LMCA - Liberty Media

[jay21]

Agree baboon. I recently increased my stake (before the sell off unfortunately). I don't try to predict future returns but the underlying looks cheap and the discount is wide. A recipe for outperformance imo.

[tombgrt]

+++ baboon. And if the correction continues you'll win twice with lower entry points and more/cheaper buybacks! Small position for me but it could just as well become 25% at some point.

[Liberty]

2 more billions in the repurchase authorization:

 

http://investor.siriusxm.com/releasedetail.cfm?ReleaseID=928991

[mankap]

Thanks for posting.

That should LMCA's ownership to 66%.

[menlo]

As the owner of the Atlanta Braves, LMCA must have an ownership interest in MLBAM.  Does anyone have any specifics?  I wonder what additional value MLBAM adds....

 

http://fortune.com/2015/08/05/mlbam-nhl-deal/

 

More:  http://us11.campaign-archive1.com/?u=886b833e7ee9981fff7354cd9&id=3907c988a6

[Liberty]

Toyota Selects Sirius XM Connected Vehicle Services to Provide Next Generation Connected Services for Toyota and Lexus Vehicles

 

http://www.prnewswire.com/news-releases/toyota-selects-sirius-xm-connected-vehicle-services-to-provide-next-generation-connected-services-for-toyota-and-lexus-vehicles-300144529.html

 

 

[Phaceliacapital]

More general question, which company do you guys think is more attractive in the Liberty world? Rationale may be provided but is not required, I'll do my own research.

[jay21]

More general question, which company do you guys think is more attractive in the Liberty world? Rationale may be provided but is not required, I'll do my own research.

 

LILA, LVNTA, LMCA are the three that I think might have the best returns going forward.

 

I think Broadband is also good and a little safer, much clearer path to generate returns. LVNTA is a way to play it at a bigger discount.

[giofranchi]

More general question, which company do you guys think is more attractive in the Liberty world? Rationale may be provided but is not required, I'll do my own research.

 

I always like to play it safe: Broadband and LMCK.

 

Cheers,

 

Gio

[Wilson-TPC]

LVNTA has imo the highest returns going forward.

[scorpioncapital]

Buying LNTA implies Charter price in the mid 60s. The current price is $180. Only problem is Expedia which to me looks really pricey for an online travel agency. On the other hand, they do own Hotwire which is a great product, IMHO better than Priceline.

 

 

[Bagehot]

Buying LNTA implies Charter price in the mid 60s. The current price is $180. Only problem is Expedia which to me looks really pricey for an online travel agency. On the other hand, they do own Hotwire which is a great product, IMHO better than Priceline.

 

Just hedge out EXPE if you don't like it. .16 shares per LVNTA share.

[Liberty]

http://www.ft.com/intl/cms/s/0/300f3dd6-615a-11e5-a28b-50226830d644.html

 

Intelsat looking to sell some assets to pay down debt, apparently talking to Liberty Media (LMCA).

 

[tombgrt]

Gap to NAV widening again. Also rather high gap between LMCA and LMCK in the last few days. Definitely getting interested in taking a larger position if the stock goes a bit lower! It's really odd that this one stays so cheap seeing how everything is perfectly known.

[gfp]

http://www.sec.gov/Archives/edgar/data/1335258/000110465915068442/a15-20466_1sc13da.htm

[thefatbaboon]

 

 

[dcollon]

Thank you for posting the link to the conference.

[thefatbaboon]

It's a good conversation.  Thoughtful CEO...and the analyst is pretty decent for an analyst. 

 

Never will understand though why analysts never seem to listen.  Surely when Meyer says unequivocally (and for the hundredth time) that he views their competition to be free radio the logical follow-up would be to ask him to talk about the competition with free radio in more depth.  Instead we keep hearing over and over again in every call the question about competition from streaming music services.  It's annoying - I'd prefer to learn more from Meyer about building competitive advantage versus the AM/FM guys.

