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

Great. We can get started. I'm Kurt Simon. I'm Vice Chairman of Investment Banking at Goldman Sachs. And welcome, everyone. I want to thank you, Greg, for being here. It's an honor and a pleasure to have this conversation today. And maybe we'll start. A lot has changed in your portfolio last year. You had a very active year, think about Vegas, MotoGP. Congrats on completing the Sirius transaction last night.

Spun the Braves.

Spun the Braves. I guess, a typical Liberty year, but maybe we'll start there. What's your thought on your portfolio? And what have you accomplished in the last 12 months?

Volume is high volume, maybe you could turn down just a little bit. It seems like I'm in an echo chamber. Look, it has been a busy year. I think you're seeing us trying to hone the portfolio and make it more focused on the things where we've had strength and success. And excited about the opportunities.

So let's start on convergence between tech and media. I think most people know you. Obviously, you spent time at Microsoft. You spent time at Oracle. A lot of your career, obviously, is on the media side. Give us a sense for how that convergence is going. It doesn't seem like traditional media is faring too well, but maybe start there.

Yes. About 10 or 12 years ago, I used to have a slide presentation which said, "Tech Godzilla Eats Media King Kong." It's not even a fair comparison. I remember, I was a CFO of Microsoft 25 years ago, we had over 50% of our profits outside the United States. There's no media company, even Netflix, can manage that. It's just a different scale. And the size of these businesses and their ability to pull levers is way more powerful than what media companies can do, which tend to be either domestic only or regional. They may have some international arms, but it's not even the same comparison. And so yes, you're seeing the tech guys obliterate much of what is traditional media.

Right. So when Skydance bought, I guess pretending you're Paramount, they made a big deal about bringing new tech to the studio, in the cloud, rethinking a tech stack at Paramount. Any thoughts on that or further consolidation on the media side?

Could there be big cost savings potentially in the content creation through AI? Yes. Do I think Paramount or Skydance is going to have a unique opportunity there? No. I think that's unlikely to be a unique opportunity. I think there could be some reductions, but I don't think it's going to change the landscape dramatically. And I think that continued drive of a world from incredibly stable, growing cash flows, when you had cable bundles, to far more volatile world with 1 winner in Netflix and a couple of guys that can afford to be long-term losers or monetize in other ways, in the Apples of the world or the Amazons of the world, nothing is going to change dramatically, I don't believe.

Yes. So streaming economics, is it a bad business or a good business with too many competitors?

When we talked about the circular firing squad, why I described it as, because you went from a world of incredible stability with a cable bundle to where you have amped up. We may have passed peak TV, but we went from 200 original shows, 250 original shows a year, to 599 at peak and cost per hour going up 2x, 3x, 4x, that's a recipe for an upside-down business model, particularly one where the ability to churn off is so much easier on these tech models. So I don't see that changing. Is it a terrible business? Remains to be seen if it gets down to a couple of players whether it's a good business, but it will unlikely to be as good a business as what it replaced, which was a much more stable cable bundle with a lot less money being spent on content.

Now you have a renewal coming up with ESPN in Formula One at some point, like relatively soon.

Through the end of the '25 season, we're committed to ESPN, but then we open up.

And we saw what happened with the NBA and obviously, Amazon, NBC, Peacock. Could we see F1 on the streaming platforms in the future?

So a couple of thoughts there. First, we're going to be renewing off a 3-year deal, not an 11-year deal. So I would not expect to kind of just mathematically like a potential uptick because the CAGR is too low off a 3-year deal. There'll be a lot of questions for us to weigh. We have interest from streamers we've had in the past with the breadth of their platform. We're relatively unique among sports that at the league level, we have a very important sponsorship business. And so we want breadth. It's important for that sponsorship business. We're relatively unique in that we're still on the right side of growth, much more than many other sports who've had lagging numbers in terms of their TV audience or their growth compared to us. And so we definitely wanted to see probably a shorter deal unless it's particularly attractive. We have our own F1 TV product. How does that get incorporated? That's been something that's been very powerful for our hardcore fans. Is that something that gets subsumed? Is it something that's apart? How much are we on linear versus that? All those questions, I think, are open. The NBA was very fortunate in terms of when they timed their deal, what was going on in the marketplace, what the needs of some of the bidders was and what the motives of some of the bidders were. That was very favorable for the NBA and they capitalized on that. We'll see if we're as smart and as lucky.

