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Liberty Media Corporation (NASDAQ:LSXMK)
Q2 2018 Earnings Conference Call
Aug. 8, 2018, 12:15 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day ladies and gentlemen and thank you for standing by. Welcome to the Liberty Media Corporation 2018 second quarter earnings call. During the presentation, all participants will be in a listen-only mode. Afterward, we will conduct a question and answer session. At that time, if you have a question please press *1 on your telephone. As a reminder, this conference is being recorded today, August 8th. I would now like to turn the conference over to Courtnee Chun, Senior Vice President of Investor Relations. Please go ahead.

Courtnee Chun -- Senior Vice President, 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, including statements about business strategies, market potential, new service and product launches, discussions involving iHeart communications, plans for the The Battery, matters related to Formula One, including digital initiative, new races, new cost structures, potential governance changes, sponsorship opportunities, and distribution renewals and other matters that are not historical fact.

These forward-looking statements involve many risks and uncertainties that could cause the actual results to differ materially from those expressed or implied by such statement including, without limitation, popular 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 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 of Liberty Media and adjusted EBITDA of Sirius XM. The required definitions and reconciliations scheduled 1-3 can be found at the end of the earnings press release issued today, which is available on our website. This call also may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding Liberty TripAdvisor holdings. 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 TripAdvisor holdings 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 TripAdvisor holdings, expectations with regard thereto, or any change in events, conditions, or circumstances on which any such statement is based. Now, I'd like to turn the call over to Greg Maffei, Liberty's President and CEO.

Greg Maffei -- President and Chief Executive Officer

Thank you, Courtnee. Good morning, or good afternoon to some of you on the east coast. Today speaking on the call besides myself, we'll have Liberty's CFO Mark Carleton and Formula One's Chairman and CEO Chase Carey. During the Q&A, we'll also be available to answer questions related to Liberty TripAdvisor. So starting with Liberty Sirius XM, we did continue our repurchases of the stock and bought an additional 161 million for a total purchase of $261 million through July 31st. We effectively bought those Sirius XM shares any 469 look through price over the period to year-to-date.

Regarding iHeart Communications, some of you may noted, we pulled our initial offer after reviewing the results in the projected balance sheet, which were below expectations and negatively impacted our estimates of value. We do continue to own $660 million in aggregate principal amount of iHeart bond. Looking at Sirius XM itself, it had outstanding second quarter results. Revenue was up 6% to 1.4 billion. I think there's lots of good news in the quarter. Two standouts: self-paying out ads of 483,000 and churn down to 1.6%. Liberty Media ownership as of July 23rd stood at 70.5%.

Turning to Formula One Group, great 2018 season with more exciting outcomes, very podium finishers, increased overtaking, more drama, and still the same glamor. In sponsorship, we signed a new technology provider in global sponsor in Amazon Web Services, renewed key global sponsorships in multi-year agreements. We also extended the Belgian Grand Prix at Spa. I would take a word of caution: as some of our more perspicacious analysts have noted, quarterly results will vary due to rev rack, timing of races, number of races, and the nature of the business. We remain very positive about the long-term direction that we're headed in the right path.

Live Nation had another fantastic quarter, revenues up 7% for the quarter. All divisions continue to deliver double-digit operating income and AOI growth. A particularly strong year for amphitheaters on track to grow by 3 million fans for the full year. Turning to Braves, in second place in the NL East after an exciting victory last night, in our second year at SunTrust Park, ticket sales have increased over 2% versus our inaugural season, which is really unusual, including 13 sell-outs and a new record attendance for SunTrust Park. There are several exciting developments at the related real estate development, The Battery.

ThyssenKrupp, a multi-national powerhouse with over 41 billion in revenue, will build its elevator businesses North American headquarters an innovation center complex at The Battery. This'll bring 900 jobs to three facilities on a nearly five-acre site. We are progressing with the sale of our residential development and have identified the potential buyer. We'll provide more details once that transaction closes but we forecast an expected IRR on that transaction of 22%.

