Malone Interview (CNBC), Iger Book, Bubble Watch

People keep talking about how crazy the market is, up more than 25% this year. It's a big year to be sure. But on the the other hand, even though the market has been decent in recent years, it hasn't been particularly bubblicious.

To put the 25% return into context, I think it's a good idea to look at it over 2 years or 3 years.  Since the end of 2017, for example, the market has return an annualized 8.4%/year.  Pretty good to be sure.  Since the end of 2016, its up around 12%/year.  Going back five years, it's up 8.8%/year (these figures exclude dividends).

Not bad at all, but not bubble-like either. If you were going to train an AI machine to look for bubbles, you would look at valuations (interest rate adjusted), sentiment etc. But one of the biggest factors that I would include would be historical returns over various time frames; strong performance reinforces the positive loop of increasing positive sentiment -> higher prices -> better-looking historical returns -> increasing optimism and 'proof' (both statistical and social) of the greatness of stocks etc.

The 10-year return is 10.9%/year, but that's off a depressed level due to the great recession. Over 20 years, the market has gone up only 4%/year.

Here is a table of the S&P 500 index change over various time periods.

S&P 500 Annualized Returns Through November 2019 (excl. dvd)

1-year return:    25.30%
2-year return:      8.39%
3-year return:    11.95%
4-year return:    11.34%
5-year return:      8.81%
10-year return:  10.91%
20-year return:    3.87%
30-year return:    7.55%
50-year return:    7.31%

S&P 500 Annualized Returns Through December 1999 (excl dvd)

1-year return:   19.53%
2-year return:   23.05%
3-year return:   25.64%
4-year return:   24.28%
5-year return:   26.18%
10-year return: 15.31%
20-year return: 13.95%
30-year return:   9.67%
50-year return:   9.36%


This is pretty insane. The annualized return over 5 years to December 1999 was 26%! And we are sort of freaking out that the market is up over 25% year-to-date in a single year, and not even double digits annualized over 2 years.

So anyway, that's why it doesn't really feel like a bubble. People aren't quitting their jobs (to trade stocks), buying new cars (with their capital gains), bigger houses and things like that we saw back in 2000. Most people I talk to still tend to hate stocks, the financial crisis still fresh in their minds.


Iger Book

I just finished the Iger book, and it was also a pretty great read. Iger seems like a genuinely nice guy. CEO's tend to have an image of not being nice guys, so it's great to see someone like him make it to the top. It's possible to be decent, honest and honorable and still do well.

Buffett did mention DIS as one of the well-managed companies (along with GE at one point); his relationship with DIS goes back to when DIS bought Capital Cities during the Eisner years (and Iger was working for Thomas Murphy / Dan Burke). And I think it goes even further back than that, actually.

It's fascinating to read about the events that we've been reading about in the newspapers from the people that were involved. This one involves Buffett / Murphy / Burke, Steve Jobs, George Lucas, Pixar and a lot of what is going on in media today. This connects (unintended) to the Malone interview below.

Anyway, this book is a quick read so go get it. By the way, I have not subscribed to Disney+ yet as I am big into Netflix and there is just so much stuff there that I can barely scratch the surface of what I want to watch (by the time I cancelled the DVD part of my Netflix subscription, I had more than 400 DVD's in the queue). My favorite things are the European cop dramas (French, Belgian, German, Norwegian etc.), the Indian and Japanese shows, and of course many U.S.-based shows too. I just watched The Irishman which is really good (creepy is the special effects to make these close-to-80 year olds look middle-aged), but at the same time I also thought, gee, do we really need another wise-guy movie?

OTT Tangent
People keep talking about the competition in direct-to-consumer streaming and how increasing competition will hurt Netflix etc. This is probably true to some extent; when Netflix was the only game in town, that's one thing, but with many participants jumping in, that's another story altogether.

On the other hand, when you think about it, this is not really an either-or world. People aren't going to sit there and debate whether to switch from Netflix to Disney+ or Apple. Netflix charges $14/month or some such thing, and Disney+ is even cheaper.