 

Also, why does no one ever ask for voluntary churn statistics?  That would be more helpful than always getting stats that are heavily skewed by the typical 71 month ownership cycle.  My guess is that around 1.4% of monthly churn is from typical vehicle churn with the customers simply starting a new trial in a new car. So their goal of 1.8%-2.0% would imply 0.4%-0.6% of voluntary churn:  in other words customer life between 14 and 20 years. But I'd like to hear more data from Sirius to make sure I'm not mistaken.

 

 

[ItsAValueTrap]

Surely when Meyer says unequivocally (and for the hundredth time) that he views their competition to be free radio the logical follow-up would be to ask him to talk about the competition with free radio in more depth.

 

I'm not sure I completely buy what he says.  Clearly, some Sirius users do listen to music.  And some of them do leave Sirius for Spotify and its brethren.

 

e.g. if you search online forums and reddit, there are people who compare Sirius to Spotify (and Pandora, etc. etc.).

 

2- Sirius has some customer service issues that it needs to work on.  Here's Louis CK blasting Sirius XM:

 

Oh yes, they all work for Sirius.

 

But... they kind of have a monopoly so they can get away with this stuff for a long time.

[scorpioncapital]

I think he was saying internet music was a technology that Sirius could also offer. That Sirius, for example, has programming it could offer on a wifi / satellite combined device. The programming being the key with the satellite connectivity in the middle of the desert a secondary benefit.

 

 

 

 

[merkhet]

As someone who has also been somewhat frustrated with the way that Sirius XM continually says that streaming is not their competitor and that terrestrial radio is their competitor, I thought I'd weigh in on something that finally clicked for me when I watched the FBR video.

 

The issue isn't that Sirius XM doesn't compete with streaming sources. They clearly might at some point in time -- the issue is about content. I think that's what Meyer means when he says that his competition is with terrestrial radio. Without the ability to seriously invest in content, free streaming sources are unlikely to be a threat while terrestrial radio sources have a different model that relies on advertising to a large "listenership" to generate enough capital to invest in content.

 

Let's put this a different way. If we view "streaming" as just a "delivery mechanism" for content, in order to compete with Sirius XM, "streaming providers" would have to come up with a business model that allows them to invest in content. So, it's likely that those same streaming providers will need to charge their subscribers (on top of whatever cap-based wireless charge is incurred while listening).

 

So, what happens when (1) a large incumbent that already has a monopoly-esque position in satellite with a very large subscriber base on which it has been continually earning capital and reinvesting that capital into content competes against (2) a new entrant that has to loss-make for a while in order to invest in content? (At least, content that's worth paying for...)

 

Probabilistically speaking, the new entrant(s) is(are) likely to get crushed.

[thefatbaboon]

As someone who has also been somewhat frustrated with the way that Sirius XM continually says that streaming is not their competitor and that terrestrial radio is their competitor, I thought I'd weigh in on something that finally clicked for me when I watched the FBR video.

 

The issue isn't that Sirius XM doesn't compete with streaming sources. They clearly might at some point in time -- the issue is about content. I think that's what Meyer means when he says that his competition is with terrestrial radio. Without the ability to seriously invest in content, free streaming sources are unlikely to be a threat while terrestrial radio sources have a different model that relies on advertising to a large "listenership" to generate enough capital to invest in content.

 

Let's put this a different way. If we view "streaming" as just a "delivery mechanism" for content, in order to compete with Sirius XM, "streaming providers" would have to come up with a business model that allows them to invest in content. So, it's likely that those same streaming providers will need to charge their subscribers (on top of whatever cap-based wireless charge is incurred while listening).

 

So, what happens when (1) a large incumbent that already has a monopoly-esque position in satellite with a very large subscriber base on which it has been continually earning capital and reinvesting that capital into content competes against (2) a new entrant that has to loss-make for a while in order to invest in content? (At least, content that's worth paying for...)

 

Probabilistically speaking, the new entrant(s) is(are) likely to get crushed.

 

Merkhat - you're right.  At least that is exactly what I have understood meyer to think for a long time.  Maybe my post was unclear...my frustration is why don't we ever get a good discussion of that position.  What i mean is why don't the analysts accept that Meyer might have some idea what he is talking about vis a vis streaming just being a technology and music not being the be all and end all.  I think he is quite obviously right.  We've had iTunes, youtube, spotify etc and we have had tethering and bluetooth blah blah blah - and Sirius has flourished.