Based on current sales, we are projecting The Battery will have three of the top ten grossing restaurants in the Atlanta area by year-end. We also announced a planned development of an Aloft hotel this morning. Final announcement, we, in fact, complete that final announcement completes our development plans at The Battery. Over at Liberty TripAdvisor and looking at the underlying results for Trip. Trip had a fantastic quarter. Full stop. The third straight quarter of hotel adjusted EBIT improvement even with significant marketing reductions.

In my view, the initial market reaction on these quarter results was just wrong. Seems the stock has been coming around but I still think they're missing the larger story. Trip is executing very well. It's optimizing its SEM marketing mix in hotels and has improved its product offering. It is growing its advertising in sponsored listing, which is a highly profitable incremental business. And it's increasing its bookable supply for non-hotel offerings and is a leader in that space. Consolidated revenue was up 2%. Adjusted EBITDA was up 8% and net income was up 19%. Mobile accounted for nearly 50% of hotel shoppers and mobile revenue for hotel shopper again grew double-digits and reached a new all-time high.

With these solid results, we now expect to deliver year-over-year, consolidated adjusted bid growth in both operating segments in 2018. Notably, user reviews and opinions also grew significantly, up 24% year-over-year and have reached a staggering 661 million as of June 30th. Fun fact of the day to amuse your friends: the single most reviewed item with over 138,000 reviews is the Sagrada Familia in Barcelona. Be sure to check out my review, it's #114,782. With that, I'll turn it over to Mark for some financial results.

Mark Carleton -- Chief Financial Officer

Thank you, Greg, and for your review, as well. At the quarter end, Liberty Sirius XM growth had attributed cash of liquid investments of $110 million excluding $64 million of cash held at Sirius XM. The value of the Sirius XM common stock held at Liberty Sirius XM as of August 7th was $22 billion and we have $850 million in debt against the use holdings. We paid down $300 million in margin loans during the quarter. Formula One Group had attributed cash in liquid investments of $109 million, excluding 89 million of cash at Formula One. Formula One Group as attributed public market securities with a market value of approximately 4 billion as of August 7th, including the intergroup interest in the Braves Group and our stake in Live Nation.

We have 2.1 billion of attributed debt, excluding the debt at F1. That decreased $354 million during the quarter as we paid an extraordinary additional distribution of $229 million on exchange will bonds due to AT&T's purchase of Time Warner. And Formula One repaid $125 million of their operating debt. Braves Group had attributed cash and liquid investments of $113 million. At quarter end, Liberty Sirius XM group had an attributed principal amount of debt of $7.4 billion, which includes $6.5 billion of debt at Sirius XM.

Formula One Group had an attributed principal amount of debt of 5 billion, which includes 3 billion of debt at F1 and Braves Group had an attributed principal amount of debt of $629 million. F1's total net debt to covenant or to ratio was to find in their credit facilities was approximately 7.3 times as of June 30, as compared to a maximum allowable leverage ratio of 8.75 times. We communicated a target total net leverage ratio for Formula One of five to six times bank covenant OIBDA. And please note that these leverage ratios are of the Formula One business, specifically not the Formula One Group overall And with that, I'll turn it over to Chase Carey to talk about Formula One.

Chase Carey -- Formula One Chairman and Chief Executive Officer

We are just past the halfway point of our 2018 season as we head into -- hello?

I guess I was saying; we're heading into our summer break -- a little over halfway into the season with our last race, the Hungarian Grand Prix being the 12th race in our 21-race season. It's been a successful season on the track, as Greg said, with competition at the top among both drivers and teams, as well as a number of exciting and dramatic races. We're also encouraged by the momentum and fan engagement as we begin to turn around the declining trends in the sport during the past five to six years. 44% of our avid fans are more interested in the 2018 season than they were in 2017 versus only 7% a year ago. 66% of fans believe F1 has improved versus two years ago while just 15% say it's worse. And 67% of fans say F1 is in good hands with Liberty, while 10% disagree.

Live attendance in aggregate is up 4% year-on-year at the ten tracks where we raced last year and attendance at the two tracks we did not have in 2017, which were France and Germany, as well in excess of expectations. In Germany, the promoter even had to build new grandstands to meet demand. As importantly, fan reaction to our enhancements, like fan zones, merchandising, track tours, hot laps, Paddock, and Paddock Club changes, and more has been great. We're also encouraged by our momentum in television viewing: race day viewership year-on-year is down 4%, however that is largely due to our move from free to pay television in Italy.

