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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by. Welcome to the Liberty Media Corporation 2017 Yearend Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded today, March 1, 2018.
I would now like to turn the conference over to Ms. Courtnee Chun, Senior Vice President of Investor Relations. Please go ahead, ma'am.
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, including statements about business strategies; market potential; new service and product launches; the proposed exchangeable debt offering, discussions involving iHeartCommunications; matters relating to Formula One; including future financial performance, expenses, tax matters, brand expansion, including internationally, experience improvement, new opportunities for commercial partnership, sponsorship; promotion and television and other matters that are not historical facts.
These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including without limitation, possible changes in market acceptance of new products or services, the ability of our businesses to attract and retain customers, competitive issues, regulatory issues and the availability of capital on terms acceptable to Liberty Media. 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 statements 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 of Liberty Media and adjusted EBITDA of SiriusXM. The required definitions and reconciliations, Schedules 1, 2, 3, can be found at the end of the earnings press release issued today, which is available on our Web site.
This call also may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding Liberty Broadband. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These forward-looking statements speak only as of the date of this call, and Liberty Broadband expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Broadband's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Now I'd like to introduce Liberty Media's President and CEO, Greg Maffei,.
Thank you, Courtnee, and good morning or I guess it's good afternoon here on the East Coast to all of you on the call. Today speaking on the call, we also have Liberty's CFO, Mark Carleton; and Formula One's Chairman and CEO Chase Carey. During Q&A we will also be available to answer questions related to Liberty Broadband if there are any.
So, beginning with Liberty SiriusXM, as you may know this morning we announced the launch of an exchangeable bond at Liberty SiriusXM exchangeable into SIRI shares. The use of proceeds for that offering includes potential repurchase of Liberty XM stock, which we hope may narrow the discount at LSXM. The lawyers have instructed me not to comment further upon this offering until it is priced and therefore I will not be taking any questions nor anybody else about the offering on this call.
I will be as many of you will be or listening in at the Deutsche Bank Media Conference on Monday, and I’d be happy to talk in more detail then. As you may have also heard this, we’re in discussions with the creditors of iHeartCommunications. We believe that we and our companies have something to offer there and we have bought a physician in the iHeart debt, which we believe is economically attractive. And I would note that we have bought a sufficient amount of debt to fund virtually all of our proposed equity commitment.
Let's be clear this is being done out of SiriusXM repurchases and if you’re asking why we get this first before buying back our own shares, I’d point to a couple of things. First, the opportunity with iHeart was now second to the discount at LSXM, which has been persistent and for a lot of reasons we’ve talked about has widened quite recently mostly in the last 60 days when we were out of the market. Buyback has only gotten more attractive now when we can be in the market and we understand that there has been some short-term pain out there for some of you and -- but waiting has proved only providing more attractive potential repurchase opportunity.
So with that, let me turn to LSXM's results. SiriusXM had a very strong 2017, revenue was up 8% to $5.4 billion. Self pay net adds were up to 1.5 million -- 1.56 million and Liberty's ownership as of January 29 stood at 70.4%. I would also note that the SiriusXM board has approved an additional $2 billion of share repurchase.
Turning briefly to the Formula One Group. It had a great first season as part of the Liberty family. Chase and his team continue to focus on long-term to build excitement in the sport and drive financial returns to benefit the shareholders in the long-term. During 2019, as you will hear more, we further refined the capital structure at Formula One and substantially reduced interest expense. We very much look forward to the start of the season later this month in Melbourne and have been watching the exciting results in Barcelona in testing [ph].
Turning to Live Nation which had yet another record year in 2017. Revenue was up 24% for the year, really quite strong. All divisions, concerts, sponsorship, ticketing, delivered their strongest AOI results in the company's history. The concert attendance was up 21% to 86 million. Solid growth in pricing and on-site initiatives to increase revenue and they continue to drive results with those efforts. And we're off to a promising start in 2018 with confirmed arena, amphitheater and stadium shows for 2018 already up 7% through February '19. In addition, already 70% of the sponsorship advertising in net revenue projections for '17 -- for 2018 have been committed.
