Liberty Media CEO Greg Maffei on Google, Spotify And Mergers

The following is the unofficial transcript of CNBC EXCLUSIVE interviews from Liberty Media Investor Day across CNBC’s Business Day programming today, Thursday, November 21st. Greg Maffei, Liberty Media president and CEO, discusses growing media consolidation and whether the company plans to buy back more stock.

Liberty Media CEO Greg Maffei

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Liberty Media CEO Greg Maffei on media mergers

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DAVID FABER: Welcome back to “Squawk on the Street." I’m David Faber at Liberty Media’s Annual Investor Day. And it is an annual tradition as well to be joined by Greg Maffei, the company’s CEO. There was a time when you would come on more than once a year. I don’t know what happened.

GREG MAFFEI: I don’t get invited, I think.

DAVID FABER: That’s not true at all. You’ve made yourself scarce. So many different things to talk to you about in terms of the portfolio. It’s funny, we started a year ago the same place I’m going to start now which is Sirius. Which has been doing very well, I know you will point out –

GREG MAFFEI: I don’t have to. You’re doing it for me, thank you, David.

DAVID FABER: There’s always that discount and you guys continue to buy back shares of the tracker. You are at 71.5%. Are you just going to keep buying it back?

GREG MAFFEI: Well, two things are happening. You noted Sirius is buying its shares back and actually we today are issuing an exchangeable – exchangeable in a series stock and they are buying the underlying shares for the hedge fund buyers who are hedging the stock out. So, they’re continuing to buy back. That’s pushing our 71.5% or something up.

But, in addition, as you rightly noted our tracking stock trades at a discount. We bought back, through the end of the quarter, $860 million of the stock, we have a $350 million profit if you look at the underlying Sirius shares.

So, we like that. We own about $22 billion worth of Sirius stock. And the cumulative or the absolute discount is about $6 billion. So, we are going to keep attacking that and buying that. If the market is going to give us the Liberty shares – the Liberty SXM shares cheap we are going to buy them back.

DAVID FABER: But it has--it persists. It just doesn’t seem to go away.

GREG MAFFEI: Thank you. Just keep--

DAVID FABER: Do you wonder why, though?

GREG MAFFEI: I think we’ve talked about it. You know, Siri has more share buyback. It’s a harder borrow to borrow against the Liberty Siri. To orbit out. You know, a bunch of things like that. But, I – you know, we just take advantage of it. We try.

DAVID FABER: You’re Chairman of Sirius still, as well.

GREG MAFFEI: I am.

DAVID FABER: Let’s talk a bit more about the business itself. Everybody wants to talk about podcasts right now. I mean, even Daniel Eck joined us on set six months ago to talk about Spotify’s efforts when it comes to that. They’re spending a lot of money. You guys are moving into it at Sirius.

GREG MAFFEI: Pandora is big in it.

DAVID FABER: Pandora is big in it. What does it look like in terms of the spending going on? I mean, some people want to equate it to the streaming wars right now, in terms of the spending on content and the profitability that it will bring.

GREG MAFFEI: Well, as you know, we have our Investor Day going on and I usually try to give a think piece. Last year’s think piece was why the video scripted content business is a horrible business. This year is why the audio business is not like that. Not only is there upside in viewership -- listenership and the types of content including podcasts.

But they’re under monetized, I think there is an opportunity to see increases in how podcasts and other forms of audio content are monetized. But to your point, the cost structure is way more attractive. Yes, there is a little bit of a bidding war for audio content. But you can’t spend on audio.

You know, a great podcast might be $250,000 a year, an hour of one of these high-end shows could be $10 million. So, your -- the numbers are so far apart. And the war is way less. And the good news for us is we are a serious player in audio.

DAVID FABER: Yes, you absolutely are. So, has the music become almost a commodity at the point? And then the differentiator is the podcast?

GREG MAFFEI: Your point is right, exclusives are what you want to have and there are different forms of that. We have exclusives obviously in things like Howard Stern. We have exclusives in the fact that you want to listen to CNBC in the car, we are the way to do it. ESPN and the like. But you’re right, podcasts are a piece of that. And more and more, we have an exclusive with Marvel. We have an exclusive with Lebron James called Uninterrupted. Lots of things that are unique just to us.