Excluding Italy, our television viewership is up 3% year-on-year and our Saturday viewership for qualifying is up even more. We're especially pleased with our performance in our two key growth markets, the US and China, where viewing figures are showing particularly strong uplifts. Fans have reacted positively to our enhancements in cameras, sound, graphics, and other elements in our broadcast and we have more to come. 69% of our fans say F1 TV coverage has improved, while just 13% say it's worse. And our digital engagement continues to be an area of dynamic growth.

Year-to-date our interactions during race week are up 60% and our video views are up 110%. And we're still in the early stages of upgrading and expanding our digital platforms and feed. We continue to move forward with an array of initiatives on the motorsports side of our business to improve competition, action, and unpredictability. We've introduced some recent regulation changes for next season and we'll introduce a larger list of sporting regulation changes in the coming weeks to further improve the sport.

Most importantly, we continue to move forward with a broader set of changes to cost structures, revenue distribution, regulations, and governance for so-called Concord Agreement. We made good progress with the teams and agree on the goals and objectives and now need to work through the details to find the right compromises as we finalize these agreements in the coming months for the 2021 season.

On the commercial side of our business, we will finalize our 2019 calendar, which we expect to look a lot like our 2018 calendar in the next few weeks as we successfully finish offer renewal agreements. We're already turning our energies to the 2020 calendar and we're particularly excited about a number of opportunities to add new events to the 2020 calendar that we believe would really capture fans' imagination and be widely supported. In fact, we are actively discussing opportunities on four continents. A potential race in Miami is one of those. We initially targeted the Miami race for late 2019, which we knew was tight, particularly for a street race where we have to navigate many local issues. It is much more important to make the race great than to push it a year earlier so we decided the prudent choice was to focus on 2020.

The support and enthusiasm in Miami is great and we look forward to a special event there. On the television side of our business, we're also successfully completing our renewals for next year in a number of midsize, yet important territories, at rates that meet or exceed our targets. These agreements conclude both free and paid platforms and we're now also addressing digital opportunities with a number of our traditional broadcast partners. For example, opportunities for television partners to distribute our over the top package.

It is still early days for our OTT product, which we launched on web platforms in May and intend to launch on mobile and other devices in the coming months. Our goal for this season is to improve the technology and content of the platform to enable a full commercial launch next season. We will continue to improve the OTT product over the next few seasons with expanded video, data, archival, and other content. While it is still early, we're encouraged by initial anecdotal fan reaction and excited about the future about this important part of our long-term strategy.

The third major pillar in our commercial area is sponsorships and with our new team in place almost a year, we're building great momentum here. Challenge one was to renew and expand relationships with existing sponsors and we've done that successfully. Over the key to success is to bring in new sponsors in the many untapped categories for us and to create a wider, deeper relationship with them. Sponsors today are looking for more bespoke plans and want to achieve a real connection with our fans in sport, not just a billboard.

We're creating the capability to offer this tailored relationship with expanded capabilities like fan festivals, e-sports, digital offerings, regionalized capabilities, and unique integrations with the sport. We're excited about the interest from potential sponsors based in new categories and for new regions around the world. Potential sponsors are excited by our story and where we're taking the sport. A recent agreement with Amazon Web Services was an important deal in tech space to which we'll build further tack relationships. The AWS agreement is an example of our ability to establish a relationship with Amazon as both a marketing partner and as a partner bringing us world-class services in the critical digital space. AWS provides us significant revenues and first-class services for our growth.

Overall, no group in F1 is busier than our sponsorship group and we believe they're on track to achieve our 2020 goals. It is a long list of other active initiatives to expand and grow the Formula One franchise from fantasy gaming to Twitter live shows, hospitality to our recently announced MIT business conferences. 2017 and 2018 have largely been investment years where we're building the foundation for the future by improving the sport and the track and for the teams in the sport, reengaging fans at both live events and on traditional and digital platforms, building an organization that can tell our story, and deliver the right opportunities to commercial partners across the board, and to develop the geographic and brand expansions for Formula One. We believe we're on track to do so. Now I'll turn the call back to Greg, thanks.