Turning to the Braves. We’ve finished a successful first season at SunTrust Park with attendance of 26.3% per game in 2017. Ticket revenue was up 76%, concession sales were up 31% and retail sales increased 45%. TV ratings importantly last year were also up 50%. So springs training has started. We are looking forward to opening day on March 29 for Braves. And lastly, Liberty Broadband, Charter had a strong quarter. Solid subscriber gains, video included, growing video subs, charter remains constant in its strategy and its paying off, enhance the product, simplify pricing and packaging, reduce transaction and customer costs.
2018 is a year in which they remain focused on completing the integration of Time Warner and Bright House and driving long-term growth through new packages. For the calendar year 2017, Charter repurchased approximately $13.2 billion of its own equity, increasing our ownership stake on a economic basis to I think about 22%.
With that, let me turn it over to Mark to let him discuss our financial results into more detail.
Thank you, Greg. At quarter end, Liberty SiriusXM Group had attributed cash and liquid investments of $546 million, excluding $69 million in cash held directly at SiriusXM. The value of the SiriusXM stock as of 220 A was $20 billion. Actually I’ve a little bit from that today, and there's $750 million in debt against these holdings. And we have increased our borrowings under the SiriusXM margin loan to fund some investing activities and for general corporate purposes.
Formula One Group had attributed cash and liquid investments of $117 million, excluding $165 million of cash at F1. Formula One group holds public market equity securities with a market value of approximately $3.6 billion as of 228, with 2.3 billion of attributed debt excluding the debt at F1. The Braves had attributed cash and liquid investments of $132 million,
At quarter end, Liberty SiriusXM Group had an attributed principal amount of debt of $7.6 billion, which includes $6.8 billion at SiriusXM. Formula One Group had attributed principal amount of debt of $5.6 billion, which includes $3.3 billion of debt at F-1 and the Braves group had an attributed principal amount of debt of $667 million.
F1's total net debt to covenant, what’s the ratio as defined in there. Credit agreements was approximately 7.1x as of year-end as compared to a maximum allowable of 8.75. This ratio increased a little bit from the third quarter due to decline in the last 12 months covenant calculation of their work done. We set up target total net leverage ratio for Formula One, of about 5 to 6x of that covenant or -- and bear in mind, this is for the Formula One business not for the Formula One Group.
In January of '18 we paid off $400 million of the first lien term loan which effectively was leveraged neutral, but did decrease the margin over LIBOR to 2.5% from 3%. On taxes for F1, in 2018, we are expecting a mid to high single-digit effective cash tax rate on U.K EBITDA. F1's adjusted OIBDA as reported, less stock based comp is a reasonable proxy for U.K EBITDA for this purposes. So 2017 cash taxes for FI, we are approximately 2% of U.K EBITDA due to the occurrence of some one-time items and charge
With that, I will turn it over to Chase Carey to discuss Formula One.
Thanks, Mark. It's been just over a year since the change in ownership in management, so I thought it is a good time to take a quick look back at the first year then touch on our priorities going forward.
As we stated day one, Formula One is essentially an organizational startup and a business turnaround for us, a tremendous franchise that had not been achieving its potential. Therefore our goal in year one has been to build the foundation for sustainable long-term growth. Our focus has been on where we will be in three years not three or even 12 months.
Nonetheless we identified a number of priorities in the past year that were key to achieving our longer-term goals. These priorities included: first, build an organization, an infrastructure that will enable us to grow and fulfill Formula One's potential. We’ve settled into our new London headquarters with headcount currently around 120, expecting to settle around 150 by mid-to-late 2018. Overall, we expect the associated incremental step up in corporate overhead to be approximately $50 million annually compared to 2016, excluding marketing and development expense tied largely to launch new initiatives.