Sports rights in general, some say they've been a peak. I think the NBA would say particularly about it not being at a peak. But if you look at the Premier League, I think last year...

Premier League effectively went down.

Effectively went down a little bit. Got more games but keep at the same price. But if you think about across the globe, and sports rights in general, do you think we're getting close to peak pricing?

I think it very much does depend on the sport. I'd like to think we're on, as I said, the right side of the curve in terms of growth, in terms of the quality of the audience, the age of the audience. We're among the youngest audiences out there which is attractive for sponsors and the like. So I think we're on the right side of that. I think you have to weigh. It will be interesting to see, how do you weigh a world where, in its fragmented distribution channels, you can get a bit up, but how do you see your product be seen by enough people? You're weighing that all the time. You see that already. The RSNs, I think, in the L.A. market, only 35%, 40% of the people can see the Dodgers. Is that long-term healthy for the sport? There's a lot of challenges around things like that. So you're always going to weigh what's your ability to be seen, what you can get paid. And I do worry with that fragmentation that, that hurts sports as much as it may help in the interim on bidding up of pricing.

Sticking with sports, new growth opportunities for Liberty in general. When you think about esports, women's sports, I assume there's a long runway still left in sports in general, right?

I think there's a long runway in sports, and I think there's definitely a longer runway in women's sports that's historically somewhat lagged in viewership, which is changing, obviously WNBA leading the charge, becoming way more popular on a relative basis but definitely lagging in terms of monetization of their popularity. So they both show a rising popularity and the potential to monetize far better. So we've talked to several women's leagues and opportunities we find very interesting, and we're certainly looking at those closely. I don't think it's a fad. I think it's going to continue for a while.

What about college sports, I mean college football, as an example? College football roughly than NFL is under monetized, right?

Yes. I think these numbers are right. the TV revenue for the NFL is about $14 billion. TV revenue for college is about $3.8 billion. And that just seems low relative to what the opportunity is, particularly as you change from a world where it's not clear what the conferences mean, you're really talking about the top 20 teams, NIL Portal and the structure of the conferences. I think over the long term, those college football and the NFL probably come more close, if not the parity, there certainly are differential declines.

But hard to figure out how it all...

A lot to get sorted out there. Your college presidents, the pretense that there's academics involved still. It's hard to argue that when you see the portal, right, and what's going on.

In NIL.

And you see the conferences trade out, right, for money. So clearly, it's a different game.

Let's go back to your portfolio. So Sirius congrats on that. I know it's a long journey. But Liberty is involved, I know you're personally going to be on the Board, but Liberty's involvement going forward.

Liberty is no longer involved. I'm still the Chairman, but we're no longer -- I think our shareholders now are 81% of the shareholder base as of this morning, but we're not directly involved as a company.

What do you think about future opportunities for Sirius going forward?

Look, Sirius has an unbelievably secure position in the car, which is very attractive. We don't see OEMs lagging at all. We have seen challenges around the size of the SAAR, the car market in the United States having shrunk. You've seen some decline in the take rates off of free trials. The challenge there is to continue to find interesting content, to take advantage of the position we have in the car and particularly in new cars. Hopefully, some of you have a newish car with 360L, which is our capacity to both utilize the wireless aspect in the car and take advantage of our satellite capacity. And I think that's a very innovative combination. Continue to do things like Atlas, our new mobile product, which improves our pricing, packaging, allows us a lot more flexibility. So I do think there are opportunities. But we need to continue to refresh our content. We were built, as I described in an earlier session, around 40-year-old men 20 years ago. And the market has moved, and we need to move with it. And we continue to find new content that is relevant today, things like SmartLess and Call Her Daddy. And so new opportunities like that are important for us to continue to grow.

And if you look at your investment track record, I assume that would be if not the top, the top.

It's a pretty good deal. We don't have a lot of money invested. Yes, we probably have negative basis still.

So pretty well done. You see the NFL talking to private equity, maybe at the time, a top somewhere. Obviously, private equity in the PGA Tour now, too. It's probably definitely going to be a more meaningful competitor for you going forward here.

Yes. I mean throwing capital against something usually makes the price go up, we'll agree with that. Multiples have expanded unbelievably in the space, right? And that's one of the things to watch. Look what's happened in the multiple on NBA teams, dramatically gone up, maybe it's somewhat around anticipating this kind of contract that they did sign for TV. But NBA teams trading at 10x, 12x revenue, that's a large uptick from where they were. Baseball teams have gone up a bunch. It doesn't seem like forever that these things can grow. But well, I think the rates, they'll probably have growth, but it's probably a decline rate from where they were on some of those traditional leagues.

Yes. And I think the NFL is probably more just -- not that many people could afford those kind of checks anymore, right? It had to bring in capital.

Yes. If you're talking about $8 billion, $7 billion per team and 1 person had to write a 30% check. That's a pretty liquid person.

All right. Let's move over to F1. Talk about the ecosystem and how it's doing and how it's changed since your stewardship?

We are blessed that it's gone up a lot. Average attendance across last year was 6 million fans, up from 3.8 million in 2017. We've gone from 20 races to 24 this year. We've increased revenue dramatically, including consolidating our own managed race, our own promoted race in Vegas. We've seen EBITDA more than double. So a lot of positive.

Team values.

Team values, when we were involved, the Manor was the last team, and they went into receivership, the U.K. equivalent of bankruptcy, and then were sold for GBP 1. Now the bottom price in a team is certainly over $1 billion. So there's been a huge growth. Aston Martin just raised money at a valuation rumored between GBP 1.6 billion, GBP 1.8 billion, GBP 1.9 billion, so up a lot from where it was. I think that was bought by Stroll for probably $150 million or something like that, 7, 6 years ago, so dramatically increases.

So Vegas was undeniable success at year 1?

Look, there was always growing pains on a new track, on a new experience, but I think, in general, very well received by viewers, very well received by the drivers. A great race in terms of more overtakes than any other track we had last year, so very exciting. The second place finish got down to the last lap, so great. Definitely expanded our universe in terms of global sponsors. There are a bunch of people who came in largely on the back of what we did there: Amex, T-Mobile, Google Chrome. Now most recently, you've seen us bring in Santander. I think a lot of those global sponsors would not have come in with what the exposure we gave them in Vegas, and I think that's been very attractive.

What should we expect differently for year 2?

I hope we don't have a Thursday night challenge on the track in terms of locking it down, manholes and the like. But I think you're going to see us have better manage costs because we've learned things. I think you'll see a great spectacle, great racing, hopefully even better racing. But I think we've learned to manage our costs there and understand what to do. We were blessed last time, actually. Getting around was pretty easy, at least from people I spoke to. The movement was way better, for example, than the movement during the Super Bowl. We did well on traffic flows. We did well in waypoints. I think that will be a positive. I think we could probably find places to make all as good as it was, but at a more cost-effective price.

If you think about F1 going forward and kind of keep growing the ecosystem, sponsorships, premium hospitality, is it still a long runway ahead of you?

Certainly, on some of these, you can see, if we continue to drive viewership, we're going to continue to drive increases in what we get paid in media rights. We continue to see increased interest from promoters. South Korea, Thailand, Rwanda, South Africa all want to race and the opportunity to bring races to those places at attractive prices for us is real. And the pressure we've created, the success of Vegas in terms of creating a high-end experience, success of Miami, all of that has raised the bar for all of our promoters. And they're all expanding. As I mentioned, how much we've grown the audience, 3.8 million to 6 million. They're finding ways to make it more of a premium experience on top of the growth. And that enables us to get a better price out of them, we get more money out of them because it's attractive for them as well. And then lastly, sponsorship, certainly for '25 and '26, I feel a big tailwind. We've reached a certain point where we're expected to be a global play that people know is a quality play, and that's worked very well. The fact that we've grown the audience and driven it younger is something that definitely appeals to our sponsors as well.

You bought Quint last year in the theme of premium fan experience. But talk about what you're doing with Quint, how important that is to driving fan experience?

So Quint is a company that packages up and creates hospitality packages for leading sporting events, including F1, but also the NBA All-Star game, the U.S. Open, the Kentucky Derby. And that bundling will include a ticket perhaps, travel, lodging. But also when you get to the site, things like dinner on the track on Thursday night before the race, a garage tour, a hot bath, a track tour. And it bundles those kind of experiences up and, it does the same thing at these other kind of supporting events. I would say Quint has been great for us in a bunch of ways. First, our business is becoming much more direct to consumer. And understanding what our fans want and offering them choices and understanding better how to meet their needs, Quint is a great arm for that. Two, allowing us to rationalize ticket sales between us and the teams and bundle up correctly and think about how to manage the whole prospects, the more data we have, the more direct touch we have, the better. Three, it's allowed us to look at other sporting events and understand what's going on. One of the things we knew more about MotoGP, frankly, is because of what we knew from Quint. And I think our ability to improve ticket sales and improve how things are done at MotoGP will be helped by our experience with Quint. And as we look at other sporting opportunities, I think we can help there as well. And finally, Quint has its own growth opportunity, even where we're not involved, the success they've had with Formula One, the success they've had with Kentucky Derby, they've got a great growth prospect to offer other sporting events and make them better. Had discussions with people like U.S. Ski, won the U.S. Open most recently. All of those, I think, opportunities are ahead of them still for new sporting events and new kinds of great experiences.

And I know you get asked, every time you're up at events like this, about the Concorde Agreement. And anything you want to comment on?

Yes, I think we're reaching some consensus with the teams about where to go. I expect it's hospitable. It's not something we need to rush, realizing we still have more than a year left on this one. But we're working to go with an early renewal. The team see the benefit of that. And I think it will be relatively in line with where we were in terms of most of the terms. I don't expect our percentage take rate to go down. but the teams probably are going to fight not to have it go up too much. So that's the challenge.

MotoGP, which you kind of referenced here, talk a little bit about it. I know that's an asset you guys have coveted for some time, but rationale for that.

Yes. I think MotoGP, I'll start with it's an unbelievably exciting product. I don't know how many of you have seen the racing, but to see people driving motorcycles 220 miles an hour 6 inches from each other, it's wild. And the overtaking there is incredibly impressive, and it's an exciting product. It's unfortunately one that is too little known here in the United States and around the world. There's interest in Asia and other places. But the real heart of it has been Spain and Italy; to some degree, France. I think the opportunity to expand it, and I would call it -- our opportunity we saw was sort of pattern recognition. We saw what we were able to do with Formula One by telling the stories, making them humanized, making the story larger than just about the car, the technology, but also about what the drivers were doing, what was going on behind the scenes, telling those stories, making sure the world understood the breadth of what was going on. But also, we did a lot to improve things, and credit to guys like David Hill improving the TV experience, improving what you could see on the screen, making our fans understand the story better. All of those are things that can be helped here. And I think, frankly, growing in the U.S. They have 1 race in Austin for which they received relatively modest revenues from TV and the like. I think there's an opportunity to improve that, the opportunity perhaps for a second race in the U.S. All of those, I think, are interesting in ways that look familiar to us from Formula One and hope we can replicate here attractively.

You talked about the importance of being a league-level owner and the economics. Maybe talk a little bit about it.