DAVID FABER: I don’t want to steal all the Jim Meyers thunder because he is going to join us as well. The CEO of Sirius. So--move on to some of the other parts of the portfolio. One that hasn’t been as good, TripAdvisor. I was talking to Malone about this as well, you know, Google changes their algorithm and suddenly everybody is discombobulated. What can you tell investors there in terms of the hotel click-based auction system not working as well as it has, experiences not growing as quickly and what your expectations are for Trip to turn around?

GREG MAFFEI: Well, I think a couple things are happening. I think, Trip has always had an enormous audience of interested people who want to travel. Historically, our best monetization method was that hotel auction, as you point out. Google has made that a lot harder.

Why? They’ve pushed free search results down the page, particularly as you went desktop to mobile. And they put their own travel on top so we’re competing with them directly. And that has happened, you’ve seen reduced results therefore, for everybody, the OTAs and people like ourselves. But we’ve seen growth in other forms.

We’ve seen growth in our direct advertising business, we’ve seen growth in our restaurants and our experiences business. And, yes, there’s competition in that space but we’re growing nicely there. And, you know, despite the challenges we have great strength in the audience and we have great strength in, you know, how much free cash flow that business is still generating.

DAVID FABER: But should it be viewed as a free cash flow generating business as opposed to a growth business at this point?

GREG MAFFEI: We have growth in certain aspects but we are going to fight challenges in the auction market.

DAVID FABER: You expect that to continue.

GREG MAFFEI: Yeah, I don’t think Google is going away. I’d like to see the government something about them but I’m not sure I’m counting on that.

DAVID FABER: Because the platform is so powerful and changes like that can take billions of market capital away interest Expedia, Trip, and--

GREG MAFFEI: And the platform is their platform and they are putting their app on top. When I was at Microsoft we went through this. I know, the government if it gets to be involved, it will be a different matter.

DAVID FABER: Right. And particularly, again, you made this point but you’re doing it on this now, as opposed to your desktop so you just don’t have the room.

GREG MAFFEI: Screen space a lot smaller, exactly.

DAVID FABER: Formula 1.

GREG MAFFEI: Yes.

DAVID FABER: What can you tell us there in terms of what investors should look for the year ahead that’s going to continue to add value to the company?

GREG MAFFEI: Well, Chase Carey just spoke, and he made some great points. We invested, when we bought this in about business in 2017, we invested in a whole bunch of initiatives around marketing, around research, about building the fan experience. And that’s really begun to pay off. And you can see,  you know,the leverage is down because of our free cash flow. We have just cut a new deal with the FIA, the regulator, that will set forth we think better on-track performance that we think equalizes some of the payments. All of that is going to be benefit. I believe Formula 1 is poised for success.

DAVID FABER: Why?

GREG MAFFEI: Well, because we’re seeing growth in fan interest, we’ve seen attendance up, we’ve seen viewership up, we’ve stabilized and set forward a much better regime going forward to make it more compelling than it already is. We see opportunities to monetize it better. I’m excited.

DAVID FABER: You’re excited about the future for Formula 1.

GREG MAFFEI: Absolutely.

DAVID FABER: And Chase Carey, I mean, he is planning on staying with the company, for the foreseeable future?

GREG MAFFEI: As long as I can keep.

DAVID FABER: How about yourself? You’ve been doing this for a long time, as well.

GREG MAFFEI: I can’t get another job.

DAVID FABER: No? You can’t find another one.

GREG MAFFEI: No. Have you got any ideas?

DAVID FABER: I don’t know. Is Malone going to keep you around? I assume he will.

GREG MAFFEI: You know, did you ask him? He was on the list.  You should have asked him.

DAVID FABER: Yeah, I didn’t ask him that. The Atlanta Braves another thing people may not realize--

GREG MAFFEI: Better than the Mets, again.

DAVID FABER: Although the Mets did not have a bad season.

GREG MAFFEI: That’s true, if you don’t mind not winning.

DAVID FABER: Braves had a great season. Unfortunately, it ended very early.

GREG MAFFEI: It did. Wait a minute. But you, Mr. Mets fan, don’t even go there.

DAVID FABER: I really don’t like the Braves. I’m sorry.