Second, we want to create a renewed sense of energy and excitement among spans, both at events and on television and digital platforms. Our growth in attendance, viewership and digital engagement last year were all signs of progress. Third, engage with the larger ecosystem of Formula One. The teams, promoters, sponsors, broadcasters, regulator, and other partners. To begin to build the type of partnership Formula One needs to be successful on both the motorsport and commercial sides of our business.
For us to improve our balance sheet and maximize long-term cash flow. A year ago we had over $4 billion in external gross debt and today were at $3.2 million with approximately $115 million in annualized interest savings and an improved tax structure. We also eliminated the overhang of potential share sales from prior Formula One owners.
As was to be expected, there have been some surprises in the past year. On the positive side, the enthusiastic response in interest from fans and viewers to the new Formula One were stronger-than-expected. We still have a lot of work to do to improve this sport in the track and the fans live and broader experience. However, the early enthusiasm from fans reinforce the pent-up demand in potential in Formula One.
We are also positively surprised by the excitement from existing commercial partners to expand and grow the relationships with us and the level of interest from new potential commercial partners. There's real enthusiasm from new potential sponsors, promoters, and video entities to engage with Formula One. Many of these will take time to develop in the right way and our priority again is building long-term value, not a short-term buck. For example, in the broadcast area and some cases we recently traded dollars for reach and digital flexibility. We are excited about the potential long-term growth that exists here.
In terms of challenges, we discovered that post our investment in Formula One, we had two significant sponsors that decided to not renew relationships with us in 2017 and a race in Brazil with adverse financial changes in the existing agreement that took effect in 2017. These issues adversely affect -- impacted -- adversely impacted 2017 revenue by a bit more than $50 million, which essentially drop straight through to the pre-team EBITDA.
We also have the end of a race agreement in Malaysian effective in 2018. The positive news is that these are one-time events that we can mitigate in the next few years. We also found a governance structure in Formula One a bit more cumbersome than expected, but believe that the continued engagement with our array of partners will help build on the shared vision of how we grow the sport for fans and its participants.
Looking forward, as I noted up front, our priority is where we grow Formula One in the long-term. Nonetheless, 2018 is an important step in that process and we have a number of priorities for the coming year. First, we will work with the FIA and teams to improve the sport in the track in the business model for all involved to deliver a sport to fans that provides the best possible competition, action, suspense, state-of-the-art technology, heroes, glamour and shock and awe.
I believe there is alignment on the overall broad goals, but we have to find the right compromises as we work through the details. Second, we need to re-energize our existing TV product and build relaunched digital platforms. We brought in David Hill from FOX Sports as an advisor to work with our internal team on a new TV product for this season.
On the digital front, we announced the launch of our new over-the-top product Formula One TV and a new web experience among other digital initiatives. We also need to build our live event experience. We will continue to work to engage more host cities as we did in London last year, to expand and improve the fan experience at the track and to grow key areas like hospitality and merchandise to their true potential. In addition, we will move forward with plans to build key extensions to our business like e-sports, licensing and merchandising and more.
We will also advance our geographic expansion in Asia and the Americans in general and the key markets of the U.S and China, in particular. New television agreements will help enhance fan engagement in those regions. Finally, we need to continue to build and expand relationships in our core revenue areas of sponsorship, promotion and television. For example, in the sponsorship area, we are working to create a much wider range of opportunities for both existing and new sponsors, to engage fans and exploit our brands.
With our promoters, we're looking to create a wider set of choices and experiences that we can develop together for fans commercial partners, all of which help us grow our business. We also have an exciting list of great locations that want to host the Grand Prix which provides great possibilities for growing this dimension of our business.
We are excited about the opportunity in front of us. We have a lot to do. I believe we are on our way to deliver on the promise of Formula One for its fans, partners and shareholders. Thanks very much.
I turn it back to Greg and Mark.