 

My BIG question for him would be how vulnerable is he if someone with deep pockets tries to compete in the national radio business.  Embedded LTE and Apps make it easier for some to try if they want.  No one has really tried to do this so far: to build a national station. Talk, Sport, News, Music etcetc.  What is to stop someone like ATT/Direct or Apple doing this?

 

You're dead right that the incumbent guy with tons of subs is massively advantaged.  I think this protects Sirius against the upstart and the medium to small.  Sirius will be able to offer much better deals and excellent audiences.  But does it protect Sirius against monsters in adjacent businesses?  So far the only good arguments I've come up with have been:

 

1.  There appear to have quite  good exclusive or semi exclusive content: Stern, Sports, etc.  But I'd like to know more.  For example, aren't a lot of local AM/FM stations going to have the attention of most of the local population who want to follow the local nfl or nba team?  So I'd like an analyst to actually try and drill down and find out how, and what, content is most potent in the battle with free AM/FM.

 

2.  The big boys - Apple, Google, ATT, Verizon - so far have not stepped boldly into content.  It is very possible that these enormous corporate entities do not want to get into bed with "Talent" who will embarrass them and tarnish mom-pop branding.  Stern talking about whores and midgets and whatever probably isn't going to help Apple's or ATT's brand.  But does Meyer have any good arguments against their entry other than this?  And, if they do come in then paying Stern 80m a year or whatever is chump change.  So my question for Meyer would be how do you defend your position if these gorillas decide to wade into the content business?

[merkhet]

I think the answer to your first question comes down to money. Take a look at the attached slide from one of Sirius XM's presentations. When you sign a deal w/ really great content, you probably have to put up a significant amount of money up front, and the other guys just can't afford to do it. (Very similar to the way that the book Ticket Masters describes how venues book artists and/or promoters book venues.)

 

As for you second question, my gut reaction is that data caps play a role. But I agree. I'd love to have an answer to that second question straight from Meyer.

[thefatbaboon]

http://investor.siriusxm.com/files/doc_news/SiriusXM-Reports-Third-Quarter-2015-Results.pdf

 

Churn back up to more normal 1.9 from last quarters unusual 1.6.  Otherwise very strong quarter.  At 24m self pay Sirius has 20% more subscribers than DTV.  (Obviously ARPU a lot less than TV - but it's interesting to note scale)  Share repurchases continuing at slightly ahead of $2bn pa run rate, and $2bn added to the authorization.  EBITDA growth is meaning that even at this repurchase rate leverage isn't increasing from the mid 3s.  Liberty up to 60.7%.

[jay21]

I started a thread on Twitter where I alluded I would post my moonshot scenario for LMCA. Here is that post:

 

LMCA: The Moonshot

 

Disclaimer: I do not think this is the likely scenario; it is meant to be what the most ideal future would look like. I am not an expert on everything in this post and some things I say can be factually inaccurate. Also, apologize if some of these thoughts are not fully fleshed out or not completely lucid. I do not like to write longer form without knowing how many people will read it.

 

I want to start this post with a review of the some of the most important assets in LMCA and then work towards what the dream scenario is.

 

Sirius XM: The most important asset in the entity. I think this is one of the most controversial assets in the Malone empire. Many people do not subscribe to satellite radio and think this can be pretty easily disrupted by streaming music (e.g. Spotify). I think every LMCA thesis should review this counterpoint because if your core business will be obsolete then there is no point in discussing any potential growth or additional levers to pull. So let’s start with the mitigants to the streaming risk:

 

Content and streaming as a technology: Streaming is merely a technology that delivers content. It is not a competitor to Sirius XM because Sirius both distributes and owns content. In a way, the economics are similar to cable. The consumer is buying a bundle of content from Sirius that Sirius then distributes to the consumer. If the bundle is valuable, SIrius will always offer a value proposition. So what exclusive content does Sirius provide? Howard Stern, sports rights including NFL, MLB, and NBA, and other premier talk and entertainment radio (e.g. Comedy Central). Ultimately Sirius will be ambivalent as to how consumers buy this bundle as long as they buy it. The bundle has remained the optimal way to monetize content and I think that content producers see this.

