QVC Group Inc. (QVCAQ) Earnings Call Transcript & Summary

Okay. We're live. Welcome, everyone. Thank you for joining us for this afternoon's, I think, final presentation. And as usual, 4:00 on Monday is Greg Maffei, who's the CEO of Liberty Media, Liberty Broadband, Liberty Media Acquisition Corp. now; Chairman and CEO of Liberty Trip; and Chairman of SiriusXM, Live Nation, TripAdvisor and Qurate Retail. So welcome, Greg. Thanks for joining us.

Thank you. And as usual, at least I'm not keeping you from the drinks on the lawn, but I am keeping you probably from whatever afternoon [ wild basin ] you want to have. So thank you for indulging.

I'm by myself. So let's hope that's not the case.

Well, usually, the people are wishing out to go out and enjoy the breaker's fresh air and [ wild basin ] at this time. So I'm cognizant.

Hopefully, 1 year from today, we'll be doing that. Greg, why don't we start off with Formula 1? Since you closed the acquisition 4 years ago, Chase and his team have made a lot of progress. And of course, now Stefano is now taking over as CEO. What's your perspective on the state of Formula 1 today and the opportunities you see ahead for the business?

Well, I think you rightly noted, Chase and team did a ton of great stuff. They really set the stage for improved on-track racing with what's coming in on the Concorde agreement. They set the stage for more evenness among the teams because it really created franchise value. And you've seen that in some of the statements, for example, that Lawrence Stroll made in Aston Martin over the weekend, wouldn't have invested without the changes that we put in. You've seen that with a more level playing field in terms of payments for winning in teams and historical teams versus less competitive teams. You've also seen that, probably most importantly, with the cost cap, which was originally going to be [ 1 75 ], and is now really [ 1 45 ] to [ 1 35 ] depending on what you're doing. And all of those have created a situation, which I think the on-track performance and the quality of racing in terms of overtaking and evenness is going to be more exciting than ever. So all to the good. We now have Stefano for the next generation. And I think the excitement that he can bring with his knowledge, both of OEMs and attracting new ones, with his knowledge of the support from his time at Ferrari, with his knowledge of social media for the things he did there. And really also to capitalize on the things that Chase and team did for the benefit of the Formula One Group, which is as we grow revenue, we start to take a larger percentage, and we have more upside. Now I'm not sure 2021 is the year we'll be able to capitalize on that because the potential for COVID to disrupt some of the promoter revenue. But in future years, I think we're going to be the beneficiary, and we've set the stage. We have the right guy in place now. I'm very excited.

You mentioned the new agreement and how you share the economics greater as you grow revenue. Just wanted to clarify, is that actually a revenue threshold or revenue metric that, that's tied to? Or is it actually preteam EBITDA?

It's tied to preteam EBITDA, and it kicks off. And if you look -- go back historically, Formula 1 took a much greater percentage. The team's percentage has grown over time. And this is just a slight rebalancing, tipping it back more towards Formula 1. Frankly, as we invest and have success, we share it with the teams. But at some point, we get a slightly bigger percentage of that ups.

Okay. Great. And can you talk about some of the key high-level engagement metrics that management is focused on as it relates to driving improvement in the [indiscernible] and its popularity and how F1 has been performing against those metrics?

Well, there are obviously a ton that matter, whether it be viewership, whether it be attendance, whether it be social media. Hard to measure some of those in the COVID era, hard to measure some of them as you cut the number of races and change that. I think, in general, on viewership, we feel very good. We were running ahead. We ended up slightly down. But compared to most sports, we were substantially better. In terms of social media, explosive. We've been the fastest-growing sport in social media basically in every metric over the last 3 years, any major sport. And in terms of obviously, attendance, COVID has had an impact on that, and we'll see what it does in 2021. We're hoping -- I don't think we're going to get full fans every race by any means, but we're obviously hoping to have that get up. There's some other metrics we see out there, which are less obvious: new demand for cities that want to host races, new interest by different sets of promoters. There are a lot of other metrics we see in terms of the strength that are very positive and I think lay good groundwork for future success.

Maybe to touch on the pandemic for a little bit. Obviously, disruptive to every sport worldwide, arguably more so for F1, though, given the travel requirements associated with the sport, yet surprising to me, you were still able to generate positive EBITDA for the year and still hold 17 races. How is management able to really pull that off? And do you think there are some lessons or benefits from this challenging period that are going to have an enduring positive impact on the business?

