Earnings Call Transcript - BATRA Q3 2022

Operator, Operator

Welcome to the Liberty Media Corporation's Third Quarter 2022 Earnings Conference Call. As a reminder, this conference will be recorded today, November 4. I would now like to turn the call over to your host, Courtnee Chun, Chief Portfolio Officer. Please go ahead.

Courtnee Ulrich, Chief Portfolio Officer

Thank you, and good morning. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in Liberty Media's most recent forms, 10-K and 10-Q or Liberty Media Acquisition's most recent Forms 10-K and 10-Q filed with the SEC. These forward-looking statements speak only as of the date of this call, and Liberty Media and Liberty Media Acquisition expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Media or Liberty Media Acquisition's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. On today's call, we will discuss certain non-GAAP financial measures for Liberty Media and SiriusXM including adjusted OIBDA and adjusted EBITDA. The required definitions and reconciliations for Liberty Media and SiriusXM Schedules 1 and 2 can be found at the end of the earnings press release issued today, which is available on Liberty Media's website. Now I'd like to turn the call over to Greg Maffei, Liberty's President and CEO.

Gregory Maffei, President and CEO

Thank you. Good morning. Today on the call, we will have Formula One's President and CEO, Stefano Domenicali, and Liberty's Chief Accounting and Principal Financial Officer, Brian Wendling. I'll begin with Liberty SiriusXM. Last quarter, we talked about our plans to reduce debt at LSXM, and we made progress during the third quarter. We repurchased approximately 21% of the 1.38% convertible debt, combining smart debt management with effective share buybacks. LSXM paid $64 million, and BATR paid $14 million to LSXM to settle their respective intergroup interests. The remaining group purchase was financed through LSXM cash and $27 million from unwinding a bond hedge and warrant. This effectively represented a share repurchase across LMC equities, costing $179 million to buy back 4.5 million LSXMA shares, 1.1 million FWONA shares, and 500,000 BATRA intergroup interest shares. We are still hedged on the remaining exposure under that convertible with our intergroup interest. Moving on to SiriusXM, they reported solid third-quarter financial results despite external challenges. The subscriber base showed resilience with a record low churn of 1.5%, revenue growth of 4%, and flat EBITDA as we continued investing in product development. Despite weaker auto sales, we maintained vehicle penetration with an enabled fleet of around 150 million. SiriusXM also demonstrated strong cash flow and provided full-year guidance for 2022 while monitoring advertising headwinds impacting top-of-the-funnel metrics. In streaming, September marked significant progress with record subscriber acquisitions, and we continue to expand exclusive content offerings. For instance, we renewed our agreement with the NFL. Sports have a strong appeal for attracting new subscribers and improving retention rates. Regarding Live Nation, they experienced tremendous demand, with fans prioritizing attendance at live events. Compared to 2019, adjusted operating income increased by 45%, and free cash flow rose by 88%. Live Nation set a new quarterly attendance record with over 44 million fans at 11,000 events. Per fan spending in U.S. amphitheaters increased by 30% through September, and Ticketmaster recorded an all-time high in gross transaction value, up 62% from 2019. Live Nation is finishing a record year, with 115 million tickets already sold and sponsorship revenue for 2023 up 30% compared to last year. Now, turning to the Formula One Group, we continue to innovate, and F1 is performing exceptionally well with strong fan interest. Grandstand and Paddock Club attendance records were set with many sellouts. We are also expanding in the U.S. market, with three races planned for next year, including a landmark race in Las Vegas. We renewed our ESPN contract at a significantly higher value than the previous agreement and announced a record 24-race calendar for the upcoming year, including three-year agreements to maintain our iconic races in Monaco and Mexico City, which generated substantial economic activity and job creation between 2015 and 2021. We aim to leverage the momentum in the business, such as the Apple film project featuring Brad Pitt, directed by Joseph Kosinski and produced by Jerry Bruckheimer. At the corporate level, we refinanced the convertible debt under favorable terms, with fewer shares involved and a lower initial conversion price of $86.06. Moving on to the Braves, they concluded an impressive season by securing their fifth consecutive NL East title, finishing with a record of 101-61. This is the first time since 2003 that they achieved over 100 wins, showcasing a remarkable comeback in the second half of the season. Early in June, they were 10.5 games behind the Mets but went on to achieve a Major League best winning percentage. The fan turnout was exceptional, with 52 sellouts at Truist Park and the highest number of tickets sold since 2000. While the postseason didn't go as we hoped, I want to emphasize that we are still the reigning World Series champions for a few more weeks. The success brings not just accolades but also increased costs, particularly due to payroll investments aimed at future growth, alongside other expenses from record attendance and additional home games at Truist. Costs also increased for post-World Series activities like a trophy tour and special merchandise. Finally, I want to mention LMAC. We issued a press release announcing our vote for an early unwind. Although the outcomes were not as we had hoped in terms of finding an attractive deal, we evaluated over 140 targets. However, high valuations from 2021, poor market conditions, and overall volatility led us to conclude that finding a solid target with appealing valuation and return characteristics was not feasible. Additionally, recent tax changes under the IRA heightened corporate liabilities if we extended the unwind into 2023. Consequently, we decided to unwind and return capital to investors in 2022. Now, I'll turn it over to Brian for more details on our financial results.

Brian Wendling, Chief Accounting and Principal Financial Officer

Thank you, Greg, and good morning, everyone. At quarter end, Liberty SiriusXM Group has attributed cash and liquid investments of approximately $225 million, which excludes $39 million of cash held directly at SiriusXM. There's also $1.3 billion of undrawn margin loan capacity at the parent level related to our SiriusXM and Live Nation margin loans. In September, Liberty SiriusXM Group paid approximately $284 million to repurchase $210 million aggregate principal amount of the 1.375% cash convertible notes. This was funded with $179 million of cash on hand as well as cash from the Formula One Group and Braves Group from the settlement of their intergroup interest held at Liberty SiriusXM, corresponding to the amount of notes repurchased. As a result, 1.1 million FWONA shares and 500,000 BATRA shares underlying the portion of their respective intergroup interest held by LSXM were canceled. Liberty SiriusXM Group also received $27 million of proceeds from the net settlement of the bond hedge and warrants related to the repurchase of the convertible notes. As of November 3, the value of the SiriusXM stock held at Liberty SiriusXM Group was $19.5 billion, and the value of the Live Nation stock held was $5.3 billion. We have $2.8 billion in principal amount of debt against these holdings. Total LSXM Group attributed principal amount of debt is $13.4 billion, which includes $9.9 billion of debt that's directly at the SiriusXM level. Formula One Group had attributed cash, liquid investments, and monetizable public holdings of $1.1 billion at quarter end, which excludes $1.1 billion of cash held at Formula One. Total Formula One Group attributed principal amount of debt was $3.5 billion, which includes the $2.9 billion of debt directly held at Formula 1, leaving $567 million at the corporate level. During the quarter, we issued $475 million aggregate principal amount of 2.25% FWONK convertible notes due 2027. A portion of the proceeds from the offering were used to repurchase $213 million aggregate principal amount of the 1% FWONK convertible notes due 2023, leaving just $27 million outstanding at the end of the quarter. F1's $500 million revolver is undrawn and Formula One's leverage at the end of the quarter was 2.8x. As Greg mentioned, LMAC filed a proxy statement to obtain stockholder approval to unwind before year-end. Formula One Group has incurred approximately $20 million in costs since LMAC's IPO in January of 2021 through the initial warrant investment and subsequent working capital loans. Finally, these are material investments will not be recoverable, but the $250 million forward purchase agreement that Formula One Group had committed to LMAC will be terminated. On the Formula One operating business, we will remind you that F1 is best viewed on a full-year basis, given some volatility in the quarters. F1 held 7 races during the third quarters of both 2021 and 2022. However, there was one additional flyaway race during Q3 of '21 with Russia having taken place last year and France hosting a race this year. Race promotion revenue decreased accordingly for the quarter. The flyaway races typically pay higher fees than European races. As a reminder, we recognize team payments pro-rata across the race calendar, though a quarter where we recognized less revenue due to the mix of races, the team payment percentage may appear disproportionately larger. F1 also recognized higher other costs of revenue, primarily due to one additional Paddock Club operating in Q3 2022, and from the cost of servicing significantly larger Paddock Club attendances compared to the prior year period. SG&A as a percent of total revenue was generally in line with historical averages for the third quarter. We did have modest increases in personnel costs due to a change in the company's LTIP from a stock to cash-based bonus program and increased headcount to support growth. Looking year-to-date, revenue increased 35% and our adjusted OIBDA grew 43% with 140 basis points of margin expansion. Finally, at the Braves Group, at quarter end, they had attributed cash and liquid investments of $159 million, which excludes $15 million of restricted cash and the Braves Group had attributed principal amount of debt of $601 million. Liberty and our consolidated subsidiaries are in compliance with their debt covenants at quarter end. And with that, I'll turn it over to Stefano.

Stefano Domenicali, President and CEO of Formula One

Thanks, Brian. The 2022 season has continued to deliver very impressive racing for all our fans and once again shows how the new technical regulations have delivered closer racing on the track. The interest in Formula One is huge from fans, potential partners, and those who want to host the races. We continue to believe that this is due to us taking the right strategic decisions to grow the sport in the correct way and to focus on the most important priorities. Formula 1 just finished a couple of amazing weekends in Mexico City and in Austin, and the 2022 season has delivered exciting action on the track. Max Verstappen has been an incredible decision, setting a record for most wins in the season with 14 Grand Prix wins so far in 2022 with his win in Mexico City last weekend. He secured a second world championship in Suzuka and Red Bull won the Constructor's Championship, their first since 2013. The team dedicated the victory to Red Bull's Founder, Dietrich Mateschitz. He was a visionary who helped transform our sport, and he will be missed. Even with this championship settled, there is still a battle among the drivers and constructors as well, their finish can have a meaningful impact both financially and operationally. Excitement for our sport continues to grow. Certainly, we've seen that in race attendance and now had 10 races with crowds over 300,000, with three of those exceeding 400,000. Many of these events have been complete sellouts. A great example of growing interest is Austin, where we welcomed 440,000 fans across the event, more than double the attendance in 2019. The promoter states that the ticket demand could have reached 500,000, but for this focus on maintaining a high-quality fan experience. We've also seen more first-time and female attendees at our races. Across the ten races where we gathered spectator data this year, first-time attendees were about 50% of the total crowd. And we've seen a surge in demand on the higher end too, with record sales in Paddock Club and our hospitality products. This sort of demand means our race slots are highly coveted, and we were pleased to confirm the 2023 calendar a few weeks ago. We were happy to renew our agreement with Monaco and will raise there through 2025, with expanded rights for Formula One related to broadcast Paddock Club and sponsorship. We also announced a one-year renewal for Belgium and a three-year renewal for Mexico City. As Greg mentioned, the economic benefits F1 has brought to Mexico City since 2015 have been incredible. This highlights the value our sport can bring to cities globally. Additionally, we will increase the number of sprint events in 2023 to six from the current three. These events are in high demand from our promoters and provide additional sponsorship opportunities and value to our broadcast partners. We will announce the venues for those events soon. We were thrilled to announce that Audi will join Formula 1 in 2026. They have selected Sauber as their strategic partner and plan to acquire a stake in the Sauber Group, which will compete as a factory team from 2026. Formula 1 presents a global stage for the Audi brand, and they see the high performance and competition in our sport as a driver of innovation and technology. Audi was further attracted to F1 given our efforts in sustainability and cost efficiency, which will aid in achieving their own sustainability goals. It also shows the increasing value of the teams in the current environment, driven by the stability provided under the new regulations and the growth of the sport, of which everyone in F1 continues to benefit. We are delighted to grow our partnership with AWS as we announced yesterday the expansion of our partnership with them, becoming a Global Partner of Formula 1. We both share a passion for technological innovation and we work together to build the fan