Thank you, Chase, and thank you, Mark. To the listening audience, we appreciate your continued interest in Liberty Media. And with that operator I look to -- like to open it up for questions.
Yes. Thank you. [Operator Instructions] And we will now take our first question from Jeff Wlodarczak with Pivotal.
Hi, guys. Couple for Chase. As you mentioned, you just launched your F1 OTT product this week in a number of markets. How should we think about startup losses, marketing etcetera this year and beyond? And is that something you intend to push fairly aggressively or more in the context of the marketing that you’re already doing at events? And then, broadly should we think about '018 as another F1 investment year with the real acceleration more in '019? Thanks.
Yes, I mean, certainly this year we’re -- this year will be an investment year in the OTT product. I think it will be judicious about how heavily that, but we’ve to market. We want to -- it's clearly something that will take time to grow. But that being said, I think we are also still sort of building that product experience, the components of the over-the-top product that are still yet to be launched. So I think we launch it, we have something like 24 camera feeds, but we will have a richer data experience, we’re going to add more historical footage. We are going to add other dimensions to it as we go. So, I think we feel it's a product the market's ready for and excited by and we will be investing in it. So shortly it's a short-term investment, but I think I’m not going to project before we even launched where -- what the timeframe is to turn it, but I think we do expect it to have growth that in -- after a couple of years of investment that it can become something that's really a positive contributor to our future and in many ways becomes the factor on how we navigate the overall video experience with our broader video partners. In 2018, certainly to be a year of growth. I think on -- in terms of stepping forward, but that being said it's -- I think '17 and '18 we looked at it as, I guess, sort of foundation building years. I think our real target for where we want to get to it as I said in the comments before is sort of 2020. So I think we expect to have some steps forward, but in a lot of places again we're still in the early stages of building out digital platform. So we're investing in places like digital platforms. We're doing more in terms of the events, although like we’re starting to generate more engagement from partners and like to support those events. So I do -- I look at '17 and '18 as sort of foundation building years with the real growth in '19 and '20 to come behind that and look at the over-the-top platform, its again probably in the next couple of years being investment building with it becoming a real contributor pass that.
Great.
And we will now take our next question from Vijay Jayant with Evercore ISI.
Vijay?
Caller, please go ahead. Your line is open.
Hi. Sorry. For Chase, if -- can we just talk about race promotions obviously adding Germany and U.K and loosing Malaysia in '18, and also some of the plans you have for new venues through 2020 and under this Concorde agreement, is the goal to get to 25 races, and are there any more venues that we can see a step down on that can impact growth? And then quick one for Greg. Obviously, the iHeartRadio interest, while financially looks attractive. Can you just talk about what synergies that may have with the Sirius business, especially may be in the 360L plans there? Thank you so much.
Yes, we don’t have a target number of races. And actually probably a large number of our races are long-term agreements anywhere any -- in any event. There are always a few to come up. We certainly could add races. I mean, we’ve got places that -- we’ve got lot of places we’d like to have races not all of them are places we consider. But I think they’re actually quite a number that would be real positives for us. But I think our real focus is making sure, again the quality over quantity and I think we’ve the capacity and we’ve the rights to go to -- to add races. Its built that we can go to 25, but I think our focus at this point as we -- I think I said in the past continues to be getting our races to -- getting the races to be what they should be and really all the components behind it is not just the race, but it's the hospitality local partnerships, the event itself, cities that support it, public support that engages it. And I think we will continue to evaluate those opportunities as we deal with renewals. Some of them are short, I mean, Germany, we're back in next year, but it's a one-year deal. So that’s a short-term agreement for the year. But I think we have interesting opportunities if we want to take advantage of that, but that’s something I think we -- again, we will decide as we go forward.