 

Poor competitor business models: Spotify, Pandora, etc have not been able to monetize content the same way that Sirius has. There are many great posts on this but some of the reasons are: lack of advertising uptake and lack of exclusive content. There is no differentiation amongst competitors. If you are tied to a royalty, content providers will put their content on any station that will offer them a chance for monetization. There is no reason not to; the marginal cost is zero and there may be some marginal revenue to achieve. If competitors are unable to build any type of financial strength, they cannot bid for exclusive premium content such as Stern and the NFL. I do think there’s a chance that some streamers can pull together a decent competitor but it would take Herculean effort and would not be based on premium content.

 

Lean back audience: The weakest mitigant right now. Most of the Sirius XM subscribers are in the car and don’t want to manage their content. They want to tune in and enjoy what they listen to. Sirius let’s them do this.

 

OK -  so I think they are putting out a pretty good value proposition. Now let’s turn to growth.

 

Increasing car penetration: The biggest driver of growth is more satellite enabled cars on the road every year. That means more potential customers. I think an underrated growth lever is the penetrated fleet that chooses not to subscribe to Sirius’ premium content. I don’t think this is relevant in the near term but somewhere 3-5 years from now a large percentage of the fleet will be satellite radio enabled and some of those will not subscribe. Sirius can do one of two things to monetize those non subscribers: 1) offer skinny bundles or 2) compete with terrestrial radio. Number 1 may be worrying because you don’t want to offer your customers too many non-premium options or else you run the chance of cannibalizing your own revenue. Number 2 is something that is interesting. You will be able to switch on a few channels across the country as ad-supported stations. The scale benefits may be attractive to advertisers and content providers. You can reach the whole nation through one entity.

 

Connected car and telematics: It’s hard to forecast exactly what Sirius has planned here but they may be in the best position to provide the technology to OEMs. To the best of my knowledge, no other company has the amount of relationships with OEMs that Sirius does. And they are taking advantage of that position by constantly discussing connected car options with the OEMs. One area where Sirius may offer a large value proposition is video to the car. Currently, Sirius is freeing up spectrum which can be used for this purpose. They already have relationships with all the sports leagues and it can be very valuable for them to broadcast games directly to cars. Also, I can’t think of a better way for Sirius to understand streaming if the smartphone becomes the center of the connected car.

 

So the immediate growth is obvious and there looks like there are longer term levers to pull even if they aren’t immediately apparent right now.

 

Let’s turn to Live Nation. Admittedly, I don’t know as much about Live Nation. Ticketmaster seems to be a pretty good business with high margins. The basic business is concert/live entertainment production. It’s a growing industry and Live Nation seems to be the best at it.

 

And finally, you have the Vivendi litigation which may be huge (~$1b I think).

 

The Moonshot

 

I think the ideal scenario starts with Vivendi. LMCA can pull off an asset swap and take control of Universal Music Group and have direct access to artists. If they pull this off, they will manage the entire music value chain.

 

Imagine the value proposition of a new artist signing with Universal/LMCA. You will have the best distribution in the form of Sirius, especially if they compete against terrestrial radio. LMCA can put you on the radio across the country using DJs. One of the issues with streamers is the lack of music discovery. They do not have DJs so a national distribution platform that can “force” consumers to listen to you. A Sirius/UMG combo is a pretty good value proposition for an artist. Then, combine that with Live Nations concert production, which can help you open for acts and further the artist discovery process. Another large value proposition.

 

Basically, the dream scenario is developing the scale and distribution to take a significant portion of the music industry economics through a combination of a large distributor, a concert producer, and a publisher/music label.

 

Further reading:

http://startupljackson.com/post/131770256460/thinking-outside-of-pandoras-box

https://www.linkedin.com/pulse/less-money-mo-music-lots-problems-look-biz-jason-hirschhorn