When we announced is a great example. We had immediately people call up and say, "I want to buy a team," including people like Lewis Hamilton. Why? Because they saw what had happened in Formula One and they want to follow. We had major distributors calling and say, "We want to be involved." And unfortunately, I had to tell them, "Well, we really can't talk about until we get EU approval, but we'd love to talk once we get it." I think there's an opportunity when you're at the league level to take advantage of those changes that you can make. When you're at a team level, in general, teams don't cash flow as well. Not absolutely true. NFL teams cash flow pretty well. But in general, trade at really big multiples of cash flow and we're still too traditional in wanting that cash flow. But in addition, your ability to change the dynamics, to set the stage and do the things that you want are far better, far easier, more manageable still takes time, but you can get it done at the league level in a way it's very difficult at the team level.

You recently completed equity raise at the Formula One level. Do you want to talk a little bit how you're going to finance MotoGP and just broadly capital allocation for F1 going forward?

We have lowered the leverage at Formula One, the parent, dramatically over the last several years partly through success and partly through generated cash flow. To finance the $4.2 billion purchase of MotoGP, we raised close to just under $1 billion of equity money, and the rest is going to be financed on our balance sheet and their balance sheet. Leverage will still be relatively modest compared to the historical numbers, which have been managed at both companies. And I think for a little bit of time, we'll focus on cash flow management. But we've run return of capital through equity repurchase and that's certainly on the table. But we'll also look at other synergistic opportunities. We have returned capital, and we do expect there'll be a repurchase of our stock in the future. That's been a Liberty hallmark. And I don't want our shareholders to think that's something we're walking away from.

On the Braves, which you mentioned, you spun out last year. Your role recently changed. Anything you want to say there?

Yes. We spun them out just over a year ago. And we really moved to a full transition where Liberty is no longer supplying many of the corporate services we had been. And I think this is really part of John Malone recognizing the good work that Terry McGuirk and his team have done there. He's given them a proxy on his stock on some voting rights that he has. And the Braves are well set up for the future and what comes what may.

Let's go to Liberty Broadband and coming back to what we talked about with what's going on in the media ecosystem. I know a lot of people here could not watch the Jets-49ers game. And I saw the Disney offer to put ABC News on for a 3-hour block, so people here could watch the debate, your DIRECTV customers.

Which is kind of funny because one of the few things you can watch on how many channels, right? That's not limited. It's not an opportunity. It's unique.

And obviously, you have the Charter side, you guys were involved in that last August. But what do you think about the DIRECTV-Disney dispute? And is that, I guess, a sign of things to come? I mean, I would have thought it would have ended before last night, but...

Yes, I think these things are going to get more and more bloody because you've seen the cable networks push up prices and push for full carriage in a world where that's not necessarily what customers want, and that's not necessarily what the distributors want to package. So that tug is going to continue. One of the other things that's going on, and you've seen this from the Charter side, is much of the great content that is produced by these people is now on their streaming product. And that is a case where they're, in some cases, been trying to charge more for the linear channel to the distributor than they charge for the stream product to a retail customer. And that doesn't really work. The distributor, he's not going to pay more than the retail customer if it's not very interesting to distribute the product. So that tension is ongoing. You've seen that at Charter with other people. And so making sure that Charter has not only attractive pricing but all the best content, including that which is on the streaming product, available to their customers and wanting to be a good partner and help resell that streaming product is something that Charter wants but not to pay more for something that's a lesser product.

Yes. For sure. Sports bundle, Venue, I guess, is pending in the court. I don't know if you saw the New York Sports next put together like a New York Sports bundle, I think $50 a month, something like that. It wasn't cheap. If you want to watch the Mets and Yankees and Rangers and Knicks and Nets. But is there a role for sports bundles here, I guess? And how big is that audience?

We'll see whether Spulu, Venue or whatever...

Venue.