And on the question around iHeart, I think there are potentially substantial synergies between iHeart and both Pandora and Sirius. The Sirius ones are probably more of a revenue nature. The opportunities around cross-promotion, around churn personalities, as you rightly point out about what 360L may be able to do to bring strength into the -- for iHeart into the car in differentiated ways and probably protect the position that FM radio has in the car. And on the cost side, Pandora probably has a substantial number of wealth around shared add technology, around leveraging sales force, around some of those things that could be done as well as some revenue opportunities around those things. The sales force at iHeart is a very powerful one and larger than substantially in the added sales force of either Pandora or Sirius and much more focused on some of the local components. So there are potentially a range of synergies on the cost side and a range of synergies on the revenue side and some of them are also about the funnel of per users and how we can move some of them into -- some of those pay categories.
Right. Thanks so much, Greg.
And we will now take our next question from Bryan Goldberg with Bank of America Merrill Lynch.
Thanks. Two for Chase. First, on sponsorship, I guess, given the increase in audience sizes you called out in the release TV audience sizes. And the new live demo events you got planned for 2018. The increase in social media followers you achieved so far and even some of the virtual trackside inventory you’re activating. How does this impact your sponsorship opportunity in 2018 and beyond? Either -- any color you can provide from an inventory or pricing perspective would be helpful? Then I’ve got a follow-up.
Yes, I mean, again I guess look at the general statement, I think the interest from broadly defined universe of potential sponsors has been great. Yes, we got a lot of interest obviously turning interest in to dollars. It's always a process, I’m going to do it overnight. I think in a nutshell, I think we actually pretty much on track where we want to be and we will have a step forward. I think we talked before about sort of saying the sponsorship arena is one to get to where we -- we think we should be -- I mean, it's an area that we’ve historically clearly underdeveloped, we haven't exploited the number of sponsors we should have or had the breadth of offerings. I think we have gone a long way to correcting that. So we're engaging with that complete portfolio of sponsors and we're creating a much broader base of offering. So I think we’ve got into that place. I think to get the dollars to where they -- it should be through this initial phase, we’ve talked about a 3-year process that sponsorship probably moves faster than some of the other areas with longer-term contracts, but it's not going to move in 12 months. So I think the year is a step forward, but '19 it will be a step forward, and '20, it will be a step forward. I mean, we are not going to be fully mature, but I think this initial phase of really sort of catching up to where we should be in terms of array of sponsors, breadth of sponsors and the type of engagement we should have with sponsors I think is on track, but it's really again probably something that is more a 3-year process and a 12-month process to get, there. Obviously, there are things we can continue to do to build on from that as we expand the sport into other areas of things like e-sports have opened up opportunity that probably wouldn't be on the radar screen. I mean, that’s a big -- I think that opportunity has been bigger than we expected. So there are some things that now we're developing that probably wouldn't have had the profile they did before. We are widening the events. We will have four City Fan Festivals this year, but we will have more as we go forward. So again those are all building steps. So we’re not going to be mature in the sponsorship area in 2020, but I think by 2020 I think we will be much closer to where I think we should be for what we’ve got. And obviously part of that is also continuing to improve the product underneath it, whether it's the race itself, the events themselves, we are -- we got work to do there. So that's again part of continuing to build the interest and the engagement with sponsors is to make sure we're continuing to get the sport and the events. And really the presentation of the events, I touched on what we’re going to do with the television product. And in the television product, we will have new graphics, new camera angles, new sound, something that add some fresh energy to that dimension of it too. So, it’s why all these things don’t -- they don’t just sort of all a sudden flick a switch and it all turns into money in 12 months. Some of it, we have to have. They want to see continued progress in the like, but we’ve -- I think we've been actually thrilled with the level of engagement and the excitement and the interest and support for the direction we're going with the sport as a whole. So I think we feel on track to what we hope to achieve in sponsorships.
Thanks. And my follow-up is really about your -- I guess, your perspective on the broader TV market, given your experience, I guess, in the U.K pay-TV market, I was wondering if you could share your perspective on the announced auction results so far for the domestic EPL rates. The deflation was surprising to some and which is curious to hear your perspective as to what the implications might be, if any, to the broader sports TV marketplace and F1, more specifically?
