Liberty Media Corp Q3 FY2022 Earnings Call

Welcome to the Liberty Media Corporation’s Third Quarter 2022 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this conference will be recorded today, November 4th. I would now like to turn the call over to your host, Courtnee Chun, Chief Portfolio Officer. Please go ahead.

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 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. 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.

Thank you. Good morning. Today, speaking on the call, we will also have Formula One’s President and CEO, Stefano Domenicali; and Liberty’s Chief Accounting and Principal Financial Officer, Brian Wendling. So, let me start with Liberty SiriusXM. Last quarter, we discussed our intention to reduce debt at LSXM, and we took actions during the third quarter. We opportunistically repurchased about 21% of the 1.375% Basket convert, combining prudent debt management and effective share buyback. FWON paid $64 million and BATR paid $14 million to LSXM to settle their respective intergroup interest. The remainder of the repurchase was funded with LSXM cash and $27 million from an unwind of a bond hedge and warrant. Effectively, this was a share repurchase across the LMC equities with $179 million effective cost to repurchase 4.5 million LSXMA shares and $1.1 million FWONA and $500,000 BATRA intergroup interest shares effectively repurchased. We are still hedged on the remaining exposure under that convert with our intergroup interest. Turning now to SiriusXM itself. They reported solid third quarter financial results despite the macro factors impacting the business. The resilient subscriber base experienced a record low churn of 1.5%, revenue was up 4%, and EBITDA was flat as we continue to make investments, including in product development. Despite soft auto sales, we continue to achieve vehicle penetrations with an enabled fleet of approximately $150 million. SiriusXM also set out strong cash flow business and guidance for the full year 2022. We continue to monitor headwinds in advertising and the reduced SAR impact on the top of the funnel. Sirius is also making progress in the streaming business. September was one of the biggest streaming subscriber acquisition months they’ve experienced to date. And we continue to add exclusive and diverse content, both in and out of the car. For example, we extended the NFL agreement. Sports has proven to be high appeal for new subscribers to both convert at a higher rate and have higher retention once they are obtained. Turning to Live Nation. Live Nation continued to see incredible demand with fans prioritizing spending on live events. Versus 2019, AOI was up 45%, and free cash flow was up 88%. Live also beat last quarter’s record for highest quarterly attendance, with over 44 million fans across 11,000 events. Per fan spending was up 30% through September in U.S. amphitheaters, and Ticketmaster experienced all-time high GTV, which was up 62% versus 2019. Live is closing out a record year, but there is more growth to come with 115 million tickets already sold and sponsorship for 2023 up 30% over this point last year. Turning now to the Formula One Group. We continue to come up with new analogies, which are familiar, and F1 continued to fire on all cylinders with incredible fan demand. There is significant growth in grandstand and Paddock Club attendance, with many sellouts and records broken. Importantly, as we’ve invested, there has been continued growth also in the U.S. market with three races planned for next year, including our landmark Vegas race. We also announced the renewal of our ESPN contract at a value that was many multiples of the prior contract. We announced a record 24-race calendar for the coming year, including renewing in Monaco, where we have a 3-year agreement to keep that iconic race on schedule; renewing in Mexico City, where we have a 3-year deal, which highlights the value that F1 brings to all cities. For example, between 2015 and 2021, the Mexico City Grand Prix generated $2.4 billion in economic activity and created 57,000 jobs. We will continue to capitalize on the momentum of the business. An example recently is the film that Apple has planned, which we think will be epic. We had a star-studded cast, including Brad Pitt. It’s directed by Joseph Kosinski, and it’s produced by Jerry Bruckheimer, all stars in their own right, very exciting. At the corporate level, we refinanced the FWONK convertible on attractive terms with fewer shares underlying the instrument and a lower initial conversion price of $86.06. And now turning to the Braves. The Braves finished an impressive season, securing their fifth straight NL East title. They finished 101 and 61. For the first time since 2003, they won over 100 games, and it was an epic comeback for the second half of the season. As you may recall, beginning at the start of June, we were 10.5 games behind the Mets. From there, we went on a Major League-best nearly 700 win rate from the start of June until the end of the season. The fans had an incredible turnout with 52 sellouts at Truist and more tickets sold at the stadium since we had done since last in 2000. Obviously, the finale was not what we had hoped. But I remind you, we are still the reigning World Series champions. We are, for a few more weeks, the reigning World Series champions. And there are wonderful things that come from that, but it can also lead to increased costs. We think they ultimately create value for the franchise and fan engagement, which will drive revenue. But on the increased cost side, the largest component has been reinvesting in increased payroll. We think that sets us up well for future years. But other elevated costs are from record attendance and four additional home games at the Truist ballpark. There were also modest cost increases for post-World Series activities, for example, a trophy tour and creating special merchandise. And let me finish by talking about LMAC. We recently sent out a press release announcing our vote for an early unwind. While the results have not been what we wanted in terms of finding the deal that we thought was attractive, I would tell you we evaluated over 140 targets, but the high valuations for 2021, the poor IPO market, plus overall market volatility led us to the conclusion that we could not find a solid target with attractive valuation and return characteristics. Finally, the recent tax law changes under the IRA created additional corporate liabilities if we were to extend the unwind into 2023. Therefore, we took action to unwind and return the capital to the investors in 2022. And with that, I’m going to turn it to Brian to let him talk about our financial results in more detail.