A lot of people are still paying $100/month or more for the conventional video package ( I dropped that a couple of years ago mostly because I don't watch most of the channels (ESPN, for example), but what bothered me even more was that they were charging me $14/month for each cable box in the house, which seemed ridiculous to me. Those things can't cost more than $100 (look at Roku at $20; and if it actually does cost more than $100, it's for functionality that I don't need), and they are charging $14/month forever; this makes absolutely no sense.

If you cut the chord, you have $100/month in video budget you can allocate (you still need to pay for the internet), so you can have Netflix, Hulu, Disney+, HBO and a few other things and still be under $100...


Malone Interview
There are a few annual events that are really exciting to me. Of course the Berkshire annual meeting (I just watch the video later), annual report, JPM annual report etc.

And another one of those is the CNBC John Malone interview by David Faber. Faber is one of the few people (of the reporters/anchors), if not the only one, who seems to understand the market and business.

Anyway, I jotted down some notes while watching the recent interview (done during the Liberty Media investor day). This is not everything, though, but a large part of it. He also talked about regulation, GOOG etc, for example, so go check out the video.

Here are Malone's thoughts on various topics:

Who is best positioned in streaming right now?
Malone answered by rephrasing the question to, "Who will be around in five years?"
Disney and Netflix.

DIS
Disney has great content, a great global brand, but doesn't have a large direct relationship with customers so must piggy back on those who do, like Verizon.

NFLX
Netflix, so far in the lead, good base / revenue stream.

AAPL
Apple may surprise. Slim content, but has great distribution in their direct customer relationships. They offer free for one year to buyers of AAPL products etc...
AAPL has optionality; see how it goes and decide how much they want to spend (how much they can afford).

HBO, AMZN
HBO is a decent service, but doesn't have the revenue stream to match Netflix.
AMZN has a totally different monetization strategy so... not primary biz.
Content is for marketing. AMZN may evolve to become a bundler of others' content

Tech companies want to be the platform, get info on customers, be gateway,
let others waste money on content.

DIS will be successful.

Direct relationship w/ customer in scale with growth and pricing power is a powerful business model.
DIS knows they need direct consumer relationship.

HBO Max: HBO content budget was $2bn/year.
If you want HBO, you already have it, so not much gain in new customers in the U.S.?   Malone doesn't see the growth. Maybe even attrition.
HBO budget is not enough to protect for the long term.  Takes years to develop content internationally. Don't own rights to intl distribution.  Problem seeing scale at HBO to get to top of direct consumer biz.  HBO is the same as it's been for 25 years. If you want it, you already have it so where is the growth?HBO may capture wholesale spread (as big bundle moves to direct).

ATT will face challenges. Historically has been the biggest dog in every fight, but not now, and not in this space (streaming media). About scale and globality. Need global scale, or won't get enough scale to compete in this space. This will be the challenge for ATT, HBO. FANG companies are all global. If you're only in the U.S., how do you compete?

Sports is glue that keeps big bundle together... will eventually blow up. Not sure when... big bundle still overpriced due to sports content...

Content Cost
At some point, hail Mary passes for some will prove to not be working so content cost will moderate. Some will fail (and stop spending) etc...

NFLX will have to moderate spend at some point.  Bundling of these services will happen too. Distributors may bundle too, if it reduces churn etc... will evolve like traditional cable. Comcast offers Netflix etc.

Cord cutting will level off. Erosion won't stop completely, though...

Cutting video increases margins at cable companies as margins for broadband is higher. Happening naturally.

Satellite will end up serving people with no other options, rural etc.

Linear TV will lose subscribers, ads, but as you get direct relationships, value of ads go up as you know more about customers.  Ad rev potential goes up; more focused ads etc.  Have to fight decline in reach due to decline of big bundle.  Provide content direct through app and sell content to others etc. Random access via app; if you subscribe to Discovery Channel, you get stuff through app too (not everything).

Cable industry changed when congress changed retransmission constraints; Margins started to go down. Content providers were able to extract more and more...

Will be profitable for people with unique situations, consistent, stable demand, pricing power, level of uniqueness...  those businesses ultimately gets regulated. 