Absolutely. There are -- first, again, credit to Chase and team, Ross Brawn, but also credit to the FIA, our regulator, and credit to the teams themselves. The fact that everybody was flexible and able to move when they were was a huge testimony to a lot of good work on all 3 groups' part. The fact we changed the 22-race season, may got a 17-race season done, but literally all scrambled. Nothing was where it was supposed to be almost, and it's amazing. And we learned we can put things on more quickly. We can put them on lighter. We learned the requirements for broadcasting were reduced. We learned the requirements for all sorts of logistics to support. Both we and the teams learned how to travel light, travel fast and be effective and way more quick in getting stuff done. And I think that bodes well for the future as we move schedules around, as we think about how to do, as we are doing this year, proposing 23 races, the most in history. The lessons that we've learned on how to be more efficient are clearly what makes part of what enables that.

Okay. And what do you think the outlook is for bringing fans back to the races over the course of this year as well as for recovery in those revenues that were most heavily impacted?

Yes. Look, I think it's going to vary race by race. And I obviously think as you move towards the back of the year, higher level of vaccines, more comfort. You'll see a higher level of fans. We'll start in Bahrain, and I believe we'll have fans. We'll have fans, I think, at many of the races. Will we have a full complement? I think that's really a TBD. But we're very interested in having races with fans not only for the economics, but really to keep the fan interest up in the sport. There's a huge amount of pent-up demand, and we're trying to meet it to satisfy our very enthusiastic fan base.

One of the, I think, questions we get a lot is just on the race promotion agreements, just given some of the history there. As we think about the race calendar going forward and you're renewing race promotion agreements, is there anything changing fundamentally inside of those agreements as far as fee structures, incentives, performance hurdles or anything like that?

Look, I think you have an ever-changing set of incentives that we have. An ever setting change -- set of cities or countries, which really want to do it. You'll see times when some country will have more or less support. Then you'll see one -- enter someone new that was willing to be aggressive and bring a race to an area which hasn't been seen before. We -- our traditional Western European races are always going to be less lucrative. But they have the benefit of strong fan base, historical precedent, strong sponsorship support. And then you have races -- newer races where we're trying to bring in new audience, new areas. And in general, we get paid more for those because it's a little more of a flyer to build that. But you also have a case that we have not done this, but have looked at doing things where we fill a slightly different role and take more of the risk on. We haven't done that anywhere, but we've considered that. And as you know, there's always this trade-off between promoter revenue, TV revenue because if you're in a market like the U.S., where our TV revenue is certainly weaker than it should be over the long term given the strength of just the TV market and the richness of the United States and also advertising and promoter support who want to be an exciting market. So you try and weigh all those. And the dollars are not just what you get from the promoter and not just what you get from that race day, but how the whole ecosystem is built.

And you mentioned the interest from other cities worldwide to host events. Given those opportunities to add new races, should we expect to see some churn in the coming years as you perhaps walk away from some of the less attractive Grand Prix that may be on the schedule today and replace them with more favorable, more exciting locations?

Look, there are places like Monaco, which will be probably forever. And there are races that go in and out. The promoters are not as happy with their result. That's to be expected. Not every promoter is going to -- or there could run its cycle. There may have been a goal to promote tourism in some area or other, and it met its goals, and it was deemed that Formula 1 is necessary. I think you'll always see that, and you've seen generally a growth in races. But you've also seen new races come in and others that not necessarily as lucrative, not necessarily as successful go out. And that just seems like a natural churn that out of 22, 23 races, 1 or 2 a year might change out, doesn't seem -- it's a natural falling-out process.

How about Miami? Any update on the progress toward hosting a Grand Prix there? It seems like it's been quite an effort.

Taking a while for a bunch of reasons. COVID didn't help. The reality is it's a different model than some of our historical races. It's one of those ones where we think there's a lot of potential to become iconic, to be build on other elements that are of value, including the broadcasting and the advertising and sponsorship. But there have been local challenges we're working through, but we still remain very enthusiastic, and I believe we will have a race in Miami.

Okay. Moving on to the right side of the business. One of the shortest bets over the past few decades has been that the price of sports rights would go up with every renewal. And obviously, that's an important trend for Formula 1, for the Braves. And then more recently, there have been some concerns over soccer rights in Europe, repricing lower on renewal. And obviously, the pressure on pay TV as behavior shifts to streaming. So I'm just curious how you're thinking about this trend for the industry broadly going forward and how you think it plays out for Formula 1 specifically.