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 3rd, 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 1. 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 1’s leverage at the end of the quarter was 2.8 times. 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. On unwind, these are material investments that 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 1 operating business, we 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 wasn’t 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 cost 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 a 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 debt of $601 million. Liberty and our consolidated subsidiaries are in compliance with the debt covenants at quarter end. And with that, I’ll turn it over to Stefano.

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 1 is huge from fans, potential partners and those who want to host the race. 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 incredible this season, setting a record for most wins in a season with 14 Grand Prix wins so far in 2022 with his win in Mexico City last weekend. He secured his 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 where they finish can have a meaningful impact both financially and operationally. Excitement for our sport continues to grow. Certainly, we’ve seen that in the race attendance as we 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 we focused on maintaining a high-quality fan experience. We’ve also seen more first-time and female attendees at our races. Across the 10 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 renewed our agreement with Monaco and will race there through 2025, with expanded rights for Formula 1 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 benefit F1 has brought to Mexico City since 2015 has 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 are 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, who will compete as a new team from 2026. Formula 1 presents a global platform 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 regulation 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 makes them 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 well as we have 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 UK 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 viewership so far this season, with average viewership in the UK up 60% since 2019; Italy up 20% since 2021; and Germany up 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 to us, and with this new deal, at least 16 races per year will air on either ABC or ESPN with all broadcasts being commercial-free. Through 18 races in 2022, they’ve seen an average audience of 1.2 million up from 994,000 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 F1TV Pro to subscribers who can easily add the service to their existing contracts for mobile or internet services. The F1 Esports Series Pro championship, presented by Aramco, returned for four events, each spanning over three years. This includes more live shows as the teams and drivers battle for their $750,000 prize spot. Similar to F1, we have seen several high-profile drivers move across the grid. We look forward to building on the incredible engagement of 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. And finally, to further our progress to net zero, Formula 2 and Formula 3 announced a partnership with Aramco to pioneer sustainable fuel for 2023. This is an important step to reach a 100% sustainable fuel by 2026, which will be a requirement of all FIA championships. F2 and F3 have proven to be a great test bed 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 that 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. Bye, bye. Ciao.

Thank you, Stefano, and thank you, Brian. We look forward to seeing many of you at our Annual Investor Day on Thursday, November 17th. 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 e-mail investor@libertymedia.com. We appreciate your continued support of and interest in Liberty Media. And with that, operator, I’d like to open the line for questions.

Our first question comes from Doug Mitchelson with Credit Suisse.

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? Thank you.

Thank you for the question, Doug. We have discussed various options in the past, and I won’t go over them in detail again, but I want to emphasize that we are aware of the situation. We are actively preparing for different alternatives and positioning ourselves accordingly. When we have an announcement, we will share it. I want to stress that we believe Live is very appealing, and we feel the value in LSXM is not fully realized. There are businesses that could enhance Live and present interesting opportunities for us. We have significant potential regarding our investment in Live. However, I'm not inclined to dive into every detail about what we can do with LSXM since we have already addressed those points before.

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 time tables?

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

Next question is from Bryan Kraft with Deutsche Bank.