Discovery
Discovery owns content globally, generating free cash, need to migrate to direct to consumer.
Malone bought more stock this week (November 2019).  Discovery will solve issues. Stock is dramatically undervalued. Malone bought $75 mn worth of stock. Growing, generating free cash. Market cap to levered free cash flow, cheapest on screen... They own all their content, generates tons of cash, investment grade b/s, they are growing while others are shrinking (5.5x cash flow). Cheap for good company...
Malone paid $28.03/share. 

CBS/VIA
They have no global presence. Lot of content is bought. CBS is totally dependent on sports rights so not sure about long-term profitability.  Not sure if CBS has enough power to carry all the channels.
VIA underinvested for many years, bought back stock at high prices, tactical mistake.
How important is MTV, Nickleodean to distributors? Question sustainability of model, and also they are U.S. only.

Yes, stock is historically cheap, but...  licensing out content to others. Ice cube melts faster when you don't put content on your own channel.

CBS/VIA needs to get global for long term sustainability. Find niche, glue to make customers sticky. Something unique.

Lions Gate
Sold LionsGate; didn't see them execute strategy of using library/content to drive Starrs. They focused too much on selling content instead of driving their own distribution.

Need global scale, or niche in small area that big guys don't care about to survive.

Wired and Wireless Together
Liberty Global followed strategy based on belief that combination of wired and wireless would lead to synergies. Turned out to be true.  Belgium, Holland (combined with Vodaphone).  Once they built scale, they were able to acquire. Synergies were real and very substantial.

In U.S, for Charter, same idea. Keep growing until they understand the economics of a combination. At the moment, not far along enough on that path.  Once scale is achieved, think about building own network. Hybrid tranmission over time. Could be joint ventures, mergers etc.

Malone interested in Altice, but Patrick wants control etc...

Uber
Not an expert, but doesn't understand Uber, how is scale going to make it profitable? Like selling hot dogs at a loss and making it up in volume. Can't see how scale changes economics. Can't understand why Dara took job.

Politics
Worries about attack on success and wealth in this country.
Worries about where country is going.

If Warren wins, wealth destruction will exceed wealth transfer.  Has places in Ireland, Canada, Bahamas etc... (that he can escape to),  but Malone rather stay here, be optimistic about balance.

Malone is Libertarian, would vote for Bloomberg.

Trump has right strategy, but not the right guy; he doesn't build a team. A lot of people that worked for him trying to take him down now. 

Liberty Media Investor Day 2013

So Liberty Media (LMCA) had their investor day last week.  I wasn't there but the investor day webcast is available with a slide presentation at the LMCA website.   

There was some fun stuff in the beginning (with a disturbing slide of Greg Maffei doing some sort of dance) and then Maffei (LMCA), Meyer (Sirius XM), Rutledge (Charter) and Rapino (Live Nation) did presentations on their businesses.

Anyway, I will cut and paste a whole bunch of stuff from the presentation as it's easier to do that than to type stuff up myself.

This will be sort of a summary, but not a complete summary.  This is sort of a note to myself so I will add thoughts along the way.  Maybe it will be helpful for people who don't want to sit down for two hours to listen to the webcast. 

Those interested in LMCA should at least go look at the slides (much of them are here, but many more in the original presentation) and if you have time, listen to the presentations.  They are really well done, and the Q&A afterwards is very interesting. 

John Malone is one of the legendary people in business and he is always worth listening to.  You can learn a lot about many things by listening to him.  Just like you learn a lot about banking by listening to Jamie Dimon and learn a lot about everything from listening to Buffett, you learn a lot about cable, media / entertainment from listening to Malone.

Anyway, here is one of the 'fun' section slides from the presentation:

Non-New Yorkers might not recognize the buildings in this photo, but that's the Time Warner Center in New York City.  Maffei was talking about a fictional radio station on Sirius XM (called Malone's Melodies).  The tune playing is "Time Is On My Side", so you know they really want to do this deal.