experience of the future. Viewers continue to tune in, and we've seen substantial interest related to our media rights. We announced a partnership with Sky that extends rights in Germany and Italy until 2027 and the U.K. and Ireland until 2029. Sky Sports F1 will continue to be the only dedicated channel to broadcast motorsport in each of these markets and their highly rated commentary will be available in over 80 markets. Sky has seen significant growth in their viewership this season, with average viewership in the U.K. up to 60% since 2019; Italy up to 20% since 2021; and Germany up to 24% since 2021. They've also seen an attractive demographic shift with viewers becoming more diverse and younger. We also extended our U.S. agreement with ESPN through 2025. They have been a great partner for us. With this new deal, at least 16 races per year will air on either ABC or ESPN, with all broadcast commercial-free. Through 18 races in 2022, they've seen an average audience of 1.2 million, up from 949,000 in 2021. The Miami Grand Prix drew an average viewership of 2.6 million, the largest U.S. audience on record for a live GP. Additionally, we extended our agreement with ServusTV in Austria until 2026 and secured a partnership with Telcel and Telmex in Mexico to bring F1 TV Pro to subscribers who can easily add the service to their existing contracts for mobile or Internet services. The F1 Esport Series Pro championship presented by Aramco returned for four events, each spanning over three years. This includes more live shows as the teams and the drivers battle for the $750,000 prize pot. Similar to F1, we have seen several high-profile drivers move across the grid. We look forward to building on the incredible engagement for 2021 when we saw 4.5 million fans tune in for the grand finale. This year, we had 1.3 million players attempt to qualify, almost three times the amount we had in 2021. We continue to expand the way we engage with fans and introduce the F1 Arcade in London. This is the first F1 licensed experiential venue. Patrons can be fully immersed with 60 motion simulators and experience the thrill of racing while enjoying premium food and beverage offerings in the heart of London. We plan to roll out this concept in additional cities. Finally, to further our progress to net zero, Formula 2 and Formula 3 announced a partnership with Aramco to pioneer sustainable fuel for 2033. This is an important step to reach 100% sustainable fuel by 2026, which will be a requirement of all FIA championships. F2 and F3 have proven to be a great testbed for innovation as they were with the 18-inch tires now used in Formula 1. We continue to show innovation and leadership in the technology space and believe our sustainable fuel can have a huge real-world benefit for the automotive sector and greenhouse gas emissions. I want to thank the whole F1 family, our fans, and our investors for all the support this year. Tomorrow, we are hosting a launch party in Las Vegas at Caesars Palace. We are bringing the best race in the world to the entertainment capital of the world, including a large caravan on Las Vegas Boulevard. We look forward to completing an amazing 2022 season as we travel to Brazil and Abu Dhabi. Avanti tutta, full speed ahead. And now I will turn the call back over to Greg.

Gregory Maffei, President and CEO

Thank you, Stefano, and thank you, Brian. We look forward to seeing many of you at our Annual Investor Day on Thursday, November 17. Please visit the IR calendar on our website for registration details. John Malone and I will be hosting our annual Q&A session. If you'd like to submit questions in advance, you can email investor@libertymedia.com. We appreciate your continued support and interest in Liberty Media. And with that, operator, I'd like to open the line for questions.

Operator, Operator

Our first question comes from Doug Mitchelson with Credit Suisse.

Douglas Mitchelson, Analyst

Greg, I just wanted to focus on Liberty SiriusXM Group. Just curious if you have any updated thoughts on the discount to asset value and sort of options and timing of options to improve that? And I guess as part of that, specifically, just curious if you could talk about the strategy around the Live Nation stake at Liberty and whether there are ways for Liberty to create value with that stake beyond just being sort of an ongoing shareholder of Live Nation, which I'm sure you're bullish on. But are there other ways for Liberty to create value with that ownership stake?

Gregory Maffei, President and CEO

Thank you for the question, Doug. We've previously discussed the options available to us, and I'm not inclined to revisit all of them. However, I want to emphasize that we are aware of the situation. We're actively monitoring it and taking steps to prepare for various possibilities. When we have an announcement to make, we will do so. I want to highlight that we find Live very appealing, and we believe that its value is not fully acknowledged in LSXM. We see potential businesses that could enhance our Live stake, and there are opportunities for us to explore. There is much we can do regarding the Live investment specifically, but I'm not going to delve into every detail about our options with LSXM since we've already discussed those.

Douglas Mitchelson, Analyst

Maybe, Greg, as just a quick follow-up, you could help investors kind of shape time frames. Are there things that you can do that you think are material in the short term, next 12 months? Or are these things that will take longer to play out? Any thoughts around helping us with timetables?

Gregory Maffei, President and CEO

Doug, I give you full credit for persistence, but I think I said what I'm going to say.

Operator, Operator

Next question is from Bryan Kraft with Deutsche Bank.

Bryan Kraft, Analyst

I've got one for Stefano and one for Greg, that you may or may not answer, but I'll try. I think on past calls when asked about the ATB status of SiriusXM, you said that you believe it is an ATD. I was wondering if your conviction with respect to SiriusXM being in ATB has since increased. Can you say more definitively that it actually does have ATB status? And then Stefano, your comments on the attendance increases, I think, were really interesting. I think that the view on race promotion revenue historically has been that it's sort of a flattish-type revenue outlook given the high pricing on those deals and some challenged promoter economics. But with the increases in ticket sales and attendance you talked about, do you think that means race promotion revenue could become a significant and consistent revenue growth driver going forward?

Gregory Maffei, President and CEO

I'm going to let Stefano cover attendance first, and then I'll touch on the things I'm not going to answer with you, Bryan.

Stefano Domenicali, President and CEO of Formula One

Okay. Thanks, Greg. Well, actually, you're totally right. The attendance increase is just magnificent in terms of what Formula 1 is bringing mainly to new audiences. And that is true that the business model we are having with certain promoters is more related to the fact that there is a fee that they have to pay, and there is the high-end Paddock Club that is on our side. And there's not a challenge, but the big opportunity to move forward is how we can maximize the revenue and monetize the revenue that we can take from the fact that Formula 1 is becoming more and more attractive. That's really what we're going to do in the future. We have a different way to do it, and I'm sure that we're going to capitalize on the growth in the best way that we can in the next couple of years.

Gregory Maffei, President and CEO

Thanks, Stefano. Bryan, I want to reassure you that I still believe SiriusXM is an ATB, and there is no change in our position. These situations usually get clarified over time as they are tested, but we maintain our stance.

Operator, Operator

Our next question is from Jason Bazinet with Citi.

Jason Bazinet, Analyst

I understand you have mentioned before the flexibility that trackers provide, allowing for the movement of assets and liabilities. However, when I consider the larger picture of Liberty, it seems like there is a gradual shift towards asset-backed securities, suggesting that eventually, everything will be asset-backed. Am I mistaken in this belief?

Gregory Maffei, President and CEO

Thank you for the question, Jason. I don't believe we have seen any changes in our approach. We see the tracker as valuable and it provides us with flexibility. Historically, we have created many asset-backed securities. For example, I can recall Lamidia, which was essentially DIRECTV, as well as CommerceHub, Expedia, and Liberty Expedia going to Expedia. There are many more instances. We have also separated Curate as its own entity. Over my 17 years, I can't say we have lost interest in trackers or changed our view that asset-backed securities can be valuable when utilized appropriately.

Jason Bazinet, Analyst

Okay. Does this sort of unwinding or shuttering the SPAC sort of nudge you more in the direction of not needing flexibility? Or is that sort of a false interpretation?

Gregory Maffei, President and CEO

I'm not sure I would interpret that in that way. I believe it's an acknowledgment that these things have a lifespan. At a certain point, we saw an opportunity but couldn't find the right one. Unlike many SPAC sponsors who focus on potential profits, we invested real capital and are concerned about aligning with our shareholders to achieve a good return, not just a short-term boost. SPACs are facing challenges for several reasons, including market reactions and regulatory scrutiny. So, this was an acknowledgment of those factors rather than a statement about a lack of options or desire for flexibility.

Operator, Operator

Our next question comes from David Karnovsky with JPMorgan.

David Karnovsky, Analyst

Stefan, I wanted to see if you could expand a bit on your media rights renewal with Sky. What drove the decision to do that deal early and across multiple territories? And then, Greg, just wanted to see if you could update on how you're thinking about using Formula 1's cash balance in light of your net leverage and decision on LMAC?

Stefano Domenicali, President and CEO of Formula One

Thanks, David. I think that when we talk about media rights, it is a landscape where we have to consider the evolution, mainly in the new markets that are becoming attractive for Formula One. In more, let's say, traditional mature markets, I think that's what we have taken as a decision to invest and to be stable with Sky means a lot because in terms of the other opportunities in this market are not really the ones that can extend from the financial and also for the awareness point of view and the accounting point of view, what we want to achieve. It is clear that the fact that we are growing gives us potential for the future to see how in that kind of dimension, not only pay TV, but also other means that could be interesting for us to be attractive for our business. Of course, we want to make sure that for the future decision, there is also the possibility for our F1 TV that is going tremendously well to be incorporated into the offer to our customers. So that's really the strategy that we have taken so far. And this is, I would say, if you go back to Sky, the recognition of the value of that investment for the value of our F1 content in the world.

Gregory Maffei, President and CEO

Yes, I want to emphasize that Sky is an excellent partner in three key regions. More importantly, they excel in production, and many of you in the U.S. are likely watching their broadcasts. I'm genuinely impressed with their work, and securing a long-term partnership with them was appealing. Regarding our cash usage, we have a fortunate situation with Formula 1 generating significant free cash flow, which we believe can grow over time. We've repurchased stock at various points with Formula 1, but we also see potential opportunities in this market due to the current challenges, allowing us to pursue options without needing external financing. We will keep considering the flexibility provided by those free cash flows, the importance of reducing debt, share repurchase, and other investment opportunities, such as our developments in Las Vegas and external ventures.

Operator, Operator

Our next question is from Ben Swinburne with Morgan Stanley.

Benjamin Swinburne, Analyst

I have a few questions for Greg or Stefano regarding the ESPN deal, now that it has been officially announced. It seems that you accepted a lower financial offer than what was potentially available. I'm curious about the reasons behind that decision. Could you elaborate on what is new in this ESPN ABC deal beyond the financial aspects that you find strategic? What are the benefits of this agreement and the duration you have chosen, considering the significant opportunities in the U.S. market? Additionally, Brian, I noticed currency effects weren't mentioned in the F1 press release. Was this a material factor in the quarter? Also, I've observed that general and administrative as well as corporate costs have risen significantly year-over-year and quarter-over-quarter; is this related to the Vegas project? Any additional insights on this, especially if there are one-time expenses, would be appreciated.

Gregory Maffei, President and CEO

I will discuss ESPN first and then let Stefano chime in if that's alright. We have confidence in the strength of the business, which led us to initially agree to a shorter deal without securing the highest payment previously. In this renewal, we pursued the same approach, aiming for the broadest exposure. ESPN has proven to be a strong partner, and we believe that the opportunity to further develop the sport in the United States justified a relatively short-term deal with them, as we anticipate better outcomes in future renewals. So far, betting on our growth and breadth rather than immediate pay has proven to be the right strategy, and I think that is evident. ESPN has been an excellent partner in many ways, including our collaborations on projects like F1 TV, which contributed to our positive partnership moving forward. We're very excited about our collaboration with F1 and ESPN over the next three years, but we are also looking forward to the opportunities that will arise in three years when we consider our next renewal with a partner.

Stefano Domenicali, President and CEO of Formula One

I couldn't agree more, Greg. I think that we need to recognize that because sometimes we have a very short memory. A couple of years ago, there were not so many media rights holders in U.S. that wanted to invest with us. And now we need to give the credit to ESPN that in terms of content, in terms of attention, in terms of how they are really following Formula 1, they did a phenomenal job, which will be even stronger in the next three years because we have agreed on the positioning of the race in certain channels to have more attention to that. So I think that we talked carefully about this step. And I think that the fact also that with this agreement, we keep a global mention of the F1 TV on our side means a lot. So I think that the best solution in three years' time, we see how the market will develop. We are pretty sure due to the growth in U.S. that there would be other players that will be around the table and interested in being with us in the future.

Brian Wendling, Chief Accounting and Principal Financial Officer

Yes. Then, Ben, on your other two questions, FX was pretty much de minimis for the quarter. We'll just remind you that about 80% of our revenue and costs are actually in U.S. dollars. So we do have ups and downs on FX from time to time. It was not impactful in the third quarter. And then on the G&A question, again, I would just reiterate, always better to look at this on a full-year basis, but we did have a mix shift in the number of races that were either European versus flyaway. We lost Russia in the current period. So that has a bit of a margin impact. There was higher G&A to support the overall revenue growth and margin expansion on a year-to-date basis. And then as you pointed out, on Vegas, still not material, but obviously, there are some costs in there related to Vegas as they have prepared for their launch event and ticket sales.

Operator, Operator

Our next question comes from Barton Crockett with Rosenblatt Securities.

Barton Crockett, Analyst

Okay. I guess two questions, if I could. The first is the macro situation in Europe; it's really kind of at levels that we haven't seen in years, maybe in my lifetime, I don't know about others. And I'm just wondering, at what point do you think that this could have an impact on the F1 business? It doesn't seem like it has to date and maybe the answer is it never will. But at what point do you think we'd ever get to a point where this could have an impact on attendance at races and maybe an impact on race promotion fees because communities or promoters are economically challenged?

Stefano Domenicali, President and CEO of Formula One

Thank you, Barton. I mean let me figure out these things. First of all, being a world championship, we can spread the risk of having this kind of situation to manage around the world. On the other hand, the fact that we have long-term agreements will reduce the exposure to this risk. What I can say and share with you is that we already see an incredible number of pre-registrations with regard to the ticketing of next year. So this is a good sign in the context that you're seeing mainly Europe, where I'm living. It is clear that this recession is taking place. But I think that the way that we are structured, the way that we have done the deal will protect us or will enable us to move forward in this direction. Therefore, I would say this kind of situation lets us think that we should be optimistic in this context that is, of course, we monitor. But this is what we see today.

Gregory Maffei, President and CEO

Yes, I think we are observing that high-end consumers are continuing to make purchases across our business, including at events like Formula 1, Live Nation, and the Atlanta Braves. The demand for these services remains very strong, which supports the point Stefano made. Many promoters are performing well, particularly in Europe, and there is significant demand from consumers, which boosts promoter confidence regarding long-term contracts. We feel very optimistic about this situation.

Barton Crockett, Analyst

I was wondering about the fact that the team winner in Formula 1 has been decided well before the season ends, unlike last year when the competition continued until the final lap. How does this affect the financial trajectory of your business for the remainder of the year? Does it pose any challenges? Can you share any insights based on historical data or experiences?

Stefano Domenicali, President and CEO of Formula One

We don't see any risk at all. Firstly, the last two races sold out tickets, and the numbers are really growing. Attention will naturally shift to other competitions from the sporting perspective, which is expected in racing. I want to add that we are very positive about the impact of the regulatory changes throughout this year. While we can't comment on specific teams, Red Bull and Max Verstappen have performed exceptionally well. Other teams may not have seized the right opportunities, but what we witnessed on the track was exciting wheel-to-wheel racing, which is exactly what we aimed for. I'm confident that next year the competition will remain intense until the end of the calendar. As we've seen in recent races, there's significant attention and competition for positions, which is also linked to the financial rewards for teams performing well compared to their rivals. Therefore, I anticipate a lot of interest in Brazil and Abu Dhabi as well, with no issues.

Operator, Operator

Our next question is from David Joyce with Barclays.

David Joyce, Analyst

A couple on Formula 1. First, I was wondering if you could help us understand what's incremental in the new agreement with AWS? And then secondly, I was wondering if you could explain what the gating factors would be to adding another F1 team? Is it allowed in the current concrete agreement? Or would that require a renewal? And is it the factor of maybe the buy-in to keep everybody equal just being kind of prohibitive? But if you could just walk us through the thought process and restrictions there would be helpful.

Stefano Domenicali, President and CEO of Formula One

Thank you, David, for the question. As you can imagine, on the incremental value of AWS, we cannot go into the details. But it is a very strong relationship that is starting from a very technical content point of view. We are working together with them on the preparation of the graphics. We are working together in order to give the right data to our customers and to our fans. So the fact that we have this for so many years with an interesting increase in terms of financial contribution, it means that also AWS recognizes the power of our platform. With regard to the value or the process related to the possibility of adding an F1 team into the championship, of course, there is the primary step that both us and FIA have to be in agreement for that. The first thing that we need to consider is this eventual possibility will bring an extra value to the championship. If so, of course, we're going to discuss it internally and see if this has any kind of real potential new entry can give the benefit for the value of the juncture. On top of it, there is a value that has to be recognized to the teams that are already in the championship because, of course, they cannot allow any dilution of their financial partnership with the F1 championship. So this is what is written in the agreement. But mainly the point is does eventually a new entry bring a better position in the F1 championship. This is really in terms of value, both financially and from a sporting point of view. And if I may on that, it's not a problem to be having one more team to have a better racing. Therefore, we would see. We will monitor the situation. If there is a real incredible new entry team that we want to discuss, we are ready to discuss, but we are not in the best position today for that.

Operator, Operator

Our final question comes from the line of Matthew Harrigan with Benchmark.

Matthew Harrigan, Analyst

With the big inflection in interest in F1, especially in the U.S., are you seeing a lot more activity on the EA game? Because that just game that's been around forever, I guess since 2000? And is there a potential with, I guess, the somewhat lame implementations of AR that are out there right now? Now that you've got a movie, it feels like video games and such are another area where you could probably increase your ancillary potential a little bit.

Stefano Domenicali, President and CEO of Formula One

Matthew, I think that the fact that we are bringing in new customers that are getting younger and younger will allow us to see on the licensing point of view an incremental opportunity to increase the revenue stream for us. And this will happen. We are pretty sure about it. We already saw this year an incredible effect on this. On the other hand, I would say what we need to stay always focused is that we are a physical sport on the track. So any kind of growth that is happening on the gaming that has to be translated to the passion that we want to see the people go into the track. And this is really the thing that we are focusing on because that's an opportunity to stabilize the growth of our sport for the future.

Gregory Maffei, President and CEO

So operator, I think we're done. Thank you all for your interest in the Liberty Media Group, and we look forward to seeing many of you in a couple of weeks in New York. And if not, until then the next call. Thank you very much, operator.

Operator, Operator

You're very welcome. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.