Greg Maffei -- President and Chief Executive Officer

With that, let me thank Chase and Mark, and remind you all that we'll be holding our annual investor meeting on November 14th in New York. As we get closer to that day, please refer to our website for additional information. As always, we appreciate your continued interest in Liberty Media. And with that, operator, I'd like to open the line for calls.

Questions and Answers:

Operator

Thank you. If you would like to ask a question please signal by pressing *1 on your telephone keypad. If you are using a speakerphone please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press *1 at this time. And we'll go first to Jeff Wlodarczak with Pivotal Research Group.

Jeff Wlodarczak -- Pivotal Research Group -- Analyst

Good morning. I had two on F1. On your second quarter F1 results, your relatively high fee Russian race last year was in April and this year it was pushed into September. So you effectively replaced that race for comp purposes in the second quarter with a French race, which I assume, is a far lower fee. How much of your 2Q revenue and EBITDA results was simply that specific sort of timing comp issue? And I assume that's gonna reverse in the third quarter. And then I had a follow-up.

Greg Maffei -- President and Chief Executive Officer

Yeah, I guess, and we don't get into specific race fees, but in general flyway, races are higher than European races, and I'd say the biggest variant in the quarter is the race calendar. I guess the other factor in the quarter is because we amortized across last year. We had a great eight races in both years through June. Last year, a date of 20, and this year a date of 21. I think the calendar factor is the primary issue.

Jeff Wlodarczak -- Pivotal Research Group -- Analyst

Thank you. And then, Chase, if you could talk about your level of optimism about getting a new Concord agreement at least as it relates to getting a deal for the engine in place relatively soon?

Chase Carey -- Formula One Chairman and Chief Executive Officer

Actually, I feel good about the discussions. The devil's always in the details and I reckon we had details to work through. But I think their people agree with the goals, people agree with the direction, and I think the overall points of what we're trying to achieve and the vision for the sport. We need to find the right compromises as you get into the details. Nobody's gonna get everything they want but I think everybody recognizes that. You're not down to dumb but I feel good about the discussions and good about where we're going and good about the engagement with the teams.

Greg Maffei -- President and Chief Executive Officer

If I could add something on that. I think Chase and the team Shawn and Ross have done a great job of turning the dynamic at Formula One, which was usually fairly short-term and often fairly, 'what's in it for me,' in the short-term into a more general recognition to build the health of the sport to the benefit of all. And I think that is gonna play through on the Concord agreement where the spirit of compromise is likely to occur and be to the benefit of all in the sport, and first of all and foremost, the fans.

Operator

We'll go next to Vijay Jayant with Evercore ISI.

James Ratcliffe -- Evercore ISI -- Analyst

Hi, it's James Ratcliffe for Vijay. Two if I could, one on Liberty Sirius, one on Formula One. On Liberty Sirius, what's the thinking around the future of that iHeart debt position given that seems like a deal is not on the table at this point? And how does that affect liquidity for a potential buyback going forward? And secondly, on F1, Chase, if you could just give us any more color about the OTT launch? What you've learned? What's gone well? What hasn't? Consumer response or any color around sub trends; that would be helpful. Thank you.

Greg Maffei -- President and Chief Executive Officer

So on iHeart first, we remain watchful. I think they're going through their process and while results have been somewhat disappointing, we do see potential for interesting partnerships or more. And we certainly recognize that we have an interesting position, which I don't expect to grow right now in a self-sustaining -- we're actually in the money against our cost. I don't think it will impact our ability to repurchase shares. We previously, well now as you know, and did that exchangeable against the Sirius dock to raise capital and we're still spending that 400 million authorized. I think it's a stand-alone self-sustained element. It has a strategic potential but it's one that we're gonna be judicious about and only execute if we can come up with the right transaction.

Chase Carey -- Formula One Chairman and Chief Executive Officer

On the OTT, I think our focus really -- I'm not sure if we've learned what's gone right and wrong. Probably not unexpectedly. We've had some of the issues a lot of people do in building the tech stack to support it. Whether that led to the product not launching initially where we targeted and some bugs we have to work out of it. I think probably, we certainly expected and recognized that's a part of the reality and this year is much more about getting the product to where we want to, both from a content and tech.

The content is probably an 18-month build so we'll add content features this off-season and probably add content features next off-season. But I think it's really at this point about getting the platform right from a technology and content perspective. And then really commercially launching it. When you're launching it mid-season, it really takes away a lot of the abilities to market and push it in the right way. I think our in-face is this year's priority is to get the product to where we want it to at this point in time to really give it a proper commercial launch next season. I think in the positive, and I call it probably more anecdotal at this point because their focus is really more on getting the platform right.

There's a very positive fan reaction in some of the specifics. The demographics behind it are great in terms of age. Spread and interest from various regions. We're not, obviously, in all countries but I think we're encouraged by the interest. We're encouraged by the enthusiasm for the product, the use of the product, those using the product, the time they're spending on it in just the time we've had it in the market. It only went in in Barcelona. It's up multiples. So the usage of it, the demographics, the ability to tap into the young market.

I think all are encouraging to us, particularly since we're still in the process of -- we probably have worked through most of the significant technological bugs but not all. And we still have some content components to add to it. But we feel good about where we're going. And this was a product for us -- the right thing was to, again, make sure we do it in a logical way. More important to get it right than to do it fast. I think for us this year is about getting the product to the place we want it to be at this stage of its life and then give it a proper commercial launch into next season.

Operator

We'll go next to Amy Yong with Macquarie.

Amy Yong -- Macquarie -- Analyst

Thanks and good morning. I guess one for Liberty Sirius XM and also one for F1. On Liberty Sirius XM, Greg, now that the iHeart transaction has taken a pause, can you talk about how you plan to close the LSXMA spread and maybe the optimal use of leverage for Sirius XM? And then Chase, on F1, I know you prefer shorter-term broadcast agreements. I think you've done ESPN, CCTV. Any big negotiations coming up? And then I guess with Miami and Vietnam getting pushed out, does this also push some of the leverage that you have out as well? Thanks.

Greg Maffei -- President and Chief Executive Officer

So, Amy, we talked about some of the reasons why in the past the press spread has existed. We're trying to take advantage of that to the benefit of the Sirius XM shareholders by doing share repurchase at that level using the proceeds we raised from the convertible exchange. We will continue to pursue that strategy. There's probably some limitation on low much leverage we can put at the tracking stock level. It does have the benefit of the dividends from Sirius -- our share's roughly $140 million so it's not nothing.

But there's a limit to how much leverage we can put at that. We'll consider that and we always have other means to surprise people and eliminate the discount as much as we did on glib. As far as the Sirius leverage, their leverage has been come down a little because they frankly had so much cash flow and the stock has run through the grid at various times. I think they're still targeting around a 3 to 3.5 leverage and they're probably at the low end of that right now.

Chase Carey -- Formula One Chairman and Chief Executive Officer

And on Formula One, the television agreements. The calendar issue is really one of -- I mean, really, right now we're largely done with our renewal. We've got a contract with our renewals, which would be for 2019. And so anything happening in the calendar doesn't affect that. What we'd be moving to at this point -- and we, actually, feel really good, we can actually see in the agreements some of the success we're having in the sport and the momentum in the sport for starting to see any agreements as we move forward.

But we'd be moving to focus on renewals or agreements that would start with the 2020 season so that the degree races are moving with the 2020 season, it's actually matching up with anybody we'd engage with. We have some important renewals next year, probably bigger renewals in 2020. We obviously, always have some in every year but we do have some important ones next year and again, probably bigger ones the year after. I think doing them short has served us well because again, I think the sport today is in a much better place than it was a year ago or even six months ago as we went into the season. And I think you can see that when we engage, whether it's broadcast or sponsors. There's an excitement about what they think is the direction of the sport.

Operator

We'll go next to Bryan Goldberg with Bank of America Merrill Lynch.