News

LMCA did a series of deals to raise some cash (that was used to pay down margin debt).  LMCA continues to repurchase shares.  As we'll see later, they have already bought back more than half the shares in the recent past.  The repurchase of 5.2% of LMCA from Comcast in a tax-free exchange was priced at $132/share.  LMCA still has $327 million in repurchase authorization after this deal (details of this deal are in the presentation slides).
The sale of SIRI shares back to SIRI also comes tax efficiently as this was some of the high basis stock that LMCA owns and effectively gets dividend treatment for tax purposes.   

The convertible bond deal is a tax efficient way to lock in some low funding rates for the long term (10 years).

As a result, LMCA has been able to pay down much of the margin debt they took on when they bought Charter.  Maffei used the term "reload the gun" to describe what these transactions did.  Those words should excite people who are looking for LMCA to do more deals.   Well, maybe they are getting ready for Time Warner Cable.

LMCA is very shareholder friendly (we already knew that), but this chart is incredible.  They've bought back more than half of their shares since 2008, and they still have plenty of liquidity (borrowing capacity, high basis SIRI shares etc...).

Stock Price Performance

LMCA share price performance has been amazing too, and recent performance is not just a recovery from the crisis lows.  The CAGR is +36%/year since 2006, so that includes the crisis.

Sirius XM (SIRI)
Jim Meyer made a presentation about SIRI which I thought was very interesting.  He addresses some of the questions that critics raise.

Of course, LMCA bought SIRI as a distressed situation and did very well with it, but Malone sees a lot more growth ahead for SIRI.

One of the issues is competition from internet radio, like Pandora and music services like Spotify.  Meyer points out that SIRI is not a music company.  SIRI does music, talk and sports:

Also, with respect to competition from internet streaming services, Meyer points out that the big competitor out there is still terrestrial radio:

The following charts show the superior earnings model versus the competition:

Growth
The following charts show subscriber, revenue and EBITDA growth:

Increasing Margins

Meyer said that SIRI can safely get to 40%+ EBITDA margins at maturity.  He said this is doable due to the scalability of the business.

But at the end of the day, what's really important is free cash:

and free cash per share:

He said he is asked what he values more; subscriber growth, revenue or EBITDA?  He said "yes" to all but free cash flow per share growth is most important.

Growth is linked to new auto sales, obviously, and here's the trend and forecast (auto industry forecast).  SIRI has been increasing share in new auto sales. 

What's interesting is that even if new auto sales flatten out, SIRI can still grow subscribers because every new auto sale is a potential new subscriber (assuming the new car buyer didn't have it before; otherwise I suppose a driver just replaces a car so subscriber count won't change).

Anyway, SIRI did some work on this and shows the growth potential based on projected new car sales:

Meyer said that they are very comfortable that they will reach more than 100 million enabled vehicles by 2018 (enabled vehicles is not the same as number of subscribers, but shows the potential).

Their balance sheet looks much better now than before at 2.7x leverage (versus 3.5x target):

The other big growth area is used cars.  The used car market is 3x larger than the new car market and this area has a lot of potential.  Also, connected vehicle services (telematics) is another area of growth potential that Meyer talked about. 

As Malone mentioned in the Q&A later, he sees a lot more growth to come at SIRI.

Charter Communications (CHTR) 
Tom Rutledge did a presentation on CHTR.  This is actually a pretty exciting situation, I think.  There is a lot more on the topic in the Q&A where Malone talks a lot about the history of cable and what he sees happening there going forward.

One of the reasons why I got interested in CHTR and LMCA (I have owned LMCA and DISCA in the past but haven't followed them too much recently until early this year) again is because I thought that the industry was coming to some big inflection point.  For many years, cable companies just kept growing by adding subscribers.  They were making so much money and growing so much that they didn't really care what they paid for content as the subscribers paid for them.  That's why I was always a fan of content; I've owned Disney and CBS in the past for that reason.  I figured content providers will always get paid regardless of what happens in the distribution world.  For all I care, the phone, cable and satellite companies can fight it out and destroy each other, but they will all still have to pay high fees to ESPN.  So as a Disney shareholder, I was indifferent to what happened in the pipe wars.  Who cares who won.  They will all just have to pay more to get more content to compete even more.