I mean -- yes, I guess, I’m not going to -- I mean, I probably wouldn’t comment on the EPL. I’m a board member at Sky, so I don't really think it's probably my place to: comment on something they were involved. And so I guess, I can comment a little bit more broadly on the TV. The TV market as a whole not actually certainly it's not specific to the U.K. I think in many ways, TV values, first and foremost, are based on competition. When we’ve experienced that already with some of our renewals where you’ve got competition and realistically two can be great, you don't need necessarily five or you’ve got competition for rights. You can see the value in the underlying rights. There are some markets that you still have pretty weak competition, and obviously that affects the marketplace. It is our belief that competitions could increase, particularly on the digital front. Although I think the digital players feel like they’re close, but probably maybe half step away from really getting deeper into the live event businesses, but when you look at who they’re hiring, what they’re hiring, capabilities they’re building, they’re all pretty good signals and they all want to meet, they all want to talk, and so I think you got to make that judgment, but I think the judgment for potential increased competition, particularly, coming from the digital world, I think portends pretty well for the value of these events. You could see the value. The events today in markets where you’ve competition. You get real -- you would get significant increases in value, that competition ebbs and flows. There are obviously other factors, I mean, within a sport, you’ve got to make sure the sport delivers. So, you want to be presenting this sport better, increasing the fans, increasing fan engagement. So we're doing all that. You also want to create choices. We talked earlier about OTT. So I think if you go in to the video marketplace, clearly for us having the ability to grow in multiple dimensions, whether it's free, pay, web-based, over-the-top, all become tools you can use and get mix-and-match as you sort of get a sense of what that opportunity is. So I think developing those opportunities, getting sports to where it should be and ultimately underlying competition, which I think it's probably the lead factor, are all forces that will impact the value of key rights. I think these key rights are uniquely valued in the marketplace, but you can look at various markets and where the competition has changed, taking [indiscernible] -- isn't competing for rights they way they were a couple of years ago would affect what happens in that marketplace. When you’ve got vibrant competition in another market, it has a much different impact. So I think those to me are the factors that you look at, you try and make judgments about and evaluating what's the potential value of our underlying rights, if we deliver a product that lives up to its potential.
Thanks a lot.
I mean, I guess, the other -- the only other thing I'd add for our product that I think positions us well, particularly to the digital world, the digital guys all want to play globally and we are unique as a global sport with 20 plus events every year as opposed to once every four years, or being a sport that operates in one country and tries to sell it to external marketplaces. So I think if you look at alignment not just -- the importance of not just events, but of a global event business like ours, I think it aligns pretty well with the potential of increasing digital interest in content.
Thank you very much.
And we will now take our next question from David Karnovsky with JPMorgan.
Hi. Just a follow-up on the Formula One streaming product. We did see some stories in the press that F1 was targeting 5 million subscribers. Can you confirm if that's the case? And then, Chase, can you just update us on how you’re thinking about your linear TV distribution. We've seen some markets that you’ve added free-to-air windows and then in others you reduce some, just any additional color you provide on how you’re approaching this would be helpful. Thanks.
Yes, I mean, I guess, on the first, I’m not going to give any projections. We don’t know. I mean, like we are -- I think we believe our sports uniquely suited to an over-the-top product that’s targeted in this product is at a hardcore fan. For a fan who wants that richer, deeper experience of being able to follow a driver or race, or probably driver's radio action all race, see what's going on in the pits, get data access, get historical look at great races, great drivers, what have you, and a deeper covering of the sport throughout things and particularly as we built the sport out as a 12-month experience and cover things like Barcelona this week. But it's early days and we have our own internal projections, but I think at this point we’re focused on delivering a great product, seeing what the market is. It's not launched everywhere, but we’re launching it in a broad range of countries across most of the continents in some manner. And this year, in many ways it's a year for us to get a better understanding of what people like and don't like and learn, and again some of the aspects of the product are still to be launched this year. So while we clearly have our own projections and expectations around it. I think, in many ways, I’d say this is a year for us to learn and get a bit on for the first time, a real handle on what the potential is and then sort of plot out where do we go from there once we’ve got that information as opposed to sort of trying to get over reliant on projections. They’re just numbers on the page at this point as opposed to something that has some real meat behind it. The -- what was the second part of the question?
