schumacher, The Making of a Legend, is available exclusively to all F1 TV subscribers. Further, on the content front, our Netflix show entitled Formula 1: Drive to Survive, will air on March 8. Be sure to check out the trailer which is online now.

With respect to our F1 TV over the top platform, 2019 will, in many ways, be the true commercial launch of the product. After using 2018 as our beta test, we've strengthened the platform and we'll have a more fulsome marketing launch as we kick off the F1 season next month. F1 TV is a long-term strategic priority. We will continue to evolve the platform, enhance the content and build on distribution opportunities in the coming years.

On the distribution front, we most recently signed agreements in the Netherlands and Germany, both markets in which F1 TV is available. 2019 marks the start of our new deal with Sky UK, the leading subscription sports channel in the U.K.

Highlights from Saturday and Sunday race weekends, along with the Silverstone Grand Prix, will be shown on Channel 4 in the U.K.

Over the past 2 years, we've signed distribution deals in many of our largest markets and global coverage is largely set for 2019. The race calendar in 2019 matches that of 2018 in number and location of races. Though there still will be quarterly variations in the race count. As already announced, Vietnam will join the calendar in 2020, and we're in discussions with numerous other locations that both answer demand in certain markets while attracting new fans and sponsors.

Again, this January, we brought all the promoters to London to meet and share best practices. We continue to believe this is a group that can work collaboratively for the betterment of the brand and fan experience. We plan to hold 4 fan festivals this year, the first of which will be in Shanghai which coincides with Formula One's 1,000th race. We will celebrate this milestone in many ways, so stay tuned.

We also plan to hold fan festivals in Chicago, Los Angeles and Brazil. We're excited that we exposed other audiences in the U.S. to Formula One after a very successful fan festival in Miami last October, that drew 80,000 spectators. In Australia, we will host our first-ever launch event on March 13 in Melbourne to include all 20 drivers and 10 principals. Our global partners, Rolex, Emirates, Heineken, DHL and Pirelli, are all supporting the event through a variety of activities. In further partnership with our sponsors, we will also host special events around races with both AWS and MIT, which will draw in a diverse audience and expose them to the many facets of Formula One.

We were also pleased to extend our partnership with Pirelli as the sole global tire partner through 2023 at the end of last year and signed a 5-year agreement with Cyber 1 earlier this year as the official cybersecurity provider for Formula One.

We continue to focus on the product, which is the race and making it the greatest racing spectacle on the planet. As mentioned earlier, the 2019 season will bring in new drivers, new pairs to the teams and many seasoned veterans. 3 drivers were pulled up from Formula 2, Alexander Albon, Lando Norris and George Russell, which proves this is a fertile-testing bed for Formula One drivers. And we're excited for the 2019 F2 driver -- Formula 2 driver slate, which includes drivers from China, the U.S., Brazil and from Germany, Mick Schumacher.

As it relates to the race, we're focused on technology and regulations that will improve competition. This includes reducing loss of performance when cars are in close proximity, designing circuits with more opportunities for overtaking and reviewing how penalties are enforced.

We continue to have discussions to make progress with the teams on a new Concorde Agreement that addresses cost structures, revenue distribution, regulations and governance. Recall, this new agreement will impact the 2021 season and beyond and we are in constructive discussions with all 10 teams to finalize the details and improve the sustainability of the model. We understand that public markets would like to have all the terms as soon as possible. We're going to take the time necessary and make sure that we get this right or are in alignment with our partners.

When Liberty bought Formula One a little over 2 years ago, we knew that Formula One was a fundamentally strong product and brand, but we knew there would be hard work ahead to turn this into an efficient business. We now feel we have the right organizational structure and have fortified the core business and can now focus on how we amplify our strengths.

For 2019, the drivers of revenue are clear, cost growth will abate, and we expect leverage to decline significantly. We remain firm in our commitment to growing this business and creating value for the long term for the teams, our partners, Formula One and our shareholders.

Now I'll turn the call back over to Greg.

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [6]

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Thank you, Chase, and thank you, Mark. I'd like to finish by reiterating the point that Chase just made. We are very pleased with the progress that Formula One has made over the last 2 years. We are confident that tremendous potential still exists. We realize the hard work and dedication that Chase and his team have put into building up this organization and look forward to seeing the payoff soon. We are committed to the F1 business. In other news, we have scheduled our annual investor meeting in New York for Thursday, November 21, so please mark the date. Finishing, we continue -- we appreciate your continued interest in Liberty Media.

And with that, I'd like to open it up for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will now take our first question from Vijay Jayant of Evercore.

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Vijay A. Jayant, Evercore ISI Institutional Equities, Research Division - Senior MD and Head of Media, Entertainment, Cable, Satellite & Telecommunication [2]

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Chase, just some clarification. Obviously, there's some dollars moving from out of sponsorship to race promotion. If that didn't happen, what was, sort of, the growth in sponsorship? Obviously, we're expecting that to continue to improve in '19. And then on the price front, as percentage of revenue that seem it improved -- increased by about 200 basis points to 69.5% in 2018 from 2017. Obviously, we thought it was more, sort of, fixed in some ways. I'm assuming there's some bonus payments and the like. If you could help us understand that.

And if I could, one final one is on what I understand is the FIA International Sporting Codes' mandate, the major technical and sporting regulations to be determined as part of the Concorde Agreement by the middle of this year. So how -- if that is the case, do we expect to get all the commercial and the budget caps and all the other things you're working on also come together at that time?

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Charles Carey, Formula One Group - CEO [3]

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So I guess on the first one as it relates to promotion and sponsorship, yes, I think probably, the impact of what was moved around and again, I think I've said on the call, it was in aggregate, sort of, net neutral and it took down a bit sponsorship revenue and increase the promotion and decrease the sponsorship revenue. So without that, the sponsorship revenue would've been certainly a few percentage points higher than it was otherwise.

And again, it's not uncommon in our agreements where we have sponsorship components, we have hospitality components, we have fee components, so quite frequently, we are working with sponsors to figure out how do we optimize for both of us the revenue opportunities, but we're pretty revenue-neutral on it in aggregate across those.

On the prize fund, it's not a bonus. The primary effect in 2018 was really how the specifics of the prize fund computation, [dealers] and things like withholding taxes, so we had a long-term dispute with the country that actually benefited us but we account for it in 1 way. But it flows through the prize fund, so it actually doesn't flow through our operating profit to us, we get the cash benefit of it but because it gets computed into -- because it gets factored into the prize fund computation, the prize fund reflects the benefit of that.

So it's a difference between how that which was essentially the resolution in our favor of a past withholding tax issue went up in a country and how that flows differently through our P&L than through the team's P&L, through the team prize fund and that was the primary thing. They took it out of -- made the prize fund higher than it would otherwise be on a pro rata basis against the profit.

And there are, sort of, structures that lead us to want to have things in place by June. I'm not going to put in place, I'm not going to elaborate on specific deadlines for the discussions with the teams. They're active. I mean, I had a number of meetings this week with teams. So they are quite active. We are trying to -- as I said in the opening comments, we want to resolve these things, they are for 2021.

So clearly, you don't -- there is still time there. But I think all of us would like to have a clear visibility to the future. So we are looking to conclude those as quickly as we can but it is true that certainly, there are components of it that we would look to have in place by June, although we certainly expect to advance things before then.

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Operator [4]

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We will now take our next question from Amy Yong of Macquarie.

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Amy Yong, Macquarie Research - Analyst [5]

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I guess now that you've closed -- or SiriusXM has closed on Pandora, can you talk about some of the cross-collaborative efforts between SiriusXM and Live Nation? And do you think it makes sense to combine these? And I guess lastly, how do you think of LSXMA as an acquisition currency?

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [6]

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I'll -- Amy, I'll take the latter first. I think it's a very poor acquisition currency, given that it trades at a discount to the underlying source of 99.999% of its value or 90 -- I guess, not quite that high, 97% of its value, something like that. So it would be a very set -- unusual set of circumstances which would cause us to use LSXMA as a acquisition currency.

On the Sirius and Pandora combinations -- combination and the opportunities, I think they're in a host of areas. The opportunity to cross-promote, the offer to have a good-better-best strategy, the opportunity to use Pandora's strength in digital advertising to enhance the offerings of Sirius' on the advertising side, the opportunity to move subscribers from 1 set whether it be in the home or in the car or elsewhere on mobile to another, the opportunity to share content, in part or in whole, is a teaser or a more completely, the opportunity to have rationalization on the cost side in several areas, in digital in particular but just in general in G&A, there are places.

So I think they are a range of them and frankly, we are only getting a handle on those. Jim Meyer has been spending and Dave Frear has been spending a lot of time in Oakland. The whole senior management team had an off-site yesterday at SiriusXM and topic one is all the things that can be done together and both sets of managements were there, and those sets of managements are increasingly integrated. So I think some of the things you suggested about bringing them forward together are happening and will happen increasingly through '19, and I think you'll see a series of initiatives in '19 demonstrating how we can work together.

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Operator [7]

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We will now take our next question from Ben Swinburne of Morgan Stanley.

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Benjamin Daniel Swinburne, Morgan Stanley, Research Division - MD [8]

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Chase, you said in your prepared remarks, the growth drivers are clear, and I think you were talking about 2019, maybe 2019 and beyond for Formula One and cost pressure should abate. I don't know if you're willing to go thus far, but should we expect revenue across all the 3 major streams for primary F1 race promotion ad and sponsorship and broadcast to all grow this year? And given your point on cost, should we also expect margins to go up?

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Charles Carey, Formula One Group - CEO [9]

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First, on revenue, we do expect -- there are obviously, other categories that matter too, so those, I mean, the 3 big drivers. But certainly, areas like hospitality are important but we expect growth across all, not equal, by largest growth in television.

The race calendars, yes, pretty stable so I think probably the growth will be more modest there. Clearly, Vietnam, coming on a year later, ads on the promotion front and the sponsorship area, we expect ongoing solid growth, we've got a lot of interest in the sponsorship area. The sponsorship world probably takes a little longer to close the deals than we would've expected a year or 2. You got to create more tailored packages and tell the story better and create the research to sell it.

But long way to the way of saying yes, we do expect growth across -- really all our primary areas, not equal growth, television growth will be the largest. And certainly, growth in some of the secondary areas too, like hospitality and events.

And on the cost side, I mean it's always a little complicated because our biggest cost is the team payments, so -- which are more a percentage. So you don't really get any margin. You don't get margin improvement off of the team payments since it's a percentage of profits. And so we -- if you -- so the other costs are so small against the team payments. The margin and movement is smaller.

We do expect some improvement but there are number of areas where cost relate to revenue. So take the hospitality area or freight which are areas where we have revenue that's attached to cost, so to the degree freight costs go up, freight costs were up significantly in 2018. We -- a lot of our freights for third parties that we bill through. So there is sort of a -- it is a revenue-generating cost increase. It's not a profit center, but it's a revenue-generating cost increase.

Hospitality, again, is an area where we have cost against revenue. So revenue go up, costs go up. So there are some places where -- in television promotion and the, sort of, core areas they're primarily straight through. Some of the other areas of growth, we are having more events this year, the MIT events. Again, they will be -- we'll make money on them, but there is a cost to create them.

So we have some costs that are not large in the context of the overall business. Certainly, the events are -- freight's a sizable cost. But in aggregate, our costs that are not attached -- or costs like operating costs and some of the basic costs, we'll certainly have margin improvement against. But we won't against the team payments and we will have some of the areas like hospitality and freight that have some costs against them.

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Benjamin Daniel Swinburne, Morgan Stanley, Research Division - MD [10]

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Got it. And I don't know if you or Mark would comment, but when do you expect or when should we expect you to get to your leverage target or get to that 6x or below if you look out over the next couple years? I think your visibility is very healthy.

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Mark David Carleton, Liberty Media Corporation - CFO [11]

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Yes. I think we're certainly -- go ahead, Chase.

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Charles Carey, Formula One Group - CEO [12]

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No, go ahead, Mark.

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Mark David Carleton, Liberty Media Corporation - CFO [13]

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No. I think we're certainly aiming towards getting that down under 6x this year. We think there is a realistic opportunity to do that. And as we look at the numbers, we -- that's certainly what our target has been and we think we'll get there.

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Benjamin Daniel Swinburne, Morgan Stanley, Research Division - MD [14]

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Great. Just lastly to Greg, any thoughts or interest in spinning the investments out of the FWONK's tracker. Obviously, as investors looking at FWONK today, there's a lot of investment -- there is more investment equity in there than there is F1, which is I'm sure sub-optimally, you'll probably agree. Any interest in, sort of, revisiting the structure here?

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [15]

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Well, I'd first note that, that it's a high-quality problem caused mostly by the increase in the value of Live Nation that has caused this to be the case. And moving it across, as we've talked about, the most obvious way would be to -- it more properly aligns with SIRI over time might be to move it there, but given where LSXM is trading, it's probably not attractive.