Then cable got saturated (well, it has been saturated for a while) and stopped growing and then phone companies came in with video offerings, and of course satellite companies continued to take share away from cable.  So, all of a sudden, with distributors unable to grow (due to saturation), and prices of content continuing to go up and customer cable bills rising, new alternatives pop up, like Netflix, Hulu, Youtube or whatever else.

Distribution companies start wondering why they are paying so much money to content providers when the same content can sometimes be viewed elsewhere for free.

In any case, I don't really understand the media business that much, but all of this stuff was the impression I was getting.  The industry seemed really ripe for a change.  Business as usual just wasn't going to work anymore.

And then LMCA takes a big stake in CHTR.  So for me, this deal coincided with my feeling that something is happening in the industry, or at least something is about to happen.  At first, I wasn't sure how the industry can change.  I thought, like everybody else, that cable was under pressure from phone companies and satellite providers, and increasingly from over-the-top TV.  I did understand that their ownership of the last mile into people's homes was a big asset but it wasn't really clear to me how the cable companies with their video package (which Malone himself said will be obsolete in five years or less) will compete with the over-the-top guys like Netflix.

Now I think I understand this a lot better what can happen.

Anyway, let's get back to the CHTR presentation where Rutledge explains why CHTR is such a great opportunity.

CHTR History
Rutledge started by explaining the history of CHTR.  It was founded by Paul Allen.  They assembled a big system by paying very high prices and spent a lot of money creating a state-of-the-art network.  Because of the high prices they paid and poor management, they went bankrupt.  They then had to cut cost where they shouldn't have leading to poor service etc.  As a result of this, CHTR has the lowest product penetration.

So a lot of the growth story here is just bringing things back up to where they should be in terms of product penetration.  Here is a slide that shows the potential for CHTR:



Also, FiOS competes in only 4% of CHTR's markets.  As for satellite competition, CHTR's edge is that they have two-way connectivity versus one-way for satellite.

Malone said a while ago in an interview that he thinks CHTR can get competitive high speed internet at a much lower cost than others (fiber optics etc.).  Here is a slide that shows how this can happen:

This is the other story for CHTR.  By going all digital, they free up a lot of broadband on their cables that will allow them to increase speed / capacity for high speed internet and other things.

Rutledge says that capex is high now due to spending related to going all digital, but once that is done capital intensity of the business should go down.  Along with increasing revenues, this should boost EBITDA going forward.

There are a lot more details in the presentation, but the CHTR story is pretty simple; reversing the years of undermanagement to boost revenues, going all digital, decreasing capex needs going forward and operating leverage from that.

Live Nation (LYV)
Frankly, Live Nation has never been on my radar.   I always thought of the concert industry has one that makes money from the occasional Rolling Stones fairwell tours, Kiss reunion tours and things like that.  I think for many years (not that I follow this stuff) the highest grossing concert tours tended to be these old, boomer-generation rock bands.  So Michael Rapino's presentation was an eye-opener for me.

Growth
First of all, I was wrong about the concert industry.  Who knew it was a growth business?  I don't go to concerts anymore, so I guess there would have been no way for me to know anyway.  But here it is:

And look at 2013 growth by region:

...and for ignorant people like me who think only U2 or the Stones can sell tickets, check this out:

I don't know if I should be proud or embarrassed to say that I have no idea who these people are.  OK, I know Fleetwood Mac, Depeche Mode, Kid Rock and Beyonce.  Not bad, I guess...

So why is it growing so much?  What's different now than before?  This is an interesting thing that Rapino said.  He explained that concerts these days are driven by fan demand.  In the past, concerts have been driven largely by record labels. It was the record distribution model that included concerts as promotional events to sell records. 

Now concert demand is driven by fans, and how this is done is very interesting:  It is done through social media like Youtube, Facebook etc.

Check out this slide:

So we see that only 17% of the Rihanna concerts take place in the world excluding North America and Western Europe, but 56% of her fans on Facebook and 40% on Youtube are from this area. 