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 ATB. I was wondering if your conviction with respect to SiriusXM being an 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 that means race promotion revenue could become a significant and consistent revenue growth driver going forward? Thanks.

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.

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 have 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 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 from the fact that Formula 1 has become 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 this growth in the best way that we can in the next couple of years.

Thanks, Stefano. So, Bryan, I’m going to give you confidence. I’m going to restate, I still believe SiriusXM as an ATB; no change in our position. These things tend to get resolved and firmed up at the time something gets tested, but we still have that position.

Our next question is from Jason Bazinet with Citi.

I understand you’ve mentioned before how the trackers provide flexibility by allowing you to move assets and liabilities around. However, when I consider the overall direction of Liberty, it seems like there is a gradual shift towards asset-backed securities. It looks like eventually everything will be asset-backed by the terminal year. Is that an incorrect perspective?

Thank you for the question, Jason. I don’t think we’ve really seen a change in our procedure. We believe the tracker has real value and provides us with flexibility. Historically, we have created many asset-backed securities. For instance, I can recall media-related ones, including DIRECTV, CommerceHub, Expedia, and Liberty Expedia going to Expedia. This list is extensive, and we've often separated those entities, which has happened many times over my 17 years here. I’m not sure we’ve lost interest in trackers or changed our view that asset-backed securities definitely hold value when timed and placed appropriately.

Okay. Does 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?

Yes, I’m not sure I would read that as the interpretation. I think it’s a recognition of these things have a life, the market. At a moment in time, we thought there was an opportunity. We couldn’t find the one we wanted. Unlike many sponsors of SPACs who were playing for the carry, we had committed real capital and we’re concerned about and aligned with our shareholders in wanting to have a good return, not just a pop. I think SPACs are obviously challenged for many reasons, both because of the market reaction right now and also because of the regulatory profile towards them. So, that was a recognition of those factors, not any statement about lack of optionality or flexibility or desire for that.

Our next question comes from David Karnovsky with JP Morgan.

Stefano, 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. Thanks.

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 1. In the 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, they are not really the ones that can extend from the financial and awareness point of view and the country point of view what we want to achieve. It is clear that the fact that we are growing gives us the potential for the future to see how in that kind of the 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 future decisions, there is also the possibility for our F1 TV that is going tremendously well to be incorporated in 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.

Yes, I want to emphasize that Sky is a valuable partner in key regions. More importantly, their production capabilities are impressive. Many of you in the U.S. watch broadcasts via Sky, and I am consistently impressed by their work. Securing a long-term partnership with them was appealing. Regarding our cash usage, we have the fortunate situation of generating substantial free cash flow from Formula 1, which we believe has potential for growth. We have engaged in stock buybacks at different times within Formula 1, but we also see potential opportunities in the current market, given the challenges being faced. This provides us with options beyond external financing, allowing us to pursue initiatives independently that could lead to interesting opportunities. We will continue to evaluate the flexibility offered by our free cash flows, the need for deleveraging, share repurchase, and other investment opportunities, such as projects in Las Vegas and other ventures.

Our next question comes from Ben Swinburne with Morgan Stanley.

I have a question for Greg or Stefano regarding the recently announced deal with ESPN and Disney. It appears you took a lower amount of money than you could have received. Could you explain the rationale behind this decision? What new elements in the ESPN and ABC deal, apart from the financial aspect, do you consider strategic, and what benefits do you see from this agreement, especially considering the duration you've chosen, given the significant opportunity in the U.S. market? Additionally, Brian, you didn't mention currency impact in the F1 press release; was this a material factor in the quarter? Also, G&A and corporate costs increased significantly year-over-year and quarter-over-quarter, possibly related to Vegas. Any insights on one-time impacts would be appreciated.

I’ll discuss ESPN first and then Stefano can add his thoughts. We have confidence in the strength of the business, which led us to agree to a shorter deal previously without securing the highest payment. For this renewal, we took a similar approach, aiming for the broadest exposure. ESPN has been a strong partner, and we believe that the potential to grow the sport in the United States warranted a relatively short-term deal, as we anticipate better outcomes in future renewals. Our strategy of believing in our growth and focusing on breadth instead of immediate payment has proven effective, as demonstrated. ESPN has also been supportive in various areas, including our collaboration on F1 TV, which has reinforced our partnership moving forward. We are very enthusiastic about our relationship with F1 and ESPN for the next three years, but we are also looking ahead to the opportunities that will arise when we renew our agreements in three years. Stefano, do you have anything to add?