Just on how you’re thinking about linear TV distribution, mix of free-to-air and non free-to-air.
I mean, its market by market. So it's -- you can't really come back to competition. It depends who's competing. I mean, we value free-to-air. I mean, we value reach, I guess, which is what free-to-air represents. In a perfect world, we would like to find ways to in every country have a free-to-air dimension, a pay dimension, digital dimension over-the-top business. That’s going to -- that’s not always going to be possible, because different players in different markets are going to have their own priorities and strategies and we got to evaluate sort of how those things mix-and-match. There are places, as I said in the upfront comments where we are taking reach and flexibility over dollars. There are obviously places where dollars drive you the other way if the over-the-air market is really not there to support it in any reasonable way. Most of our -- our reach is still much more over the air than our free-to-air than pay. Although pay is certainly a meaningful part of it and you look at the broader world and pay is clearly been continuing to take share in the sports world. But I think we go in wanting to sort of have a balance of reach dollars and flexibility, and flexibility probably means the ability to develop the longer-term opportunities like over-the-top, but those trade-offs are going to be different in every market and you got up -- you got to evaluate those trade-offs sort of market-by-market opportunity -- by opportunity.
Thank you.
And we will now take our next question from John Tinker with Gabelli.
Thank you. Two quick questions. I think Greg you mentioned at the beginning that you have bought a sufficient position in the debt -- iHeart to fund your equity position. As an equity person, now that …
I think just to be clear, I said the vast majority, just to be …
It looks -- wonder if you could just talk about that a little more. And two, Jim Meyer, on the Sirius call, talked about his orderly retirement. And could you talk about how you -- what the criteria would be for someone to be CEO of Sirius and …
I think -- just to clarify, we bought the vast majority. So the proposal that we have put on the table, we made an offer to invest $600 million U.S into iHeart at -- and roughly and to have SIRI invest about the same out, just a little bit under. And if you look at the amount of debt, either if it's converted into equity or gets cashed out and we round trip. But it's the vast majority of what it would take to fund that $600 million.
On -- the question of IR, first is -- my first criteria would be to continue to have Jim Meyer run SiriusXM rather. You’ve done a great job. These renewed. He is on -- this is its third relatively short-term contract or renewal, so I remain hopeful that I can get into the fourth one. As far as what the criteria? Its thinking fully you could imagine a couple of things.. Great leaders, managers, would be appealing. People who have had experience as knowledgeable with content would be appealing. People who had understanding of how to run a subscription business, would be appealing, because our metrics and processes around subscription businesses which are different. And people who had knowledge about technology would be a feeling. So besides, Jim, what I’ve already said is my first choice, a candidate who had those set of skills or something around those set of skills would be things I think the board at SiriusXM will be looking for.
Thank you.
And we will now take our next question from Barton Crockett with B. Riley FBR.
Okay. Thanks for taking the question. On the debt, did you buy this at a discount? And is the idea that it would be converted at par, so there'd be an embedded gain there on the iHeart deal? And then give us a sense of what the timing is we’re getting resolution on whether this interesting offer succeeds?