Well, I think if you look in a lot of cases, you're certainly right. The breaking of the TV bundle, the potential pressure on RSNs. You could argue about certain sports rights in the U.S., how they'll move. I think Formula 1 is in a different position. One, worldwide, different markets, different situations. Two, I think in general, we're undermonetized compared to many of the sports that have commensurate levels of interest. Three, I think the things I mentioned earlier about creating greater fan interest and overtaking are going to be important, and we've seen that. And the growth in social media is an example of why we have fans who are getting more interested and more rabid for our sport. And lastly, I think the most important thing that drives sports rights is competition. And to the degree we begin to see new distributors, large digital distributors and the like enter the markets, that's a positive. To the degree we, in some cases, have seen trade-offs between free-to-air and pay and then a new version to pay those digital, I think all -- having new players, new entrants is probably the most positive effect we can have. And I do see that likely to happen for some of the sporting events in some of the countries we have.

Are you actually seeing signs of big cap tech coming in and bidding real money for sports rights? I mean, it's something that has sort of been held out there as the promise for sports rights after the pay TV bundle. I mean, are you actually seeing that?

Well, I think you're beginning to see. Look, Amazon is certainly looking pretty actively, it looks like, at the NFL. So I don't think that's news. We've certainly seen interest from various players. Have we seen the execution yet? No. But I think you're -- I would be very surprised not. Look, Amazon has moved from a bit player in NFL to being a serious player, and I suspect they're only going to get more serious over time. And I wouldn't -- I expect they won't be the only ones.

Yes. Okay. You mentioned the balance of free-to-air versus pay. Where does that stand now for Formula 1? Is that balance where you want it to be? Or do you see it tilting more in one direction than the other going forward with the next round of renewals?

I think you're always going to be weighing, and I mentioned that our sport, not uniquely, but perhaps more than most, is balanced between promoter interest, fan interest on site, TV revenues and advertising and sponsorship. And to the degree that you concentrate all of your efforts on one or the other, you -- you're -- if we went all pay, we might get a large amount of broadcast, but it would have a negative effect on our advertising and sponsorship and perhaps even our fan interest at promoter level. So you want to maintain that balance, and you want to look market-by-market and make trade-offs. In some cases, it makes sense to move to more pay as we did in Germany. In other cases, it's better to stick with free-to-air as you weigh all those factors. I don't see some big mix change in general. But I do see on a case-by-case basis where we'll make that call.

Okay. What have you learned from your experience with Formula 1 TV so far? And how does that fit in strategically over the long term?

I think we've learned that, that can be an unbelievably powerful fan engagement tool. But it's hard at the amount of content we have, 23 races, and even shoulder content to build enough content to probably build a compelling service for a broad, broad group of people. For -- to be a fan engagement tool, great. To be something that is amazing for a really dedicated hard-core fan group, perhaps. But to be something which substitutes or overruns our traditional partners or the large pay partners or the large digital partners, I think that's going to be harder to see. And I think you're going to see a lot of sports find difficulty in building. And we don't have enough content, but I think a lot of sports are going to have that problem building a broad enough content interest on an ongoing basis to build a subscription product that really replaces what they have.

Okay.

Look what happened to me pulling back and going to Peacock. I could argue that's sort of an example, and they have a heck of a lot more content than we do.

Yes. That's a good point. What about e-sports for Formula 1? How much of an opportunity is that? And how exactly does Formula 1 participate in the economics? I know you're -- Formula 1's involved in it today, but maybe you could kind of walk us through that a little bit.

Today, it's really been mostly fan engagement and building that interest and a sponsorship tool, but I have no doubt over time that the opportunity for us to have teams engaged on various levels, prize money, payment fees, greater broadcast and greater sponsorship, all of those as a secondary product or as ancillary product to what we have are all possible. And I do think it eventually will be a revenue stream of its own that's meaningful.

Okay. And I realize it's not a primary revenue source. But on the video game side, with EA acquiring Codemasters, do you see an opportunity for EA to turn the Formula 1 video game into a larger franchise from a unit sales perspective, which could help you on the licensing side, but also add to the popularity of the sport in the U.S. where you have such high console penetration?

Absolutely. Look, I was on the EA Board for 10 years. I'm happy to see my old friends, Larry Probst, Andrew come forth and get in the sport, and they were inquiring about our views as they bought into Codemaster, and I think it's going to be great. Codemaster did a great job with the product, but they obviously don't have the reach, promotion capabilities that EA has. And so I think I'm enthused for that, and I think EA is enthused for us. So it's great.

Okay. Let's move on to LMAC, the SPAC and maybe some macro discussion here. So you completed the IPO of Liberty Media Acquisition Corp. in January. You indicated on your earnings call that you're in discussion with potential targets. Maybe just -- maybe you could talk through what made you decide to do the SPAC in the first place, just given the access to capital that Liberty has and the number of issuing companies you already have. And then secondly, what drove the decision to attribute LMAC to Formula 1 -- to the Formula 1 tracker rather than one of the other stocks?

So we have had good access to capital and have been able to raise both private money for alongside deals as we did in Formula 1 or Charter. We've had access to capital where we've done rights offerings as we did at Liberty Sirius. And I would say we've had a largely successful set of those offerings and had investor interest. But in some cases, we've seen opportunities where attaching this to what we already have would probably muddy the waters or be less attractive or be more complicated. And the SPAC offer an opportunity to have a clean shot at certain industries, which may be alongside what we do but not exactly apart. You may not have wanted to pollute Liberty SIRI. You may not want to pollute Formula 1 by doing something alongside. In general, we've tried to clean those up and have pure plays for our investor interest. And so the SPAC offered a way to participate in new areas in an interesting way, take advantage of the fact we did have a group of investors who were fans and followers, and thank you very much, who were willing to come along and bet that we would find something. And we -- as I said, we had seen things in the past where having a SPAC would have been easier in a way to accomplish something than we could do with our existing set of assets, an existing set of stocks. So that opens up the door. You -- sorry, the second part of your question, I'm not sure if I addressed it.

What drove the decision to attribute LMAC to Formula 1 as opposed to one of the other stocks in the complex?

Well, Liberty has always been sort of the vehicle from which most things emanated. And it was -- if you look at the 3 trackers, the one that had the excess capital, probably the large amount of excess capital at the moment was FWON, the holdco for Formula 1, having done the reattribution. We had a current and obvious use for cash at LSXM, which was the repurchase of the stock, given the deep discount. We can think of certainly things to do at FWON, but it wasn't as compelling that, "Oh, my gosh, you're detracting. By putting this $250 million, you're detracting from something else we can get done there."

Okay.

But FWON was [indiscernible] beneficiary because not only do we think that we'll do something smart, we hope with that $250 million, but they're obviously the beneficiary of the shares we were given as the sponsor for doing LMAC. So to the degree we're successful, FWON will hopefully get double success out of it, right, both the $250 million investment and the promote shares.

Is that a prediction on future stock performance?

It is not. Note that it's leveraged to the upside, mathematically.

All right. So have you found that the escalation in public market values have made it difficult to find potential targets for LMAC available at prices that you find attractive?

Yes. Obviously, you'd rather buy things cheaper. So sure. The markets have moved a lot, and there are a lot of sectors look very expensive. So we're certainly cognizant of that, no doubt. We'd like to think of areas where we can be convinced a target or a partner that we have valued at. And that normally in a SPAC, the initial money being invested by the SPAC and the target is not the totality of what is going to be invested, i.e., that they are likely to hold. The selling shareholders or the participating shareholders of the company that you're working with are likely to hold a substantial amount of stock. And I think we're going to point to all the aftermarket performance of companies like Charter after we invested in Formula 1, after we invested to say, there's a lot of legs. It's not just the initial transaction. And the highest price is not necessarily the indicative fullest price over time, highest initial price.

It's a great point. I guess one thing I wanted to ask you about is just your perspective on some of the relative performance of the stocks under the Liberty umbrella. I think, and this was probably a week ago when I looked at it, so the numbers are a little off, but Charter and Live were up the most. And I think Live has only outperformed since.

Live has got no -- Live has got -- virtually no business has been the best performer.

The irony of it, right? And aside...

[indiscernible] rebuilding, but it shows the market is obviously willing to look past current conditions.

Yes. And then -- and Qurate actually has outperformed the most. But I was kind of putting that one aside because there's some company-specific things there. And then Sirius has been the worst performer and -- which actually did pretty well during the pandemic. I don't know. Any perspective or reconciliation of that relative performance?

No, I think you're right. I mean, we have people who were COVID winners, not in the stock market. But in terms of consumer demand, certainly, Charter, GCI, QVC, even to a degree, Sirius, were all winners in that sense, right? WFH caused incremental demand for a lot of their products. And then we have people who were seemingly suffered, TripAdvisor, Live Nation, Formula 1, the Braves. And interesting, those latter 4 have all had great performance, tremendous stock performance. So the correlation between how you did on an operating basis and how you did on a -- in the market are not necessarily -- obviously, the market is looking for future periods, not just current periods, no surprise.

Yes. What are your thoughts, I guess, on the -- talking about reopening, what are your thoughts on the outlook for the economy and the current direction of fiscal monetary policy? I know these are things that you and John talk about and think about. So would love your perspective on things.

Well, when -- at our Investor Day, I gave a talk about how some trends we saw in the market during COVID. That was in November. And I think it's only -- some of those things have only accelerated where you -- look, if you pump personal income up in the United States, and our businesses, we have certainly business with international elements, but we have a lot of businesses with a U.S. focus, witness Charter, QVC is a big U.S. component. SIRI has all U.S. We got on the list. The -- if you think about that, U.S. personal income gets pushed. You shut down the services economy anywhere from 30% to 50% depending on what time frame you are. Guess what? You -- personal savings go up, and product spending goes up. And I suspect even as we open the services economy in 2021, and I do believe we will, there's going to be a ton of pent-up demand in part fueled by incremental money coming from the U.S. government. Personal income will be up again, and they will have bought all the bikes and used cars and houses, maybe not all, but a lot of them [indiscernible] get done. And they're going to spend a lot on services. So I expect that's one of the reasons why people moved to TripAdvisor stock up. They leisure travel. It's one of the reasons why they've moved to Live Nation stock up. And I -- we certainly see that demand in every survey we see. And logically, when you look at the economy, I think that's all very likely.

Pent-up demand, pent-up savings and people dying to get out, yes.

That's the roaring '21s. Everyone's ready to go.

Online sports betting, a scenario that's attracted a lot of capital and strategic interest from the media industry over the past couple of years as more states legalize. Is this an area that you think could be attractive from an investment perspective? Or do you prefer to limit your participation to the indirect benefits to your sports assets?

Look, I think there -- I think it's going to be big, but a lot of those prices reflect it. They've moved in large ways, some of them in SPAC. As we talked about, SPAC prices have moved up. We -- our indirect beneficiaries through things like selling our proprietary data at -- or relatively direct beneficiaries, I should say, from selling our proprietary data Formula 1. I think we'll be indirect beneficiaries from things like baseball where the sport will have increased demand, but we don't yet have -- haven't yet figured out what looks like a cost-effective way to play directly ourselves, but we're still looking. I think it will be a big area.

Yes. When I look at the investments, the major investments and the acquisitions that Liberty has done over the years, they've all predominantly been consumer-focused companies. I haven't really -- I can't recall anything you've done really in the B2B space. Is that by design? Is there a reason that you haven't invested in companies that primarily serve business customers?

I don't think so. I think if you look, we have a -- we came out of a mentality of consumer subscription companies, whether it be back to TCI, DIRECTV, Starz, Charter, Sirius, all -- we understand that consumer subscription mentality, how churn works, all those things. That's sort of intuitive to us and how to put leverage on those, financial leverages, to grow those. And most of the businesses we've done have been around that space. We are not anti-B2B. We just have a more of a familiarity and a history with B2C, but we certainly are not adverse. And we do have things in our portfolio which are smaller, the Sky Hooks of the world, which are in the B2B business and have been successful.

Okay. Let's talk about Sirius a little bit. First one is more of a structural question. So historically, it seems like there's been resistance to the idea of SiriusXM using its excess capital to buy Liberty Sirius shares, even though at wider discount levels, the economic rationale is pretty compelling. Given your ownership level now at 76%, headed to 80% later this year, might the non-Liberty Sirius directors find this to be increasingly attractive as an option for allocating capital? Is this something that you would like to see happen and that you would support? Because obviously, there's a plus and a minus for you. But really, the question is mainly, how would the Board look at it? Because the lens is a little different now, isn't it?

Well, I think from -- first, from your lips to their ears, I'm sure investment bankers have pitched the concept. But Boards are reluctant to look like they're doing something which favors the control shareholder. So they'll probably want to ensure that their process is good, something, obviously, we can't push. We can suggest, but we're not certainly going to compel. I do think your point is right. And let's take the obvious. Once we get over 80, it's pretty clear where this is going eventually, and they might be fearful about continuing to buy their own stock back and get to 90 because we could do a short form, squeeze out merger then. A good use of capital rather than dividends might be a repurchase of LSXM if it is trading at such a discount. But I think it's just about corporate governance today. Everybody is worried about getting sued and looking like they're favoring us. So they have to be very comfortable with the process.

Got it. Okay. Back at your 2019 Analyst Day, 2 investor days ago, you had presented your view of the audio opportunity for Liberty and Sirius. How has your view of that audio opportunity evolved since then? And how do you think Sirius is positioned today, given the steps that it's taken to execute toward that?

I think Daniel Ek was listening because he seems to have taken a few out of the book. But look, I think we've done some important and good work in that space at Sirius, whether it be the Stitcher acquisition, the Simplecast acquisition, building out our podcast. Obviously, we haven't had the splash of Spotify. But I think some of their numbers are harder to sell and justify, but God bless the market. They seemed at least for a while there to believe. We -- I still think the audio opportunity is good. There are certainly more attention being paid to audio and more money being spent on audio that not all of which I would call justifiable. But compared to video content, still looks cost-effective on the cost side and looks like more revenue opportunity on the ad side and monetization than upside comparatively. So I still am pretty bullish.

And has your -- how do you think that the podcasting evolves from here, though? And what are the keys to success for Sirius as it relates to podcasting going forward? And are the strategic pieces in place now for Sirius? Or do you think that there are any that they still need to kind of either build or buy?

First, I think we're in the early stages of podcasting because there's enormous amount of content which I expect from major brands, which will become podcast the bull, become podcast content that isn't there today. But secondly, podcasting is still relatively difficult in terms of discovery, recommendation, search. All of the capabilities on the platform side are relatively weak. And you're seeing that risk on the video side. I think search and recommendation were better for people like a Netflix, who do a great job. But now you have the plethora of video brands, finding what you want, where you want it is difficult. And I think that problem is magnified in audio. So I think there's a great opportunity still to build the right audio platform for podcasting.

Okay. And looking at the Pandora acquisition, how successful do you think it's been so far? How do you think that turnaround is progressing and, obviously, notwithstanding the COVID headwinds that hit ad revenue last year?

Yes. Look, I think the business of streaming audio, the subscribers, whether paid or ad-supported, is a difficult business in terms of growth and very competitive. I feel very good about the ad tech capabilities we've built in the platform. I feel very good about the monetization. I wish we were able to grow our base of users, listeners, our MAUs better. But we gained enormous strengths in portability and mobility and in ad tech by that acquisition that didn't exist in the SiriusXM world that are very critical to our future success. Whether it be in podcast or trying to take SIRI out of the car, there are a whole bunch of capabilities that we gained that were important to the Pandora acquisition. So I'm not thrilled about every element of the financials, but I think it was -- it's still a very important strategic move.

Okay. Is increasing your stake in iHeart still of interest? And if your stake did increase to the allowable 50% threshold, what kinds of financial synergies and strategic benefits would you be able to realize without fully consolidating and controlling it?

Look, I think we have an interesting position to watch what's going on at iHeart. I think, obviously, COVID impacted them quite a bit. They've done some interesting things around podcasting. But I don't think we're in any rush to move on iHeart. I don't think that's the front-and-center priority, and I don't think we're at risk. Even though somebody else did some kind of investment, I don't think that's at risk of trading away. There are a ton of synergies between -- on the ad tech side, on the tech side in general, on ad sales between Pandora, SIRI and iHeart that would be interesting. But I think we've got a lot of other priorities as well. So it's certainly not front and center right now.

Okay. Okay. If you look across the value chain of the music and audio entertainment industry, which parts do you think will see the greatest intrinsic value creation over the next 5 years or so?