Bryan Goldberg -- Bank of America Merrill Lynch -- Analyst

I've got one on the Amazon deal and then another one on the race calendar expansion efforts. First, on Amazon, I just want to clarify. On the economic impact of this relationship to F1 from a P&L standpoint, is this solely gonna show up as sponsorship revenue or is this a change in cost at F1 we should be thinking about given the services that they'll be providing you? And I just want to verify; this deal kicks in third quarter of 2018?

Chase Carey -- Formula One Chairman and Chief Executive Officer

Yeah, it kicks in the second half of this year and there are two proponents to it. There's a sponsorship component to recognize sponsorship and we're getting tech services from them and they're services we need to build out the digital capabilities. Again, just like other costs we incur in building out the digital platforms. Those call to be recognized. It's clearly a net revenue positive deal to us but the services are important and obviously, those sponsorship relationships are important. But each will be recognized for what it is. And in terms of -- what was the calendar question?

Bryan Goldberg -- Bank of America Merrill Lynch -- Analyst

So as you guys have been hard at work looking at new venues for the tour and also renewing with existing venues, and I was just curious -- we've read some press around Miami, what that relationship might look like. And as you just sort of think about expanding the calendar in general, how would you characterize F1's appetite for entering into risk-sharing arrangements with local promoters as opposed to fix fee agreements? What are the puts and takes as you see them from this lever in the model?

Chase Carey -- Formula One Chairman and Chief Executive Officer

Realistically, every race is unique. I think each one we'd look at both on the specific terms. And again, I don't think people realize these events frequently have a lot more moving parts than just a fee their hospitality components, sponsorship components, and a title in relationship components, other components around it. Look at each on the merits and what are the direct economic benefits, uncertainties. We're not afraid of risk if we believe there's an upside to the risk. We obviously can afford that.

I think we value -- we like having our promoters have skin in the game so I think it's important to have that skin in the game to stand behind it. But if we think there are opportunities that have upside both within the event itself, as well as upside to us on a much broader level, we'd evaluate it on the merits. If the returns justify the risks -- I don't think we're gonna turn a model upside but if the returns justify the risks I think we look at it. We'd look at that conservatively. We'd want to be comfortable. And again, I think we're not looking to transform our model but we'd look at each one based on unique characteristics of that event.

Operator

We'll go next to Bryan Kraft with Deutsche Bank.

Bryan Kraft -- Deutsche Bank -- Analyst

Hi, thank you. Chase, at the beginning of this year you had talked about 2018 being an investment year with '19 and '20 being growth years. Now we're about almost two-thirds of the way through 2018. Are you on track with your plans to begin realizing that growth potential of the business in '19? I realize that you're managing the business for long-term growth rather than margin but as you get beyond 2020, do you think that the revenue growth will lead to natural operating leverage in the business as you do grow revenue or do you think it's more of a stable margin business going forward but with a better topline growth? Thank you.

Chase Carey -- Formula One Chairman and Chief Executive Officer

First, I actually think I feel we are on plan. I think we feel, actually, pretty good about where we are. That's both financial as well as in reality confidence in the sport. So we're not just looking at the numbers. I think it's also a confidence in the quality of the sport, fan engagement with the sport, so I gave some of the stats on that. But yeah, I think we're actually -- I feel pretty good about where we are in terms of the goals we set out and the objectives we've set out to achieve that. In terms of leverage, we're a fairly unique business.

Our biggest cost is a contract cost by a large margin. The payment to the teams is not something -- we'll have a new agreement in 2021 but that's a contract cost. So you can't manage that up or down that's up. It obviously can change in 2021. It changes per year based on what the contract says. But our operating costs below that are relatively a small percentage of our overall revenue. Doesn't mean we don't pay attention to it. We obviously want to watch every dollar. But we are really up in many years a revenue center.

As we build out some capabilities, there are costs to build out hospitality, there's some that are just pure revenue that goes through to the bottom line. We get sponsorships, you got the sponsorship organization but in some place like hospitality there's a cost in providing hospitality and over the top, there was a cost to building out the capabilities to drive those. We've added overheard so I think we're probably through the bulk of putting the organization in place to support it. If I look at the cost to grow some -- we have fairly significant costs for things like production for the television broadcast, freight that we provide to move the show around the world, and those things. Freight can move with freight costs but they should scale as we grow revenue.