If you ever wonder who benefits or makes money from Youtube or Facebook, well, now we can think about LYV.

The live concert business is not a particularly high margin business.  So that may be another reason why I wasn't too interested in LYV before, but the LYV business model is actually to use the live concert business to drive the other high margin businesses:

They are also increasing business through mobile (another question people keep asking; how people make money off of mobile), and their secondary ticket sales business looks pretty interesting.  There is a bunch of stuff in the presentation that you should look at if you're interested.

But the bottom line is that all of this is leading to some interesting growth:

 

Anyway, I've never looked at LYV in detail so I don't know where all the above numbers lead in terms of valuation, but there seems to be no doubt that it is growing at a decent rate and there seems to be some more growth opportunities in the future.

So that's it on the business presentations. 

And then there was what many may consider the most interesting part of the day.

Q&A Session
Malone and Maffei took questions from investors and there were some interesting discussions on various topics.  Anyway, these are from my messy notes so not word-for-word or anything.

Why continue to keep owning SIRI? Why not spin it off?
They like SIRI.  LMCA has no big free cash generating assets.  SIRI is the only big one.  It's ability to generate capital for LMCA to use is interesting.

SIRI is also a work in progress.  They feel they can still help SIRI. 

Maffei mentioned that historically, LMCA has spun off assets when the value of an asset was not recognized by the market, or when a business has reached an apogee.  They think neither is the case at SIRI.  The value of SIRI is well recognized inside of LMCA now and there is much more they can do there.  There is still "a lot of upside".

Malone says CHTR will require capital (Time Warner?).  SIRI will give them the financial flexibility to "chase a few more rabbits".

Malone also said that there are still some synergies in the music business that hasn't been exploited (and LMCA can help SIRI with that).

Is there more tension between programmers and distributors now?  Relationship more complex, more aggression than in the past?  Is this a reason for consolidating?
Malone said that programmers and distributors have had good relations for years.  It was all about who could create economic value.   The over-the-top phenomena is creating unusual tension.  TV everywhere would create value for everyone.   Distributors and content providers still have huge monetization systems to defend.  They will eventually realize that.  Consolidation will make it easier.  Fewer rational players works better than more, but is is not the primary reason to consolidate.

Dilution at CHTR in case of Time Warner deal
LMCA would like to keep interest above 25% for future flexibility.  LMCA would purchase more CHTR to keep interest above that level to offset dilution, for governmental reasons.  He explained later that the Investment Company Act makes a 25%-owned asset a good asset, and one under 25% a bad asset.  I think he meant that under 25%, the ICA would deem it a passive investor interest or an investment security so would make LMCA an investment company, whereas owning more than 25% would make it an operating subsidiary (so wouldn't make LMCA an investment company).

Competition to Cable
Malone feels that the long term competitive position of cable is good.  Increasing digitization of video will free up bandwidth,and increase speed and capacity of internet delivery.  Cable has a marginal cost advantage (a tremendous advantage) for base network.

He mentioned that DT (Deutsch Telecom) put in a volume cap.  DT provided content is not included in the volume cap but non-DT content is.  The regulators are currently digesting this so don't know what will happen.

Malone mentioned that eventually terrestrial carriers will have to price traffic based on volume.  The current model is unsustainable as revenue and pricing won't reflect capital pressures of the providers.

Over-the-top content can be bundled with broadband and when that starts to happen, cable can clawback share from satellite.  Cable market share will grow because of services bundled.  (Somewhere he said that cable will get at or equal to fiberoptics in terms of speed).

Intrinsic Value versus Price of the Parts
Someone asked him how he viewed the prices of LMCA holdings versus intrinsic value.

Malone said that he has always been a leveraged free cash flow investor, so he discounts the free cash flow at whatever interest rate they can fund at.  If you lengthen the maturity and fund at current levels, he says that the "multiples look low to me".

Importance of Content?  Does CHTR need more content?  Comcast bought NBC
Malone said that the control of content is an important determinant of market share.  He then went on to explain the evolution of the cable business.

Cable in the early days was highly balkanized.  There was no ubiquity and they didn't compete with each other.  Back then, the opportunity for cooperation, scale and uqiquity was obvious.