I -- look, I think the -- I'll go the other way. I think there's a run here for the publishers, but I think that they've got a changing landscape that the longer term will be interesting to see how that moves. Content creators, I think, will continue to do well. At what scale they'll be able to pull it off, we'll see. But I feel good about our position. I think we have a huge brand recognition, huge value in the car, growth opportunities, both on the mobile side of the business and in the ad tech -- ad-supported side of the business. So I'm quite bullish on where we are with SIRI.

Maybe to follow up on your comment on the publishers. How do you see the relationships between the publishers or labels and the artists and the music distributors changing in the future, if at all? It sounds like -- do you think it will change?

I think it will fracture a little bit. I don't -- I think they will lose their market share. They've had a great run. Streaming has been a huge benefit, but I think they will lose their -- some of that share over time and that will fragment.

Okay. And I can't not -- I can't have a conversation with you without asking you formally about the NAV discount at Liberty Sirius. So you've taken some steps to take advantage of it through share repurchases, and that discount has come in somewhat. Will you continue to take advantage of the discount at these levels? At what point does it become maybe if you take your foot off the gas a little bit?

Absolutely. And I think you rightly pointed out, it only gets more efficient for us once we get to 80 at SIRI. So we have roughly a 7% drag or something like that for taxes. It will go to 0. And maybe SIRI finds it attractive to buy Liberty SIRI. Maybe SIRI finds it attractive to grow their dividend stream, knowing that, that 90 cap on our ownership is something to consider in the future. So all of those, I think, are going to give us more fuel, more opportunity to go after that discount. And again, when you buy your stock back, are you doing it to buy that cheap? Or are you doing it to get your stock price up? Well, in some cases, it may be a little of each. But we're going to take advantage of that discount for as long as we have -- can because it's cheap.

If Sirius were to increase the dividend substantially, obviously, the pace of your ownership create flows. But then you have a lot of cash. And so how do you weigh buying back your own stock at a discount versus maybe getting yourself to that 90% so that you can execute the short-form merger?

Look, I think that will be really driven. We don't set capital policy. That's really set by the Board, and the Board will drive that. But we'll take advantage of the opportunities presented to us, i.e., there's benefit in getting to 80. Well, maybe there's benefit in getting 90, not as obvious. There's clear benefit to continue to buy back stock, our stock at a 30-odd percent, 29% discount, whatever it is. So we'll try and take advantage of the cards we're dealt.

Okay. Maybe shift gears here to Liberty Broadband. You recently reached an agreement with Charter that will require Liberty Broadband to sell Charter shares into the buyback in order to avoid tripping the ownership cap. We're not used to seeing Liberty sell shares of large strategic holdings. So I guess I'm just curious, is this the only option that you could go with if Charter is going to continue to repurchase shares? You couldn't agree to just cap your vote or anything?

We talk to the Charter independents about various options, and they presented us ideas about going higher. We looked at those and said, actually, given the 18-odd percent discount and the only 5.5% tax leakage we're going to have this year, that sounded pretty attractive. And so if people are questioning whether we're willing to go after discounts, watch Liberty Broadband, where we're spending a lot of money and to spend a lot more money to go and take advantage of that discount.

Curious on that 5.5% tax leak that you mentioned on the Charter sales. Is that the tax rate on the gain? Or are you just expressing the tax leakage as a percentage of total proceeds for simplicity purposes?

For simplicity purposes, that's the leakage on total proceeds.

Got it.

So that really compares to the 18. You're 5.5 leakage, 18% discount. I got that 13, 12.5 spread, I like it. So we're going to go after that.

Okay. What are you -- you just answered that question. What are you going to do with the $2 billion? So now we know that. What are the potential path to consolidating Liberty Broadband with Charter tax efficiently longer term, if hypothetically, you were to consider such a move?

Look, we've seen us do it in the past. We merged our stake in DIRECTV into DIRECTV, tax-free. We merged our stake in Expedia and Liberty Expedia into Expedia tax-free. I suspect there'll come a day which we merge our stake into Charter. But -- and there are reasons why the Charter Board and management probably would consider that good corporate governance. We have a bunch of governance rights. We have a bunch of preemptive rights. I think we've had a good relationship, witnessed the partnership, for example, we're doing on comScore with Charter. But there are also reasons why Boards like to get rid of those kind of arrangements. So we will take advantage of the discount, buy back stock and if somewhere down the road, they're -- I suspect there'll come a day in which we merge our interest into Charter the way we did all those others. But that may be tomorrow, that may be 10 years from now. I don't know which day it will be.