GREG MAFFEI: I understand. I really don’t like the Mets.

DAVID FABER: I don’t blame you. You own the stadium, too. What are the trends there that you’re seeing? I mean, are you going to have to spend each more in free agency to make that last leap into the World Series?

GREG MAFFEI: Well, you know, we are well set up, as you know, with great young talent, observing in a Ron Acuña Jr., Yordan Alvarez, obviously Freddie Freeman. But, in addition, we just Signed Will Smith, probably the best reliever in baseball. Yeah, we’re going to spend some money. And we have relative freedom under the cap and in our payroll compared to most people, including the Mets.

DAVID FABER: Okay. We will move through the portfolio. iHeartRadio, passive investment, you guys owned the debt, they came out of bankruptcy. Is that something you could see taking control of?

GREG MAFFEI: You know, we have no plan or intent on that today. We look at the radio business, terrestrial radio business, as being interesting. Respect, have a lot of respect for what Bob Pittman and Rich Bressler are doing there. So, we’ll watch.

DAVID FABER: Just going to keep watching. Do you mean it? Because, so often you hear, well, the Liberty guys might get more active here. What are you watching?

GREG MAFFEI: Their performance, how that market trends. You know, some people think terrestrial radio is going to slide the way linear video was. Others think, including Mr. Pittman and Mr. Bressler, they have got a good future. So, we’ll watch.

DAVID FABER: How do you view it?

GREG MAFFEI: Well, we own 4.8%. So, we’re rooting for them.

DAVID FABER: Right. You have a pretty darn good view, given Pandora and Sirius, in terms of the way audio is distributed around the world or certainly in this country.

GREG MAFFEI: They have a big funnel that’s very interesting.

DAVID FABER: Big funnel.

GREG MAFFEI: Yeah, a lot of users, a lot of listeners.

DAVID FABER: What do you guys own, by the way?

GREG MAFFEI: What do you mean?

DAVID FABER: What’s your economic?

GREG MAFFEI: Just under 5%.

DAVID FABER: Just under 5%. Speaking of very small--you can look at your watch --

GREG MAFFEI: I was wondering what time –

DAVID FABER: What’s the problem?

GREG MAFFEI: Places to be.

DAVID FABER: Got to run somewhere?

GREG MAFFEI: I have an Investor Day to do.

DAVID FABER: It’s all right, you can just wait a second. Speaking of small positions, you guys still own a little bit of Viacom.

GREG MAFFEI: Yeah.

DAVID FABER: Why not get rid of the rest of that?

GREG MAFFEI: Well, we’ll see.

DAVID FABER: Did you wait too long? Should you have sold it earlier?

GREG MAFFEI: Absolutely, we missed the window. But, no, we’re fine.

DAVID FABER: By the way, Malone is not doing you any favors. He was not particularly positive on the prospects for the company. How about you?

GREG MAFFEI: I think the stock has performed less well than we thought it would under the merger conditions. Yeah.

DAVID FABER: Why did you think it would perform better?

GREG MAFFEI: There are synergies between the two businesses. And we thought it would trade better than it had. We were wrong.

DAVID FABER: Finally, back to the big picture, you said a year ago you presented on what the future of why scripted television is not necessarily the way to go.

GREG MAFFEI: Yeah.

DAVID FABER: Do you still feel that way?

GREG MAFFEI: Only more so. I think we are here a year later, the OTT players, you know, Over-the-Top players, are going to put a big hurt on linear television and they are going to put a big hurt on each other, somewhat of a circular firing squad.

DAVID FABER: I know. So, when does it end? When do content prices start to rationalize?

GREG MAFFEI: You know, it’s only going to end when these large players, some of them decide to reduce or not give up but reduce their efforts. I don’t see that happening for, you know, several years. The winner here is the viewer. They’re getting an unbelievable amount of content, probably too much. No one can consume it all. But, they are getting a lot of inexpensive content.

DAVID FABER: Greg, always appreciate your taking ten minutes or so for us every year.

GREG MAFFEI: For you I will go to 12, David.

DAVID FABER: Alright, we look forward to it.

GREG MAFFEI: Thank you.

DAVID FABER: Maybe we can do it twice a year. Greg Maffei, the CEO of Liberty Media. Back to you guys.



About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver