Earnings Call Transcript - BATRA Q1 2020

Operator, Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Liberty Media Corporation 2020 Q1 Earnings Call. As a reminder, this conference is being recorded today, May 7.

Courtnee Ulrich, Chief Portfolio Officer and Senior VP of Investor Relations

Thank you. 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 our 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 expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty Media'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, 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 our website.

Gregory Maffei, President and CEO

Thank you, and good morning. Today speaking on the call, we will have Formula One's Chairman and CEO, Chase Carey; and Liberty's Chief Accounting Officer, Brian Wendling. First, let me say, I hope you all are healthy and safe. Second, I'd like to thank and salute our employees and management teams who have done an impressive job managing through this COVID crisis. Now on to Liberty Media. We completed the reattribution of our Live Nation stake and other assets and liabilities between the Formula One Group and Liberty SiriusXM on April 22. We've spoken to many of you since this announcement, and obviously, we had a conference call right after that. So I won't go into detail, but I'd like to reiterate why this was a benefit to both equity shareholders. For the Formula One Group first, it creates a pure play; provided additional liquidity and reduced debt. And for Liberty SiriusXM, acquiring Formula One Group's Live Nation interest with the complementary business with us at SiriusXM tracker at a compelling price resulted in ample liquidity. We are pleased with the stock market reaction since. All the stocks have outperformed the market since we made the announcement. Turning to Liberty SiriusXM, including the LSXM shares that we acquired as part of the reattribution, Liberty SiriusXM repurchased $98 million of stock from February 1 through April 30 and effectively bought the SiriusXM shares at a $3.73 look-through price over this period including the reattributed shares. Our ownership of SiriusXM as of April 24 stood at 72.2%. I'd note that we have stopped our repurchases prior to the reattribution. But I expect post close of the planned rights offering in early June, we will look to start repurchasing LSXM stock again. The nagging discount to NAV is an opportunity and one we will continue to take advantage of. As SiriusXM continues to repurchase stock and we approach 80% ownership of SiriusXM, I expect the opportunity may wane. Now looking at SiriusXM itself, it continues to operate very well during the COVID crisis. It has launched innovative new programming, including a 24/7 COVID-19-focused channel on Hotline, 9 new limited run channels with iconic artists, including the Prince Channel with music and exclusive content like a never-before-heard demo of a conceptual radio show Prince created for the SiriusXM channel back in 2005. Howard Stern has done great and innovative interviews, including a 2-hour plus session with Tom Brady from Derek Jeter's house in Florida. The subscription-based business model we have at SiriusXM has proved resilient. Self-pay net adds grew 69,000 to nearly 34.8 million total subscribers. And the very strong liquidity and cash flow of SiriusXM has shown through. We still have $1.75 billion available on our revolving credit facility, which has not been drawn. Turning to Formula One Group. I'm sure you have all missed the Dubai F1 racing. Hopefully, you've gotten a little taste by watching or rewatching both seasons of Drive to Survive on Netflix. And we expect all of you watched the Virtual GP this past weekend. There was an epic battle between Alex Albon and Charles Leclerc. They passed and repassed each other several times with Albon finally taking the win. The final results highlighted the next-generation of F1 drivers, Albon, Russell and Leclerc, exciting and going to be thrilling us for years to come. The F1 team has done a great job navigating the crisis and working on the 2020 calendar. They are planning an early July start in Austria, and Chase will talk more about that. We continue to evaluate the needs of the business but definitely want to be opportunistic and find synergistic assets that we can add. And we think we are well positioned to do so. Turning to Live Nation. It does not report until after the market today, so I won't comment on results, but I want to say we are pleased with the announced actions they have taken to build liquidity. And on to the Braves. We are working closely with Major League Baseball to see how we can put a season together. We appreciate how the commissioner, teams and players are working together toward that solution. Everyone is eager to see baseball return. The Braves players are eager, too. They've been doing Zoom sessions with the trainers, medical staff and manager, Brian Snitker. They've also been in celebration of 25 years since the Braves' 1994 World Series title. The 95 players joined a Zoom reunion while watching the final Game 6 on FOX Sports Southeast. Fans were able to watch the Zoom live on YouTube as well.

Brian Wendling, Chief Accounting Officer

Thank you, Greg, and good morning, everyone. The earnings release has our cash and debt balances by tracker as of March 31. Since we completed the reattribution in April, as Greg discussed, and repaid the margin of the F1 revolver today, I'll walk through liquidity and debt at Liberty SiriusXM and the Formula One Group as of March 31 on a pro forma basis for these two transactions. Liberty Media, SiriusXM, Formula One and the Braves are in compliance with all debt covenants as of March 31. Given the uncertain impact of COVID-19, F1 and the Braves are monitoring their ability to comply with their debt covenants in future periods, and we are in positive discussions with their respective lenders. On a pro forma basis, Liberty SiriusXM Group had attributed cash, restricted cash and liquid investments of $139 million, excluding $52 million of cash and restricted cash held directly at SiriusXM. And we have $870 million of undrawn margin loan capacity at the corporate level. The value of the SiriusXM and Live Nation stock held at Liberty SiriusXM as of May 6 was $21 billion, which excludes the value of the Live Nation call spread held at Formula One Group, which was valued at $165 million at the time of the reattribution and will be marked to market quarterly. We have $2.1 billion in principal amount of debt against these holdings. Total Liberty SiriusXM Group debt is $11.1 billion, which includes $7.9 billion of debt at SiriusXM. This debt balance excludes the $750 million intergroup loan owed to the Formula One Group, which is expected to be repaid with proceeds from the rights offering, which we intend to launch on May 18. Today, F1 will fully repay the balance under its revolving credit facility using cash on hand restoring its full capacity of $500 million. Pro forma for this repayment, Formula One Group had attributed cash and liquid investments of $1.4 billion at the corporate level. This excludes $536 million of cash held directly at Formula One. Total Formula One Group attributed principal amount of debt was $3.6 billion, which includes $2.9 billion of debt at Formula One, leaving $688 million at the parent level. F1's total net-debt-to-covenant-OIBDA ratio as defined in F1's credit facilities for covenant calculations was 6x at the end of the quarter as compared to a maximum allowable leverage ratio of 8.25x for both the term loan and the revolving credit facility. Please note these leverage ratios are for the Formula One operating business, not the Formula One Group. The term loan financial covenant is in current space and not maintenance. We are having positive discussions with the RCF lenders to temporarily move this covenant from an EBITDA based to a liquidity based. Payment of the RCF combined with the reattribution gives us more flexibility in renegotiating the maintenance covenant on the revolver. Lastly, to the Braves. At quarter end, the Braves group had attributed cash, liquid investments and restricted cash of $343 million and attributed principal amount of debt of $698 million. With that, I'll turn it over to Chase to discuss Formula One.

Chase Carey, Chairman and CEO of Formula One

Thank you, Brian. We entered 2019 with great momentum and were ready for our biggest season yet with 22 races. We were ready to race at Australia, but it was necessary to cancel the event at the last minute for reasons related to COVID-19. This global pandemic has had a significant impact on Formula One, and we're adjusting and responding in numerous ways that are in the best interests of our fans, employees, partners and constituents while focusing on the Formula One business for the long term. Let's walk through all the actions we've taken. One of the first actions we took as a sport was to move the team's summer break up to March and April as we wanted to have ultimate flexibility to race during the normal summer break in August. On Tuesday, the 28th of March, the FIA's World Motor Sport Council approved a further extension of the shutdown period from 35 to 63 days to be taken during the months of March, April, May and/or June. During this break of the season, we were inspired to see several U.K.-based Formula One teams come together for Project Pitlane. This is part of a larger U.K. industry-wide focus to manufacture and deliver respiratory devices to support the national need. Formula One has the unique ability to rapidly respond to engineering and technological challenges and is focused on its core skills of rapid design, prototype, manufacture, test and skilled assembly. These efforts have proven fruitful, and the go-ahead has been given for two of Project Pitlane's initiatives, including ventilators being produced by several teams plus a breathing aid being manufactured by Mercedes. We're grateful for the team's efforts in supporting the national need. In further actions, F1, the FIA and all 10 teams unanimously agreed to delay the introduction of the 2021 technical regulations until 2022 and to keep the majority of their existing 2020 cars into the 2021 season. This will reduce costs for all teams at this time when they would usually be investing in working on the cars for the 2021 season. We have further been working with the FIA and teams to strengthen the long-term future of Formula One with an array of new technical, sporting and financial regulations that will improve the competition and action on the track and make it a healthier business for all involved, particularly as we work through the issues created by COVID-19. One of the key areas of focus has been the cost cap on team expenses. We've previously implemented a cap of $175 million for 2021 but now expect to move forward with a significantly lower cap. Just like our teams, Formula One has been evaluating our cost structure. We made some difficult decisions and furloughed over 50% of our workforce on April 1, with senior executives taking a voluntary cut in pay. We froze all hiring and pay review plans and also deferred a number of initiatives we planned to pursue this year. We recognize we may lose a bit of time in implementing some of these plans. However, we felt the current uncertainties warranted the actions. As Brian mentioned, we're actively engaged with lenders of our revolving credit facility to address potential issues related to our quarterly leverage covenant. They've been very supportive as we work together to identify potential changes to the covenant to enable us to navigate through the possible scenarios, including the remote possibility of no racing in 2020, and we expect to agree to necessary changes in due course. We've been working tirelessly since Australia, and we're actively engaged with our promoters in putting together a potential 2020 race calendar. We have two primary challenges: identifying locations where we can hold the race and determining how we transport all necessary parties and their equipment to that location for a race. We're in discussion with all of our promoters as well as some tracks that are not currently on our 2020 calendar to ensure we explore all options. Our goal is to launch the season on the weekend of July 4th and 5th in Austria. It is likely that we will race the weekends of July 11th and 12th in Austria as well. We're in the advanced stages of putting together a schedule of additional European races through early September, including races during the traditional August break. We will then plan to race in Eurasia, Asia, and the Americas in September, October, and November before finishing in the Gulf in Bahrain and Abu Dhabi in December. We hope to have a calendar with 15 to 18 races. We expect the early part of the calendar to be races without fans, but we hope to be able to allow fans to attend in the latter part of the year. We are working with the FIA, local authorities, and other experts to determine the steps and procedures necessary to safely transport everyone to each race location and to enable those individuals to operate and be housed in a safe and secure manner. We feel increasingly positive about the number of locations that would be able and want to hold the race this year. Our work in the travel and other logistical issues related to each country is a work in progress. The economics of races, particularly those with fans, will clearly vary from existing agreements, and we're actively engaged on this front, too. We've been working closely with the FIA with the consent of all the teams to change the calendar without a formal vote amongst the teams, and this was formally approved by the World Motor Sport Council and Formula One. This will allow for a streamlined process as we reshuffle the calendar and appreciate the team's support. With the postponement of the season, we are pleased that our teams quickly pivoted and launched a new Formula One Esports Virtual Grand Prix Series featuring a number of current Formula One drivers and celebrities. To date, Charles Leclerc, George Russell, Antonio Giovinazzi, Lando Norris, Alex Albon, Carlos Sainz Jr. and Nicholas Latifi have all been on the grid along with former F1 drivers such as Jenson Button, Johnnie Abraham and Nico Hülkenberg. They've been joined by England's Cricket World Cup winner, Ben Stokes; musician, Liam Payne; professional golfer, Ian Poulter; and 6-time Olympic Gold Medalist, Sir Chris Hoyt, to name a few. These races have run in place of every postponed Grand Prix. The series utilizes the official Formula One 2019 PC video game developed by Codemasters, and the visuals are impressive. The races have provided great racing and entertainment value with lively commentary. Charles Leclerc won his debut race after receiving the game just three weeks earlier. Then he won the next race as well, and we're excited to see new rivalries emerge. The broadcast is available on the official Formula One YouTube, Twitch and Facebook channels as well as marquee TV broadcasters such as Sky Sports in the U.K. and ESPN in the U.S. And we've experienced strong engagement. Through the first three races, digital cumulative views reached 12.9 million. And total viewership, including TV estimates, reached 16.3 million. The Virtual Grand Prix even trended #1 on YouTube U.K. We will continue with these virtual GPs until we return to racing. We were also pleased with the response to the second season of Drive to Survive, which debuted on Netflix at the end of February. The season provided unprecedented access to the teams and drivers. We saw the drama of the driver switch from Gasly to Albon mid-season at Red Bull, behind-the-scenes action of the wet race in Germany, and learned more about Williams' challenging season. We are in advanced discussions for season 3, and the team is ready to capture footage in 2020. In news that may have been overlooked due to COVID-19, we welcomed Aramco as a long-term global partner to Formula One. We announced this agreement on March 10, and Aramco is our sixth global partner alongside DHL, Emirates, Heineken, Pirelli, and Rolex. We look forward to sharing our expertise to identify opportunities for the advancement of sustainable fuels, enhanced engine efficiencies, and emerging mobility technology. This deal includes trackside branding at most races and title rights to three Grand Prix in 2020, and exposure on our digital platforms. Further in this area, we welcome Ben Pincus as our new Director of Commercial Partnerships at the end of February. Ben joins us from Heineken where he managed their worldwide sponsorship team and partnership with Formula One. On the distribution front, we announced a multiyear media rights deal extension in Canada with Bell Media's TSN and RDS, which goes through the end of the 2024 season. Our fan base continues to grow in Canada. The 2019 season audiences across TSN and RDS grew 19% year-over-year, and coverage across the two networks reached nearly 5.3 million Canadian viewers. We've been in regular contact with our commercial partners, broadcasters, sponsors, and other partners. These partners have almost all been very supportive. Our conversations with them regarding the 2020 season are not as advanced as those of promoters as we need to determine our modified calendar to have more substantive conversations. A number of agreements have provisions related to the number of races, although that number of races is well below our originally planned 22. These are all valued long-term partners, and we expect to resolve any potential contractual issues in a fair and straightforward manner. We had been in the final stages of completing the Concorde Agreement when the coronavirus crisis turned everything on its head. We decided to put the Concorde on the back burner for the short term and prioritize addressing issues related to 2020 first. As we move forward with the 2020 calendar and finalize regulatory changes with the teams, we will once again return to completing the Concorde Agreement in the immediate future. Obviously, we are still dealing with a lot of uncertainty regarding the short term and the coronavirus. We're increasingly confident, although there are no guarantees that we will have a 2020 championship season. Fan support has been great, and there seems to be an incredible pent-up enthusiasm for racing to begin. At the same time, we're also looking beyond this year to a 2021 season. The long-term contractual nature of Formula One helped provide long-term stability at a time of uncertainty. We continue discussions for potential new races or race renewals for '21 that are going well. We also continue discussions with other new or existing commercial partners. We expect the impact of the coronavirus crisis on the broader world will extend into the future, but we feel we're well positioned to return to the growth curve we were on a few months ago and look forward to a better future for all of us. I recognize everyone would like revised projections for 2020. At this point, all we have are sensitivities with a range of potential results based on many variables. What is clear is that 2020 results will be significantly below original expectations, but we believe it is equally clear that we can manage through 2020 with or without racing and more importantly, that our business can quickly return to our prior expectations in 2021 and beyond.

Gregory Maffei, President and CEO

Thank you, Chase, and thank you, Brian. And to the listening audience, we appreciate your continued interest in Liberty Media and hope you all stay safe and healthy. And with that, operator, I'd like to open up for questions.

Operator, Operator

We'll take our first question from Jeff Wlodarczak with Pivotal Research Group.

Jeffrey Wlodarczak, Analyst

I have a question for Greg and one for Chase. After seeing another strong performance from Charter, which is aggressively continuing to buy back shares, I wanted to discuss your 25% ownership cap in Charter, which I believe you are nearing. Once you reach that cap, are you willing to participate in Charter's share buybacks, or do you think you can work with Charter's management to potentially exceed that cap? Additionally, Chase, could you elaborate on the impact of racing without fans on race promoter fees, as well as on sponsorship and advertising revenues? While it's clear that race fees will significantly decline, are there any advantages for promoters in racing at tracks where fees are subsidized or funded by the government?

Gregory Maffei, President and CEO

So I'll go first. Jeff, thanks for the question. First, since our holdings are really in two buckets, it's not clear that we're soon to be up against the cap. And it's not clear what the buckets are, both how they're counted. Secondly, there is some time on that repurchase until we come up against that. Third, we have had begun some discussions about how to adjust that because it's not necessarily in the interest of the shareholders of Charter or Charter to have us selling. So we'll see how that goes. We are long-term holders of Charter. We like Charter. We certainly don't want to be in a position of being required to sell Charter stock.

Chase Carey, Chairman and CEO of Formula One

And I guess on my front, I think clearly, races without fans have a much more significant impact on the promoter side than the broadcasting and sponsorship side, in many ways. I think racing without fans is first and foremost for the broadcast digital sponsorship side. The fans will all connect through various platforms and in many ways, actually, when you watch a race, even at a live race, a lot of people watch it on television screens anyway. I think in terms of the rate on the promoter side, clearly, these are very different events without fans, and that will be reflected. I mean we've talked about these being week-long spectacles, multi-day events, with the city involved, the track involved. Without fans at any of that, it's clearly a very different opportunity. It's a very different event. And we recognize that. So I think these are unprecedented situations. And so I think with the promoters, there's a more significant change, I think. With the broadcasters and sponsors, they do look at it as a season as a whole. As I said, there are contracts that have provisions tied to a number of races. It's below what we'd have. So we have some room there. But we feel we can deliver a quality event for those. We feel we can make a great event, but live fans won't be there. And so again, the impact is going to be significant, more significant on the promoter side.

Operator, Operator

Next, over to Bryan Goldberg with Bank of America.

Bryan Goldberg, Analyst

I have a couple of questions regarding the promoter aspect of F1. Given the complexities that promoters face, especially with the absence of fans or as they gradually return, what measures could F1 take to collaborate with promoters to ensure the events are both enjoyable and safe? Additionally, do you anticipate any long-term changes to the revenue contract model for race promoters as a result of this situation?

Chase Carey, Chairman and CEO of Formula One

So I mean first, on the long-term impact, whether it's promoters or sponsors, we're planning to be business as we planned it in 2021. So that's our expectation. In terms of managing through these events, right now, we expect the European events to largely be without fans. So that's how we're planning it, without fans. We're obviously dealing with different issues. We still have to deal with how do we get the teams there? How do we get the necessary personnel there and secure they're safe? We're working with the country host regulators. We're working with the appropriate authorities. We need testing procedures, transportation, and procedures. I actually had a fairly long conference call this morning with an array of parties putting that in place, focusing first on Austria because it's the first race but talking through all our tentative European races. So I think we feel we're making good headway on having races that can be secure and safe for everybody without fans, which again, is what we expect in Europe. I believe that as we approach events with fans, we haven't made significant progress yet due to the scheduling being a bit further out. It's challenging to discuss these matters because we don't have clear guidelines at this point. The situation is unpredictable and not very transparent, making it hard to converse with the authorities. We can begin to consider potential options for managing spacing and traffic flows if we had the necessary information. However, it's tough to engage in discussions about what can be done in September and October since the focus is currently on solutions for June and July. I believe the challenges regarding how we will handle the fan aspect are likely to arise as we approach races where having fans is a feasible option. However, since those races are not scheduled for July or August, we are currently organizing events without fans to ensure they can proceed. Ultimately, the situation remains uncertain, and there are varying reports from different locations. For instance, China is currently reopening venues for public gatherings. Therefore, as we manage larger crowds, we will gain more insights week by week as we progress. The sponsors have been fantastic. We've been in contact with all of them, but until we have clarity on the calendar, it's challenging to have meaningful discussions about modifying their races. They have title races that involve specific terms in their agreements. That's why we've mainly been keeping them informed. We are very pleased with their support and enthusiasm. We're working with global companies, and our main sponsors are focused on adapting and resuming business. While the pandemic has impacted small businesses, that isn't our primary sponsorship base; our relationships are with significant brands that understand they have a future and are eager to return to their usual operations. Our sponsors are very enthusiastic and supportive, and we anticipate progressing our discussions with them as we learn more about our 2020 calendar details.

Operator, Operator

And we'll take our next question from Bryan Kraft with Deutsche Bank.

Bryan Kraft, Analyst

I have two questions for Greg. First, is there a scenario where you would consider a reduction of your Live Nation stake, especially now that the value you need to achieve 50% pro forma ownership is lower than it has been in recent years? Or is it strategically important to keep it within the Liberty Media umbrella? The second question is regarding Liberty Sirius. You mentioned that you believe the NAV discount will narrow once you reach 80%. Is this due to tax consolidation, relative trading liquidity between the shares, or potential changes in capital allocation at SiriusXM once you hit that 80% threshold?

Gregory Maffei, President and CEO

Thank you for the questions, Bryan. For an RMT to happen, our shareholders would need to hold 51% of the spun-off company. Currently, our priority for capital at LSXM is to focus on capturing the discount. I don't see us using that capital for an RMT of the stock. Long-term, we believe the reattribution is strategic, and there are collaborative opportunities for Live Nation and Sirius that will benefit both. While an RMT is mathematically easier, it still presents challenges and would require capital that we have different plans for. On why the 80%? Yes, I think you'll see a lot of potential for all of the things you mentioned to drive the factor including free flow of capital up to the LSXM will probably, on the margin, make us more willing to consider dividends and push for dividends at Sirius, particularly if the gap sits where it is today and you can look at the relative value of which stock is more attractive to purchase, SXM or LSXM.

Bryan Kraft, Analyst

Great. And maybe just one follow-up. Can you quantify what the tax rate would be on the dividends today once the dividends received the exclusion that you're getting?

Albert Rosenthaler, Tax Consultant

I am. So it's roughly 7% to 8%. So it's pretty low.

Gregory Maffei, President and CEO

I was going to say that, but I want to get the authority to verify. Thank you, Albert.

Bryan Kraft, Analyst

You always want Albert to bless it.

Gregory Maffei, President and CEO

Yes. Albert blesses everything. Thank goodness.

Operator, Operator

Next, we'll go to Vijay Jayant with Evercore.

Vijay Jayant, Analyst

So Chase, a couple of questions. So obviously, you're targeting to get a schedule for 2020, but is December 31 sort of the end of the race calendar? Or could you move to January? I know the new season typically starts in March. So are we sort of looking at basically December 31 to try and meet all your requirements on contractual commitments also? And second, obviously, there's been a lot more liquidity in Formula One post the reattribution. And at the same time, some of your teams probably with no prize fund or working capital may be in trouble. Have you been approached on subsidizing these teams or sort of bankrolling them until the season starts? And is that something that Formula One would do?

Chase Carey, Chairman and CEO of Formula One

Currently, our targeted plan has us finishing in December, likely around the 13th or 14th, which is later than we initially planned. However, we are evaluating our options. Finishing in January is also a possibility, but we would prefer to complete everything in December. We would need to take a long break over the holidays since racing during that time isn't feasible. We need to collaborate with our promoters and various parties to make it happen, but this is being considered. For now, our aim is to finish a couple of weeks later than our original schedule but still wrap things up in mid-December before the holiday season. I think regarding the teams, 2020 will not meet our initial expectations. Everyone is making efforts to improve the situation. I've mentioned our cost-cutting initiatives as we progress and solidify our actions. Currently, there are too many variables, making it difficult to address specific issues. We need to advance far enough in our plans to understand our position. We expect the teams to take the necessary steps to navigate through this challenge. It's clear that our primary goal for 2021 is to return to the trajectory we were on at the beginning of the year. That is what we are committed to achieving while managing this year as best as we can. There has been some speculation about the level of support needed for certain teams. We care about them, but those discussions have not yet taken place. We'll assess the situation as we move forward, but right now there are too many uncertainties to provide specific details.

Operator, Operator

Now we'll take a question from Ben Swinburne with Morgan Stanley.

Benjamin Swinburne, Analyst

Chase, just continuing this discussion. Can you give us any sense for what the sponsorship revenues will look like this year with a 15- to 18-race calendar, at least relative to your original expectations? I assume it's lower, but I'm just wondering if there's any way to dimensionalize that. And on the race promotion, if you have races with fans later this year, as you mentioned is your goal, would there be any impact on race promotion fees for Liberty? It would seem like that's pretty close to what we used to consider normal.

Chase Carey, Chairman and CEO of Formula One

The promotion is likely more connected to obligations such as signage and screen titles. We have mentioned previously that we have a significant amount of excess capacity at the 22 race level. We're increasing it, but as the number of races decreases, it does create some challenges for that capacity. Clearly, there are issues we need to manage, especially with hospitality that may not be available at some events. However, we believe we can go a long way in fulfilling what our sponsors expect from the sport this year. Our goal is to align with our sponsors' expectations. Ultimately, these are partnerships, and most of our sponsors have long-term relationships with us. We will work together to find a fair way forward, ensuring they feel satisfied with our efforts. At the same time, we have a responsibility to provide value, and if we do, we expect to receive fair compensation for it. We will approach this collaboration as partners. As we consider promoters with fans, we are approaching a more typical business situation. There are various scenarios to examine, such as whether a race originally scheduled for spring has been postponed to fall, which affects ticket sales. Currently, many of our promoters, including those already scheduled, are not actively selling tickets due to uncertainties, and consumers are hesitant to buy as well. This is not a standard operational environment. However, when we do have races that include fans, we must consider whether those fans will experience the event as usual or under certain restrictions. We need to address all these aspects. I believe our approach for 2020 is that we have agreements in place, but these are long-term partnerships. We anticipate strong support from them and aim to ensure fairness in our dealings. We want to achieve fair value while being equitable to our partners. Our primary goal is to make sure that in 2021, our business for 2020 aligns with our expectations from four months ago, maintaining the same outlook we had at that time.

Gregory Maffei, President and CEO

So operator, I think we're done with our questions today. Thank you to the listening audience and for your continued interest in Liberty Media. We look forward to speaking with you again next quarter, if not sooner. Thanks very much.

Chase Carey, Chairman and CEO of Formula One

Thanks a lot.

Operator, Operator

And that does conclude today's conference. We thank everyone again for their participation.