There is debt against it which would reduce the net equity value. But the moment I would describe that is probably a worthy goal but not worth the costs or the friction to get it done at the moment, may change but not at the moment.

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Operator [16]

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We will now take our next question from Jeff Wlodarczak of Pivotal.

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Jeffrey Duncan Wlodarczak, Pivotal Research Group LLC - Principal and Entertainment &Interactive Subscription Services Analyst [17]

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One for Greg, and one for Chase. Greg, can you comment on your potential interest in taking a stake in Universal Music? Do you need an ultimate path to control? And will that be done through Liberty or SIRI? And then, I guess, the same question on Fox Sports Net and do you think those assets actually get sold or Disney Sports to spin them out?

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [18]

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Look, Universal Music, if you look at SIRI, one of the largest, if not the largest cost they have is to the content suppliers and understanding how you might hedge some of those costs is interesting, an ownership stake in Universal Music could be interesting.

That's really only going to be true on the right terms and conditions. We were asked, I was asked, would you look at it? Of course. We are a -- it's a huge supplier to us, an important constituent in the music space and we would look. So when Vivendi announced that they were going to potentially seek partners, we certainly would express interest. It would have to obviously, unspoken, don't need to say it but will anyway on the right terms and conditions, and would we prefer a path to control? Usually in life, we do but we're also -- it would depend on what else is available and what else is offered and whether that's attractive in the total.

That probably would be done at SIRI, but I can't guarantee that. We would look and say, is it attractive for SIRI, is it attractive for LSXMA, what are our alternatives? You've seen where we've been putting our money in LSXMA. I don't want to note that. And you should -- just to further on the LSXMA's investment priorities, I think I told you, we're going to get 3 components of iHeart spun-out to us, the CCO equity, the radio debt and the radio equity.

The first 2 are probably not things that we're going to hold for the long term, if at all. They're just not in our investment portfolio. CCO may be a great company for the future, it probably doesn't fit well with our portfolio so you might expect us to utilize some of that cash to do things like shrink the LSXM discount or take advantage of it.

And as far as the RSNs, it's a set of assets we know well. We understand both their strengths and their weaknesses which are manifest. And you have a seller who is a forced seller. My understanding is by the terms of their consent decree which could be modified, they're going to be a seller, not a spinner. But the current consent decree does not allow them, as I understand it, to spin, could change.

You've got several large players, including Fox, have suggested they're not interested and walked away. It's the kind of situation we would look at, and we've been rumored to look at and it would be logical that we would look at it. But we're going to look at it only on the basis that it's attractive for us for the long term and that we can see reasonable upside, given what are clear risks in the distribution of these and then changing MVPD world.

Where that investment would get done, whether it'd be done at BATR or would it be done at LBRD or somewhere else, really depends on the scope and size and who our partners are and how that turns out. But we are approaching them with appropriate caution and appropriate wide-eyed certainty and understanding that we formed a lot of these things with Fox a long time ago. We have a lot of history with them and understand those businesses well.

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Jeffrey Duncan Wlodarczak, Pivotal Research Group LLC - Principal and Entertainment &Interactive Subscription Services Analyst [19]

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And then one for Chase. Chase, is it fair to say under a new potential Concorde Agreement that the revenue share payments' percentage for the teams are probably going to be about the same as they are today, but if you can grow the revenue materially, you'll get a larger share of future revenue?

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Charles Carey, Formula One Group - CEO [20]

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I don't think at this point I don't want to get into, sort of, speculating on things that are still in active discussion. We certainly expect to grow the business and there's no question. I mean, we've talked, like I can go back to the last 2 years, we've talked about '17 and '18 being, sort of, building foundations. We expect growth to really start to flow through the business in '19 and more so in '20. We've talked about 2020 being the target.

So certainly, we are focused on growing the business. We believe there's lot of growth in it and we expect to start to recognize that, but I don't want to get speculating on things that I think -- as it's also said many times, I think we're best off having those discussions private with our partners and when we resolve it, we'll address it.

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Operator [21]

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We will now take our next question from David Karnovsky of JPMorgan.

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David Karnovsky, JP Morgan Chase & Co, Research Division - Analyst [22]

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Just one for Chase. Regarding the contract with the sale of broadcast rights broker, can you just say what regions this covered? And then can you walk through what happened when the contract terminated? Did you move to agreements directly with your TV partners? And then do those deals restart in 2019 or in 2020?