Spulu, Redux whether that comes back or not. Obviously, there are issues around the packaging, both in terms of what customers want. But now, as you've seen, they've found a judge, Fubo found a judge who found it compelling that you were arguing you can't rebundle that way for Fubo but you can for Spulu. So I think there's going to be a lot of turmoil here, whether these products are really going to be attractive at these kind of prices for incomplete sessions. There is demand for sports, but it will be tested.

So back to Charter, you saw T-Mobile has been active buying fiber companies. Verizon obviously bought Frontier, announced it actually, Frontier last week. What are you seeing competitively with fixed wireless, fiber and the Charter footprint? Does cable need to have an owner's economics in wireless at some point?

Well, I would flip it a little bit. You've seen some reduction in fiber builds over the last several quarters. It's been sort of trending down. And you saw actually a peaking of fixed wireless access several quarters ago. It's been holding more steady. But neither of them appears to be growing. And I actually think the efforts of the wireless companies to expand their fiber footprints, or their fixed footprints is the more interesting. It's not that do we need a mobile play that's our owner of, do they need a fiber play that's broader. And I think what you're seeing is they recognize there's only x amount of design, desired access for fixed wireless access for that product or their ability to actually go out and build that they have to go find partners. So we'll see.

Moving to Liberty Live. It seems like a lot of tailwinds behind live entertainment and concerts. Any sign of that abating?

Not really. I think Michael Rapino spoke this morning. I don't know if some of you saw it, but demand remains very high. This year has been a year which is less revenue growth just because of the nature of the mix, fewer stadiums, but a lot more profitable on smaller venues. Next year is going to be a big for tours. I think they're well set up for next year and see demand already coming through on that. From 2019, EBITDA is going to be up multiples, not quite multiples, but approaching multiples. It's been a big tailwind post-COVID.

People want to spend on experiences, right?

Experiences remain strong. And I think that we molted a lot of our portfolio away from things like video several years ago, looking at experiences, so investing in Live Nation, investing in Formula One, owning the Braves. We've had a great run on the experiences and the live experiences in sports side because of that.

And ticket pricing at the concert level here to stay at premium levels?

I'm shocked that prices go up when there's excess demand compared to capacity.

It's got a math, right?

I'm particularly surprised. And that used to be captured by the scalpers and increasingly, artists want to capture it themselves. And that's what the dynamic pricing or letting higher some of the market price, then capture a certain percentage with market price. That's what's going to go on. I don't think the artists feel good about the high price for every ticket, but they also don't feel great about seeing it captured by scalpers and third-parties and not the artists themselves.

And I guess from a structural perspective around Liberty Live, what do you see about optionality down the road around that?

I think there are a lot of things. You've seen us take action at things like Sirius or the Braves to try and capture that value. And there are ways through spins of the like, combinations, that I think you'll see us over time move to capture the full value of Liberty Live. And it does trade at a large discount to the underlying stock. And you've seen us take that action. I wouldn't be surprised, over some period of time, we take action at Liberty Live.

Maybe the last question I have is, so we're seeing a recovery in the M&A market off of a low...

I'm sure that makes you unhappy, Kurt.

So it's up about 35%, but off a low base, right? But we're still well, well below where we were in '21. And I guess, if you think about the opportunity set going forward for Liberty Media, are you as excited over the next 3 to 5 years as you were if you go back kind of pre-F1, pre-MotoGP?

Yes, I think there's a lot of opportunities in the spaces where we've been focused, around live events, growing out the portfolio, doing things like the Quint that edge out on it, looking for other opportunities to take advantage of some of the success we've had with Formula One. So we'll see. We're not in any rush. We have a great portfolio there, but I do think our ability to add to that is attractive.

Braves in or out, wildcard.

Well, they may make the wildcard. The question is whether they make it on the first top 2 or not. That's a little more challenging. We'll see. They're right on the bubble. It's not been an easy year with injuries, as you know.

Listen, thank you.

Thank you, Kurt.

It was a pleasure to have you.

Thank you, everyone. Thank you.