TCI did one acquisition a week for ten years.

As an industry, they got together to cooperate.  They organized joint ventures.  For example, in technology they created the MPEG video compression, coaxial cable architecture etc...  In content, they created Discovery, BET, Telemundo etc...  The industry created 23 or 24 programming vehicles that the cable industry collectively invested in.

Ted Turner was an entrepreneur that got the support of the industry.  TCI was a founding investor in Fox News.

The industry solved the balkanization and scale problem by joint effort.  Malone says it can be done again.  Hulu can be syndicated, or something created from scratch.

He mentioned Comcast, as big as it is, can't buy national level content.  It's not big enough. You have to be pretty big to get content for TV everywhere.

So this cable industry inability to buy or create content has benefitted Netflix. They buy nationally, distribute ubiquitously and their local distribution is incrementally free.  This is not a situation that can persist indefinitely.

Cable industry is in the need of organizational development.

HBO transformed the cable industry and "made us all rich".  If there is an equivalent to that, of course they would be more enthusiastic in investing in the business.  M&A and industry cooperation go hand-in-hand. 

(At some point the Microsoft purchase of Comcast shares was mentioned, and Maffei was actually at Microsoft at the time and did the deal; so we know he knows the business)

Investment opportunities?  Which Liberty entity is the cheapest?
Malone said international (non-U.S.) is where the opportunity is now.  He said don't put all your eggs in the U.S. basket.  There are some rabbits outside of the U.S., but obviously he can't say what looks good.

Mobility?
75% of mobility is is wifi (and rising). The implication is that mobile traffic will end up on cable (wifi -> cable connection) and not cellular network.

With over-the-top and TV everywhere why do consumers need aggregation interface and pay economic rent?
Netflix, Hulu and other streaming models offer content without economic rent.
Malone said that the answer to that is that they don't need it.
Why did HBO come into existence?  Why didn't Hollywood sell directly to cable operators?  They couldn't work together.  This created opportunity for HBO to get scale.  Once they had scale, they didn't need all the studios so changed pricing power.

Over the top guys will get content through scale; original and unique content.  Netflix has enough scale to get exclusion and original content.

Netflix
Netflix started as a library of old content.  They built a business on low distribution cost (almost free); heavily subsidized U.S. Postal Service.  Netflix migrated to streaming service.  They have gained scale and ubiquity of presence.   The cable industry has been very slow and that gave a window of opportunity to the over-the-top guys.

With network neutrality (free incremental distribution cost) and scale, they have "quite a good business".

A year ago NFLX was written off by many, but it's good that NFLX survived.  If it was bought by someone with deep pockets it would've been more dangerous;  someone with infinite capacity to underwrite their strategy of buying exclusive content.

NFLX has scale and uniqueness to do well now   (but as he said before, this is not sustainable).

So that's about it.

My Thoughts
I do like LMCA and CHTR; I find them very interesting situations (SIRI and LYV don't look too bad either).  As far as valuation is concerned, it seems like most of LMCA value is driven by the large listed holdings.  The multiples look high, particularly on the big SIRI position, but the growth rates are pretty high too.   If they keep growing subscribers and their margins get up to over 40% (EBITDA margins) as they say, it can be pretty interesting.

On the other hand, for an entity like LMCA at this point in time, I tend to think the bigger question is what LMCA does with the liquidity offered by SIRI over time.

I would tend not to look at it like, "what is SIRI actually worth and how much per LMCA share is that?".  My question would be more like, as LMCA liquidates SIRI over time (via SIRI buybacks and maybe other transactions), what do they invest in next?

LMCA is obviously holding SIRI for the cash generation ability so more interesting to me is what they invest in with the cash from SIRI rather than what SIRI is worth.

This is not to say that it doesn't matter what SIRI is worth.   Malone said that SIRI gives them the flexibility to "chase a few more rabbits".  I'm sort of more interested in the "rabbits" than satellite radio.

Still, it's good to know that Malone thinks there is still a lot of upside there even as they use SIRI as a source of liquidity.