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Charles Carey, Formula One Group - CEO [23]

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Yes, so I'm not going to elaborate too much on them. By design I did not identify the specifics of the -- probably Turner people can guess and essentially it was a broker, a middleman that controlled our rights just sold it on. So when the broker went broke, the agreements were eliminated as part of the process.

So yes, what we did is go back and it was -- there was a large region and a number of smaller ones, so we went back and engaged directly with the parties that had been buying through the broker. Given the timing through which it happened and some of the circumstances for 2018, it clearly created the consequences and timing of it made it adverse to us. We expect in 2019 while the season is imminent, we're still addressing it.

We expect to get to a constructive place that works for us in a better way for 2019 forward and are actively finalizing, some of it's finalized, but we're actively finalizing it now and -- but when we had to deal with it live, with a week's notice or what have you. Clearly, there was a consequence to us in '18, but we believe we are in a path to address it in a constructive way for us for the '19 season.

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David Karnovsky, JP Morgan Chase & Co, Research Division - Analyst [24]

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Okay. And I think Formula One has a few race promotion contracts that are coming up in 2019. Is there any even high-level commentary you can give us into how are you thinking about those races? And then is there any update you can provide on Miami?

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Charles Carey, Formula One Group - CEO [25]

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Yes. I mean up in '19, which means for the '20 season. Obviously, our '19 -- the 21 races we have for '19 are all contracted. So it's -- we have contracts where '19 is the last season, and we have to either create a new agreement or more partner separate -- go separate ways.

And there's nothing really unique to this that wasn't true last year. We had a number of renewals last year, just as we had a number of renewals the year before. There are different issues in each one. I think the most positive aspect to that is we have -- we're increasingly encouraged by the breadth of interest of new parties who want to come in and that really is -- the dynamic that's important for us is more on the supply and demand.

We value some of our -- some of our racers are long-term partners, some not quite as long. I think our first approach is if we can get to a place that works for both of us, is to renew races. We haven't -- we're not necessarily always going to be able to get there, but to make sure we're getting fair value, it's important that we have alternatives in places that provide not just attractive finances but attractive races, example being Vietnam. We think it's going to be an exciting new place to go, fulfills an objective of growing in Asia. And it's a win-win for both of us so it really ticks all the boxes.

We have places really around the world that we'd like to add races, including not just new markets but some traditional markets like Western Europe. So I think it is engaging with partners, seeing if we can get a place -- get to a place that works for us and trying to judge that against the opportunities we have in other markets.

And that is a process we're engaged in now with the renewals for 2020, which won't be different than every year. We'll always have some 3, 4, what have you, negotiations we have to go through. And I think as we've gotten a few years under our belt, I think we increasingly feel pretty good about the trajectory of that and the ability to continue to have a healthy business there. And we are looking to, we've talked about it, we think there's room to add a bit to the race calendar.

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Operator [26]

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And we will now take our next question from John Tinker of Gabelli.

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John Philip Tinker, G. Research, LLC - Senior Research Analyst [27]

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Just following up on Jeff's question on the Fox Sports Net. One thing I found a little confusing is can the MLB bid on them? And would it -- how likely possible is it that they could be split up and that the Braves could just pick up FOX Sports South rather than the whole package?

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [28]

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Well, I -- this is a Greg. I don't know -- thank you, John, for the question. I don't know why MLB could not bid on them. There's no reason, I don't -- I wouldn't understand why they would not bid on them. And it has been certainly rumored that they are a bidder. And I can see why MLB would find it attractive to try and reconsolidate those rights to give them more flexibility into the future in dealing with over the top and other kinds of bidders.

In that vein, I think there are a couple of reasons why -- while these might be cut up that's unlikely. There are bunch of MFNs in these things that make it very hard to unwind the pieces. And secondly, while you can't say for sure, look the power comes from having multiple and giving you leverage vis-à-vis the MVPDs and to degree that you only had 1 region as attractive as the Fox South region is and it may be the most attractive region. It's among the largest with relatively low rights. In general, having 1 region, gives you less leverage and is a less appealing opportunity. You don't want to say definitively no to anything but in principle more is better.

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John Philip Tinker, G. Research, LLC - Senior Research Analyst [29]

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And so a quick follow-up on the -- you've now, sort of, set up your -- you're going to spend another couple of hundred million completing out -- completing the development, at what time does revenue start to kick in from that on the second phase?

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [30]

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Oh, the Battery?

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John Philip Tinker, G. Research, LLC - Senior Research Analyst [31]

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Yes.