So there are some places like expanding hospitality has some costs associated with it. As we build out digital platforms there's probably some costs associated with that revenue. There are other costs that will be, whether it's overhead television production, freight that would not have -- there should be leverage on. But in an aggregate, those costs realistically are still a relatively small percentage of our aggregate revenue. Our biggest cost is the contract cost of the teams.

Operator

We'll go next to Ben Swinburne with Morgan Stanley.

Ben Swinburne -- Morgan Stanley -- Analyst

Thanks. Chase, a couple questions about some of the comments in your prepared remarks. You mentioned that the 2019 calendar, you say will look like a lot like '18. So should we assume the same number of races? And then the second thing is, you mentioned you are optimistic you can finalize the agreements in the coming months. I just want to make sure -- is it your expectation or at least your hope that you can finalize sort of the entire Concord agreement so not just the engine design but sort of everything before the end of the year? Just wanted to ask for some clarification on those two.

Chase Carey -- Formula One Chairman and Chief Executive Officer

We haven't announced the '19 calendars so I'm only talking to provide more color than I did on the prepared comment. We will announce it certainly before the end of the month. In the next few weeks, we will clearly put out a preliminary calendar. It needs to be approved by the FIA and go through other steps but it will come out. We haven't announced it so I probably won't go further. In terms of what we're finalizing, we're looking to manage the major components -- there'll always be components that are sort of moving. It's not like you're done, particularly when you get into issues like regulations -- they're a living, breathing process that will continue to evolve so you'll have a set of regulations in place but whenever you put sporting regulations or others, some change less frequently.

When you get an engine, obviously that doesn't change that often but other regulations will clearly change. I think with the things we put in place, we'll probably continue to find ways, hopefully, to make whatever we put in place better. But when I'm talking about getting us more than just the engine regulations, it's talking about a more holistically, probably not completely, but more holistically getting the major components in place. I'm not gonna put out a specific deadline for it. One of the challenges of bringing it to a completion is it doesn't -- I mean, the actual, what obviously affects many of these things is 2021.

So there isn't a natural deadline deal made easier by having a deadline you have to get it done by. I think we and the teams will all recognize and know it would be good for us to get these things stabilized so we can all plan for the future. So I think there's a shared objective to get it done but there isn't a sort of external forcing mechanism in the short-term but I think our goal is to move this forward, try and get it done in the coming months.

Ben Swinburne -- Morgan Stanley -- Analyst

Great. And then just a broader follow-up. I would imagine that you guys have relatively good visibility into the top line of this business; it's underpinned by some nice long-term contracts. I know there are moving pieces but externally, we're dealing with the quarterly accounting, which as Greg mentioned, is challenging to extrapolate. When you look at the back half of the year, or you look at this year, do you guys expect revenue to grow for Formula One? Because it's down first half. I know it's an investment year but any help you could provide us would be helpful.

Chase Carey -- Formula One Chairman and Chief Executive Officer

I guess you go back to the things I said. In a quarter, I think in particular with any year, what races fall where and to some degree when you change the number of overall races and how they flow through have impacts. I'm not gonna project in the second half of the year but we feel good about where with are, though realistically, and I said it before, our focus is gonna be where we're gonna be in 2020. Yes, we care about the short-term but at the end of the day, our real objective is we think we can take this business to another place.

We think the opportunity is there to do it. Priority one is really about getting this business to where we think it can be. It doesn't mean we take our eyes off the ball in the short-term but the short-term quarter to quarter will move due to the factors we talked about earlier inside it. This year, we feel good about the momentum in it. There are issues to deal with, whether it's over the top or continuing to engage with parties and tell a story. And in some degree, again, predict the right momentum in a business that probably didn't have the momentum a year ago.

Operator

We'll go next to Jason Bazinet with Citi.

Jason Bazinet -- Citi -- Analyst

Maybe just a question for Mr. Carey. This is before your time and it could be wrong because it's based on press reports. But when I look at those team payments it looks like they were a much smaller percentage of the overall EBITDA than it is today -- something in the 40s, then it went to 50s and 60s, and now we're sort of in the 70s range. Is that accurate if I go back ten years that there's been that sort of steep rise?