We bought the debt at a discount. I don't believe that it is likely there with the plan out there or is there anything else sort of being agreed to among the creditors, which would bring the senior debt to par. But I think potentially we will have whatever happens transpires where there are offers to take it or not. We will likely to have some modest gains in our debt position. How does this play out? I think in the near-term likely given that they had a non-payment on some junior notes, just about 30 days ago, that the company is probably likely would be my guess, to file in the near-term. And either we will be a part of that in some way -- maybe not. We had documented, but somehow agree to the principle? Or we could see it could go on for a while with some negotiations among creditors and our . potential participation. In any case I think as I said the filing of iHeart is likely to be somewhere near-term. And the resolution -- the full resolution of iHeart emerging, whether it's with our participation or on its own, is more likely something that doesn’t happen towards the end of the year.
Okay. And then, if I could just -- one more fundamental question. What is the appeal of AM-FM radio on its own? I understand the idea of synergy potential. And on the synergy -- but just the fundamentals, what do you think of that?
Well, the reach is somewhere about between 93% and 95% of all American listen to FM during some part of the month. It has been relatively resilient. It has been relatively stable, so there have been certainly ad cycles and changes around political. We recognize technology may not favor another way, but we can ameliorate some of those things. It's a large free cash flow generator. And I think we would be less likely to be interested if we didn’t think we could bring, we, meaning delivery family, including Pandora and Sirius, bring something to the table. With the advantage we could bring to the table, we think we can perhaps reduce some of the risks that are inherent in the business.
Okay, great. Thank you.
And we will now take our last question from Kannan Venkateshwar with Barclays.
Thank you. Greg, a couple from me. First, on the structure of the iHeart deal, why structure it this way in the sense that it's doing half and half between Sirius and yourself instead of doing the whole deal yourself on your book? And secondly, in terms of the timeline and we think about the hard spin, I mean, now that the exchangeable I’m sure -- I know you can't talk about the exchangeable itself, but when we think about the implications post a potential buyback and so and so forth, the NAV [ph] discount was to close. Should we start thinking about, say, the next one-year as the potential timeline for a hard spin? And how should we think about that whole process?
Okay, great. Thank you. First on why there was a participation from both Liberty and SiriusXM, I think there's a host of reasons. First, it's relatively complicated transaction were both Liberty structuring and skills are helpful, and Sirius's operational skills are necessary. So there's an element of value for both parties and they were highly aligned as we are 71%-ish of interest. There are some different things we both bring to the party. Secondly, given the higher growth rates at SiriusXM compared to iHeart, well I think it's a very attractive strategic opportunity for SiriusXM, and one which their synergies and Pandora strategies to be interesting. It probably is not one that makes sense to consolidate. And as I said, to keep it as an equity investment below the 20% around the 20% is probably the right strategy at least for a period, while the growth rates are higher at SiriusXM than they’re at iHeart. So I think those were all factors in some of our thinking about how the participation would be from both parties. On the second part, I don't think -- first we -- obviously, we have no plan or intent to do a spin or we'd be talking about that. We, of course, evaluate all these spins all the time. I’m not sure this factors -- this on its own iHeart factors into tfhat decision. Our history is, is we tended to keep these things as part of the Liberty family, while we thought we had something to offer. Where we thought we were getting full value or we wanted to go out realize value, that's been a little more difficult here at SiriusXM, I will acknowledge, we haven't gotten the values in LSXM that we’ve always liked. But we still think that there's reasons that our participation as a large shareholder within the Liberty family are useful and helpful to the SiriusXM Group. So I think for the moment that's our plan, and I'm not sure it changes dramatically with this. But we are obviously mindful and watchful of the discount. And surely we will think about ways to capitalize on that, at least in the short-term.
All right. Thank you.
I think that’s our -- I think, thank you. I think that our -- that brings us to our point of time today. Thank you all very much for your interest in Liberty Media. Thank you for your time on the call and I expect we will see some of you at the Deutsche Conference, and hopefully we can be more fulsome in been talking about the convertible exchangeable offering rather and where we're going. Thank you.
Thanks a lot.
And ladies and gentlemen, that concludes today’s conference call. We thank you for your participation.