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [32]

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I think there are some units leased up. I think we'll see beginnings of it in '19 and more meaningfully in '20. We could ask Chase to comment on the RSNs. But we'd probably put him in a difficult position. He has a lot of knowledge but we'd probably put him on the spot.

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Charles Carey, Formula One Group - CEO [33]

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I'll pass.

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Operator [34]

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We will now take our next question from Barton Crockett of DCFStocks.

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Barton Crockett, DCFStocks LLC - Analyst [35]

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It's Barton Crockett. I guess, a couple of things. One is, your business at Formula One having some substantial, kind of, obvious European and international exposure. A lot of companies with that type of footprint are seeing impacts from the economy, Brexit in the U.K. and weakness in some other places.

You don't seem to be seeing that, but I just want to double check. I mean, does your business seem to be economically resilient? And if so, if you explain that as just, kind of, the affluent nature of people going to your races and some of the improvements you're making. How do you feel about the economy in terms of what it means for you there?

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Charles Carey, Formula One Group - CEO [36]

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Yes, I guess, I'd say the economic issues, we -- I do think we feel pretty immune to them. I mean, in Brexit, we've got some logistical issues that are more, sort of, if you end up with a no deal Brexit, how do we get in and out of Britain with various equipment but it's not a financial issue, it's more logistics. So we're contingency planning for things like that.

I think we are immune. I guess, I'd say the reasons I think being global, while certainly we're European based, we're a global business and we're unique. I think those that probably feel it the most are ones that are more commoditized and we're not. I think it also helps that we're largely a contract business. So we're not ones -- if you look at our revenue streams there are some that are more ongoing hospitality, something like that but the vast majority of it is long-term.

And so I think people the less -- the parties are less consumed. We are a fairly high -- we're certainly high-demo sports, so I think that probably helps. We've got quality sponsors and the like. So I think the combination of unique events, long-term agreements, strong demographics and those we deal with and I think to some degree, upside to our story. And we really do feel that we've got some wind on our back. And our focus in the last 24 months has really been as much as anything building interest in fans, creating momentum in the business, creating momentum in the sport. And then as we now move to monetize that, we, sort of, get the story told, create some momentum. And I think we're seeing the interest that we experience.

There are some places not really so much economy. I mean, certainly the sponsorship area, again, is -- if you're not Google or Facebook, it's probably harder than it was. But actually, we're pretty encouraged by the interest. It's -- but you've got to tell a better story. You've got to have a meat in the bones in the story, you can't just sell signage on a wall anymore and you've got to find ways to create unique relationships with them and have the research and data that proves your story out. I think we're doing all those things.

So again, I don't -- the economic issues, we really aren't -- while we're based in the U.K., we're certainly not a U.K. company, so that for the U.K.-specific issues. I wouldn't expect it to, but I think certainly Europe is meaningful to us. But I think we feel we're riding above whatever that noise is for the reasons I said.

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Barton Crockett, DCFStocks LLC - Analyst [37]

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That's great. And if I could just switch gears for Greg. You pointed out that you guys will have your positions in iHeart post bankruptcy. I was wondering if you could update us on your feeling currently strategically about traditional radio. Is that iHeart stake a strategic one or something that we could characterize as maybe a flyer that didn't work and not so strategic now?

And if radio is strategic, why -- is it safe to think that iHeart's really the only play for you there? Or is there a possibility that you would look at others? The space did seem to have a better, kind of, revenue trajectory in the fourth quarter and into the first quarter, so I don't know if that factors into your thinking.

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [38]

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Well, I'd like to think that back into our thinking why we got into it in the first place, not after the fact. But look, I would not characterize it as a flyer that didn't work. That's a little -- we took a position. We made some proposals that could've been interesting to have an investment. We have a smaller investment now. We'll watch what's going on.

The terrestrial radio space is still a scale space. There are clearly challenges for them but also opportunities, and iHeart is doing a good job compared to most radio companies about -- thinking about how to attack that, and I give credit to Bob Pittman and Rich Bressler for their thinking in that way.

The opportunities for us to have synergies across the Sirius/Pandora footprint with iHeart, I think, are still very interesting. We're very focused at SIRI today on managing the Pandora integration, but both SIRI and Liberty, we'll watch closely what's happening at iHeart and we'll see. You -- I think being an interested shareholder will be a good thing.