As we go forward, what would you like to see and can you just remind us -- I think there was a time when you tried to issue some equity to the racing teams to sort of get everyone on the same page so incentives were aligned. The reason I ask is because that's probably the biggest risk to everybody's model because I think everyone agrees that the top line can inflect in '19-'20 and those other costs, as you said, are small. But the big cost is sort of a big one and it's a big unknown. So any color that you can provide in terms of what you'd like to see.

Chase Carey -- Formula One Chairman and Chief Executive Officer

Well, first, your statement on the long-term trend going back is accurate. I think actually if you go back into the early 2000s I think the percentage was 25% to 30%. Today, it's more in the high 60s sort of closer to that many -- I think you're right closer to 70. First, for '19 to '20 it gets locked in. so realistically, it is what it is through '19 and '20 to the degree what the revenue distribution is both among the teams and between us and the teams is what is part of those longer-term discussions for '20-'21.

But that's the first year we'd be there. Since those are the discussions we're having with the teams, again, I'm not gonna -- I think those are discussions at this point we're best having with the teams in private and then when we get to the place when we finalize that we'd be happy to discuss where we're at and what we think the opportunity is under that revised structure. But since those are live discussions with the teams, I'm not gonna probably comment a lot on that. I think those are best still had in a private room between us and the teams.

Operator

We'll go to our last question to John Tinker with Gabelli.

John Tinker -- Gabelli -- Analyst

Thank you. Just to switch gears, the Atlanta Braves, which had a very solid EBITDA number. The team's generally valued on revenue so how do you sort of look at the team when you think about how to value it?

Greg Maffei -- President and Chief Executive Officer

I would say, in general, we look at some of the metrics that people talk about for third-party valuations. You're right; teams are often not valued on EBITDA, partly because many baseball teams do not make significant if any, money. We're in the blessed position of actually having a profitable team, partly based on some of the innings we've done around things like The Battery. We'll see how that all plays out. I don't think there's an obvious answer. I don't know how to do it because we're a relatively rare item. Obviously, the only publically traded team with an unusual structure and an incremental asset in The Battery so it's a little hard to look at apples and oranges.

John Tinker -- Gabelli -- Analyst

Just given the new developments you've had with ThyssenKrupp and now Aloft -- how much land has been developed and how much is left to develop?

Greg Maffei -- President and Chief Executive Officer

We're everything that we can we have blocked and set out -- either been done or we've announced the plan. Unfortunately, there's not an infinite supply of this stuff up there. Pretty valuable location.

John Tinker -- Gabelli -- Analyst

In this IRR of 22% that you are targeting to the sale of the residential properties, is that something you think crosses over the rest of The Battery development? Or is that your sort of most successful part so far?

Greg Maffei -- President and Chief Executive Officer

We'll see. But clearly, if you just look at the market, residential is probably hotter than something like retail, for example. The nature of the deal we cut and the nature of how it works, we're unlikely to get that kind of a return on the hotel portion. Those would be two that would be probably at the lesser end and residential at the higher end. But there are others, I think the office market's pretty good. There'll be a range.

Operator

And that concludes today's conference call.

Greg Maffei -- President and Chief Executive Officer

Thank you, operator, we're done with today. Thanks for everyone for joining us and hopefully we'll talk to you next quarter if not before.

Operator

And that concludes today's conference call. Thank you for your participation. You may now disconnect.

Duration: 47 minutes

Call participants:

Courtnee Chun -- Senior Vice President, Investor Relations

Greg Maffei -- President and Chief Executive Officer

Mark Carleton -- Chief Financial Officer

Chase Carey -- Formula One Chairman and Chief Executive Officer

Jeff Wlodarczak -- Pivotal Research Group -- Analyst

James Ratcliffe -- Evercore ISI -- Analyst

Amy Yong -- Macquarie -- Analyst

Bryan Goldberg -- Bank of America Merrill Lynch -- Analyst

Bryan Kraft -- Deutsche Bank -- Analyst

Ben Swinburne -- Morgan Stanley -- Analyst

Jason Bazinet -- Citi -- Analyst

John Tinker -- Gabelli -- Analyst

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