Okay. And your investment in Charter has obviously generated great returns for Liberty shareholders over the last 8 years. I think the original investment based on that, it's a cumulative 550% roughly return. Are you in a...

[ 1 05 ] and [ 1 95 ].

Okay. Yes, I was only doing it on the first one, so -- but still probably a solid 500. So pretty impressive. Are you still bullish on Charter, given where the valuation is today? Do you think there's anything that's misunderstood or underappreciated by the market as it relates to the outlook for cable?

Look, you're -- based on historical multiples for cable, the business looks expensive, but it's not the business it once was. It's a broadband business today with much lower reliance on third-party content. It has much higher returns on invested capital with DOCSIS upgrades. It has a much more secure position, I think, in terms of its competitiveness in some of the markets it's in with less competition head-to-head and more opportunity for growth. We saw how vital a serve it was during -- vital a service it was during COVID. We've seen the increased demand both for more lines and more capacity. And I see the opportunity to have very attractive returns in the mobile business alongside to further pull along our broadband business. So -- and as a result of all those things, the free cash flow has come up dramatically. That's partly a function of the return on invested capital, as I said. So all of those things, say, when you look at historical cable multiples, they're not relevant to today's business. And today's business is a much more attractive, secure business than the cable business of 10, 15 years ago. And I've had the joy of investing twice major runs in cable. When I was at Microsoft, we put the money in Comcast at 7x EBITDA when it was [ through ] at the low end and started off a run. The business that we invested in at Microsoft had a nascent little piece of things like at home. Today, that's the majority of the EBITDA at what's Charter. It's a different kind of a business. So I've seen the changes in the business are manifest, and I feel very good about the positioning for Charter.

Yes. That was the set-top box player, right, for Microsoft back then?

It was much -- really what we -- it was much about [indiscernible] to control our at home. That's really where we would -- or not have at home -- or close to us, I should say. We saw that as we were not having it foreclosed.

Right. Okay. Interesting. I have a couple of questions on Trip from the audience. So I'm going to throw them at you. So first, Liberty Trip, what is the latest on how to pay for the Certares dividend and put option? What can or will you do to close Liberty Trip's very large discount to NAV, which has been over 30% for a while? There was even a Barron's story today highlighting the big discount.

Yes. So a couple of things. First, it's a little weird, the discount [ on attack ] because if you look at the B price, which looks bizarre, because it looks so out of whack compared to the A price, it's not clear what the discount really is when you take those blended prices, okay? The other thing I'd note is Certares has had a great run. They invested their capital at the bottom. They helped us. They profited. And God bless them. They're a great strategic partner for the things we're doing around TripAdvisor Plus, some of the things we're trying to do with some financial partners. And I think Greg O'Hara and team are pretty happy with what's going on at Trip, pretty happy with going on at Liberty Trip. We don't have to pay that dividend in cash, that dividend compounds. And they really get the lesser of 8% of the gains. And believe me, the gains look like more than 8%. And so they're going to go with the gains. I don't -- they -- it's a 5-year instrument. They do have the right to put early. I think they're pretty bullish about where the business is going. They have been involved in strategic negotiations on things like Hertz. I think they value the Trip relationship not only for what Trip is doing and what they can do with Trip or what Trip can do with some of the other companies they have in the travel business like the Hertz investment they're trying to make. So I think it's a good relationship. I'm very enthused for it.

Okay. And then we have a couple of questions from people who would love to know what you think of the performance of some of the media stocks, cable network stocks and what it implies about the success of their direct-to-consumer services. And if you care to give any thoughts or opinions around that topic.

I'm surprised with some of their success. I understand they may have gotten too cheap. In some cases, they look pretty expensive now. When you're still trading out my comments earlier about how many services everyone is going to have, I still think that's true about video services. And in many cases, you're trading out high-margin dollars from cable providers like a Charter for more work going direct and lower margin dollars going direct-to-consumer. The market is in love with DTC. There's some love with sub numbers. But I'm not sure all the math is going to add up, but we'll see. The market has certainly given them a lot of credit.

Okay. All right. Well, we're coming up on our time here. So why don't we wrap up unless you wanted to make any closing comments?

Well, thank you for your interest in all the Liberty companies. Bryan, thank you for hosting us. And I hope next year in person down in Palm Beach.

Me, too. Thanks very much, Greg. Have a great day.

Ciao.