And sorry, just as other radio, I can't say categorically no, but iHeart is the largest scale play and in some ways not only is the leader in scale but the leader in technology and what they're -- and where they're going, so that makes them probably, if not the only choice, the first choice.

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Operator [39]

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We will now take our next question from James Ratcliffe of Evercore.

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James Maxwell Ratcliffe, Evercore ISI Institutional Equities, Research Division - MD & Senior Analyst [40]

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One for Greg on Liberty Trip, if I could. Based on the filings, it looks like representative of Liberty Expedia was willing to collapse that structure into Expedia, essentially at par and maybe a very slight premium? I'm wondering if any comment about if there are any readthroughs to your views on the appropriate relative valuation of Liberty Trip versus Trip.

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [41]

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Yes. I don't think it speaks to that so much. If you look at the Liberty Expedia situation, that's largely about -- we have a relatively pure play there with -- at Liberty Expedia of Expedia stock and a large embedded corporate gain that the consummation of that merger, if it occurs, would eliminate and would allow our Liberty Expedia shareholders access to the underlying Expedia stock at a premium to the marketplace that they're experiencing today.

It sounds like a good transaction. It does not require anybody to sell their Expedia stock instead gives them a more liquid stock at a slightly higher price. It sounds pretty good and eliminates potential future liabilities. For Expedia, lots of good things eliminate the uncertainty around the overhang, eliminates the uncertainty around the ownership somewhat being shared today between Barry Diller's control and John Malone's control, also eliminates the condition where you go from a hard control situation to a influenced situation where Barry Diller would not have as much voting control as Liberty has today.

So all that's to say the reasons why that transaction should get done that have little readthrough or look through on what you think about Trip. We remain very bullish on Trip on its own accord and the things they're doing but probably not influenced by that transaction.

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Operator [42]

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We will now take our next question from Bryan Kraft of Deutsche Bank.

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Bryan D. Kraft, Deutsche Bank AG, Research Division - Senior Analyst [43]

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Chase, just I have one for you on advertising and sponsorship. Can you help us to understand, I guess, how the revenue growth in 2019 and 2020 will be driven? I'm just curious, is it by adding additional sponsors? Or is it increasing the spend among existing sponsors by providing them more inventory and opportunities to engage with fans? Just trying to get a little more color and better understanding there, if you would.

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Charles Carey, Formula One Group - CEO [44]

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I think more of it comes from adding. I mean, we have been successful in -- with some of our renewals in adding some expansion to it and as we have more opportunities for them to support things like fan festivals or MIT conferences or e-sports, some of them have stepped up. So there is some expansion with existing, but I'd say the bigger -- I think we still feel we have a lot of the portfolio to fill out. So I think we expect that to be the bigger component and offering more opportunities.

So we brought on a regional sponsor, significant regional sponsor. We're going to have regional feeds this year. We didn't have regional feeds to sell before. So I think as we create more opportunities for more sponsors to step in and sponsor more things, we expect all of that whether it's filling out the portfolio and untapped opportunities, unsold title sponsors on races, unsold global sponsor slots, more opportunities for sponsors to step in. We expect that growth to come from additional sponsors although we -- that doesn't mean we're not looking for ways to add to -- add to the -- add opportunities with the existing guys.

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Bryan D. Kraft, Deutsche Bank AG, Research Division - Senior Analyst [45]

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And is there a lot of room to add sponsors -- large sponsors from here? Or are you filled out for now, given the amount of inventory?

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Charles Carey, Formula One Group - CEO [46]

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No, we have room, but it's not infinite but certainly, whether it's a global, sort of, entitlement in there. There are 3 basic -- 3 primary tiers and then you can create a lot more crafted ones as we create again more capabilities, we can create more unique propositions. But certainly, we have -- we're not capacity constrained, at some point, we may be, but right now we have the opportunity -- we have untapped opportunities that we won't run out of certainly in the short -- that we won't run out of in the short term.

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Operator [47]

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We will now take our last question from Jason Bazinet of Citi.

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Jason B Bazinet, Citigroup Inc, Research Division - MD and U.S. Cable and Satellite Analyst [48]

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I just have 2 questions. I know Mr. Carey's encouraged us not to look at the quarterly results as indicative of the health of the business. So I apologize for asking a quarterly question. If you have a race that occurs on the first or the last day of a quarter in any given year, does that have any bearing on revenues because I think we're all modeling it as if it the race occurs day 1 of a quarter, it all shows up in that quarter.

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [49]

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Chase, you might let Brian Wendling talk about the accounting recognition because...

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Charles Carey, Formula One Group - CEO [50]

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Let me tell you, in the technical accounting, there's probably somebody better than me to answer it so...

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [51]

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Brian?

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Charles Carey, Formula One Group - CEO [52]

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I'll let Brian.

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Brian J. Wendling, Liberty TripAdvisor Holdings, Inc. - Senior VP & CFO [53]

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Yes, I mean, it's a pretty simple answer but the answer is that if the race occurs on a Sunday, and if that Sunday falls into the next quarter, we recognize it in the next quarter. So we recognize all the revenue based on the day of the race.

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Jason B Bazinet, Citigroup Inc, Research Division - MD and U.S. Cable and Satellite Analyst [54]

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Okay, very good. And then just a follow-up question.

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Brian J. Wendling, Liberty TripAdvisor Holdings, Inc. - Senior VP & CFO [55]

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We have some race-related revenue, we have some season-related revenue. But the race-related revenue gets recognized when the race happens.

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [56]

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Yes.

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Jason B Bazinet, Citigroup Inc, Research Division - MD and U.S. Cable and Satellite Analyst [57]

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Okay. And then just a follow-up for Mr. Maffei. I think the quote was it is not worth the friction of moving the Live stake and some debt over to another tracker. Can you just elaborate on what friction you see?

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [58]

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Yes, Jason. We -- I think I talked earlier about the discount in LSXMA. The most obvious way would be to compensate the FWONK shareholders for the stake. The net of the debt is associated with it for the Live holding by issuing FWONK stock to them -- excuse me, by issuing LXSMA stock to the FWONK shareholders. But given the discount that LSXMA trades at to the underlying SXM, I don't think that's a very attractive or fair or appealing to the LSXMA shareholders.

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Jason B Bazinet, Citigroup Inc, Research Division - MD and U.S. Cable and Satellite Analyst [59]

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You couldn't do it just -- you just couldn't do it NAV-neutral where the equity stake in Live plus the debt is sort of NAV neutral and moved across? Why does it happen when you [take] the equity issuance?

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [60]

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I'm not sure how -- you either -- you've got to compensate FWONK or the FWONK shareholders in one of two ways that I can think of, either you pay them cash or you give them equity. And the equity that would be available will be LSXMA or the other choice would be levering up LSXMA and giving them cash. And I think at the moment, we think there are other things that are attractive for LSXMA to do with its firepower.

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Jason B Bazinet, Citigroup Inc, Research Division - MD and U.S. Cable and Satellite Analyst [61]

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So a third option of the LSXMA equity value married up against some debt that sits at the Formula One Group is not an option, so the 0 NAV transfer to that.

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [62]

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I guess, I'm not following because -- yes, there is this debt, the exchangeable that we would do but that still has net equity value. So let's look at the net equity value of the Live stake. How am I paying for it? You're proposing to pay for it with look through-value of SIRI or are you proposing to pay with market value?

If I'm a FWONK shareholder, I probably don't find look-through value to be attractive. And if I'm an LSXMA shareholder, I probably don't find market to be very attractive. So I don't know, somebody's ox is going to get gored until those numbers balance out better. I don't want to disadvantage either side of shareholders.

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Jason B Bazinet, Citigroup Inc, Research Division - MD and U.S. Cable and Satellite Analyst [63]

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I was just saying if you mark-to-market the Live Nation stake, whatever that's worth is equity value and you marry it up with a like amount of debt.

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [64]

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Again, that has a net equity value. The Live Nation stake is worth --

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Jason B Bazinet, Citigroup Inc, Research Division - MD and U.S. Cable and Satellite Analyst [65]

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It does? Okay.

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Gregory B. Maffei, Liberty Media Corporation - Director, President & CEO [66]

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Yes, the Live Nation stake is worth 3 something and the debt is $1 billion something. So there's net equity value of 2 plus sitting inside of FWONK. I got to pay for it somehow if I move it across. And I only pay cash for stock, so I don't know how it isn't goring somebody's -- unfair to either the FWONK side or the LSXMA side. I don't know about that, but I think I got those numbers roughly right.

Thank you today for the questions and the interest in Liberty Media, and we look forward to speaking with you next quarter if not sooner.

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Charles Carey, Formula One Group - CEO [67]

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Thanks a lot.

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Operator [68]

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This concludes today's conference call. You may now disconnect.