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 the U.S. that wanted to invest with us. And now we need to give credit to ESPN that, in terms of content, in terms of attention, and 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 races in certain channels to have more attention to that. So, I think that we talked carefully about this step. And the fact also that with this agreement we keep, as mentioning, 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 the U.S. that there will be other players that will be around the table and interested to be with us in the future.

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, it’s 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 prepare for their launch event and ticket sales.

Our next question comes from Barton Crockett with Rosenblatt Securities.

Okay. I guess two questions, if I could. The first is just 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 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?

Thank you, Barton. I mean, let me figure out these things. First of all, being a world championship, we can spread around the world the risk of having this kind of situation to manage. 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 regarding ticketing for next year. So, this is a good sign in the context you’re seeing mainly Europe where I’m living; it is clear that this recession is taking place. But I think that the way we are structured, the way we have done the deal will protect us and enable us to move forward in this direction. Therefore, I would say this kind of situation leads us to think that we should be optimistic in this context that, of course, we monitor. But this is what we see today.

Yes. I think we’re seeing that high-end consumers continue to make purchases across our business, whether at Formula 1, Live Nation, or the Atlanta Braves. The demand for all these services remains very strong. This reinforces the point made by Stefano; many promoters, including those in Europe, are performing well, and there is strong demand from consumers, which boosts promoter confidence regarding those long-term contracts. We feel very good about this situation.

Okay. And then, the other thing I was curious about is the fact that we’ve got the race winner, the team winners pretty well sewn up well before the season is over at Formula 1, whereas last year, things were pretty competitive until the very end, the last lap. What difference does that make in terms of the financial arc of your business over the balance of this year? I mean, is that a headwind in any way? Anything you can speak to based on historical or any other kind of anecdotes?

Well, actually, we don’t see any kind of risk at all. I mean, first of all, we have the last two races with sold-out tickets, and the number is really growing. The attention will be shifted, of course, in other fights from the sporting perspective. So that’s part of racing. I would like to add, if I may, another comment. We are totally positive on the impact that the change of regulation provided throughout this year. We cannot comment on the fact that the team, but specifically in this case, Red Bull or Max Verstappen did an incredible job. Maybe the team didn’t take the right opportunities, but what we saw on track is real racing, and that’s what we wanted. I’m totally confident that next year, the fight on track will arrive up to the end of the calendar. And, yes, as you have seen in the last races, on the sporting side, there is a lot of attention. There is a fight for places that also, from the team perspective, is related to the financial position and the financial rewarding if they achieve a position better than the other team. So, I think there will be a lot of interest in Brazil and Abu Dhabi too, with no problem.

Our next question comes from David Joyce with Barclays.

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 contract 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.

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’s starting from a 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 a new agreement for so many years with an interesting increase in terms of financial contribution means that AWS recognizes the power of our platform. With regard to the value or the process related to the possibility of having an F1 team in the championship, of course, there is the primary step that both us and the FIA need to come to an agreement for that. The first thing that we need to consider is whether an 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 that can give a benefit for the value of the championship. 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. This is what is written in the current agreement. But mainly, the point is whether an eventual new entry will bring better positioning in the F1 championship. This is really about value, financially and from a sporting perspective. And if I may, it’s not a problem to have one more team to enhance the racing. Therefore, we will see. If we have a real incredible new entry team that we want to discuss with us, we are ready to do so, but we are not in the best position today for that.

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

Thank you. With the big inflection in interest in F1, especially in the U.S., are you seeing a lot more activity on the EA game, Codemasters game that’s been around forever, I guess, since 2000? And is there a potential with, I guess, the somewhat lean 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. Thank you.

Matthew, I think that the fact that we are bringing in new customers who are getting younger and younger will allow us to see an incremental opportunity to increase the revenue stream for us on the licensing point of view. 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 on is that we are a physical sport on the track. Any kind of growth that is happening on, i.e., gaming, has to be translated to the passion that we want to see the people go to the track. 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.

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.

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