WHEN: Today, Thursday, November 16, 2017
WHERE: CNBC's "Squawk on the Street"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Liberty Media CEO Greg Maffei and CNBC's David Faber on CNBC's "Squawk on the Street" (M-F 9AM-11AM) today Thursday, November 16th. Following is a link to video from the interview on CNBC.com:https://www.cnbc.com/video/2017/11/16/liberty-media-ceo-challenge-ahead-for-overall-content-business.html.
All references must be sourced to CNBC.
FABER: WELCOME BACK TO SQUAWK ON THE STREET IM DAVID FABER. YET AGAIN HERE AT LIBERTY MEDIAS ANNUAL INVESTOR DAY, AND GREG MAFFEI, THE CEO OF THE COMPANY JOINS ME NOW ALWAYS NICE TO HAVE YOU AND THANK YOU FOR HAVING US.
MAFFEI: THANK YOU, DAVID.
FABER: AND TALKING TO ALL OF YOUR DIFFERENT PORTFOLIO COMPANIES, AS WELL LETS START OFF BROADLY SPEAKING ABOUT THE CONTENT BUSINESS NOT ANYTHING TO DO WITH LIBERTY VIACOM TODAY THOUGH IS DOWN SHARPLY, ABOUT 7%, AFFILIATE FEES PEOPLE ARE CONCERNED THEY DID RECENTLY DO A CARRIAGE DEAL WITH CHARTER WHICH IS A SIGNIFICANT INVESTMENT OF LIBERTYS. CONTENT BUSINESS SEEMS TO BE A PRETTY TOUGH PLACE TO BE IF YOU DONT HAVE SCALE THESE DAYS.
MAFFEI: I THINK THE LINEAR VIDEO CHANNELS ARE IN A TOUGH SPOT. BUT I REALLY THINK THE OVERALL CONTENT BUSINESS HAS GOT A CHALLENGE AHEAD. YOUVE SEEN SCRIPTED SHOWS GO FROM SOMETHING LIKE 200 FOUR OR FIVE YEARS AGO TO 450 THIS YEAR OR NEXT YEAR AND THE COST PER HOUR HAS PROBABLY DOUBLED. SO YOUVE SEEN ROUGHLY A 5X KIND OF NUMBER INCREASE IN CONTENT. AND I DONT SEE HOW YOU MONETIZE THAT. I DON'T CARE HOW MUCH BINGE WATCHING HOW MANY SCREENS ARE RUNNING AT THE SAME TIME I THINK THATS GOING TO LEAD TO EVENTUAL PRESSURE ON THE CONTENT BUSINESS COMBINE THAT WITH THE FACT YOU HAVE NEW ENTRANTS WHETHER IT BE NETFLIX WITH A SOMEWHAT TRADITIONAL MODEL OR EVEN MORE PEOPLE LIKE AMAZON, APPLE, GOOGLE, FACEBOOK WHO HAVE DIFFERENT VIDEO MONTIZATION METHODS. THAT PUTS A LOT OF PRESSURE ON TRADITIONAL CONTENT COMPANIES.
FABER: TRADITIONAL BUT YOU ARE NOT NECESSARILY SAYING NETFLIX. I TALKED TO MALONE EARLIER, $8 BILLION NETFLIX WILL SPEND ON CONTENT THEY CAN DISTRIBUTE IT OVER A PRETTY WIDE BASE SPEAKING ABOUT SCALE. HIS POINT THEIR MARGINAL COST GETS VERY, VERY LOW WHEN THEY CAN GO THAT LARGE.
MAFFEI: LOOK I THINK THEY HAVE A LOT OF ADVANTAGES LETS TALK ABOUT THEM FOR ONE SECOND AND THEN THE CHALLENGES PERHAPS TO THEM. THEIR ADVANTAGE, LETS LOOK AT THEM AGAINST HBO HBO SPENDS 2.5 BILLION DOLLARS ON CONTENT CHARGES $14.99 FOR HBO NOW FOR A CONSUMER, YOU CAN GET NETFLIX WHICH IS SPENDING 7.5 TO $8 BILLION ON CONTENT AND CHARGING SOMEWHERE BETWEEN $8 TO $13 SO FOR A THIRD TO 40% LESS YOU ARE GETTING 3X MORE CONTENT. UNLESS YOU ASSUME HBO IS ALWAYS GOING TO BE BETTER AT PICKING CONTENT, THATS A TOUGH MODEL FOR HBO TO SELL CONSUMERS OVER THE LONG TERM. NOW GO TO PEOPLE LIKE AMAZON, THEYRE SPENDING $4.5 BILLION THIS YEAR BUT IT WILL GO UP. I WILL PROJECT JUST FOR YUCKS IN THE NEXT FIVE YEARS, I PROJECT ITS $10 BILLION AND THEYRE GIVING IT AWAY YOURE GETTING PRIME AND VIDEO IS FOR FREE.
FABER: OK ALTHOUGH TECHINICALLY SPEAKING WE DONT KNOW HOW MANY PRIME MEMBERS THERE ARE. THERE ARE A LOT OF THEM.
MAFFEI: SURE BUT MY POINT IS NO ONE BOUGHT THAT ORIGINALLY FOR THE VIDEO. MAYBE OVER TIME THEY WILL, BUT THATS A FURTHER COMMODITIZATION AND PRESSURE ON PRICING. WHAT HAPPENS WHEN FACEBOOK SAID THEYLL SPEND A BILLION. GOOGLE OBVIOUSLY GOOGLE HAS YOU TUBE WHERE THEY ARE SPENDING A LOT OF MONEY ON CONTENT OVER TIME I THINK THOSE ARE ALL GOING TO PUT INCREASING PRESSURE.
FABER: SO NOBODY GETS A RETURN ON ALL THIS INVESTMENT BUT THOSE OF US IN THE CONTENT BUSINESS DO OKAY I GUESS.
MAFFEI: WELL I THINK THATS NOT RIGHT. IF YOURE APPLE YOURE GETTING RETURN BECAUSE YOURE SELLING DEVICES. AMAZON IS GETTING A RETURN BECAUSE YOURE SELLING A LOT THROUGH PRIME. TRADITIONAL CONTENT COMPANIES WILL FEEL A LOT OF PRESSURE.
FABER: AND WE ARE SEEING THAT HAPPEN. WHAT GETS THEY WILL OUT OF THE CUL DE SAC? THE WAY IT HAS BEEN DESCRIBED TO ME ITS LIKE A BUNCH OF CARS NOW STUCK. NOBODY SEEMS TO KNOW HOW TO GET THERE OR WHAT TO DO IN TERMS OF TRADITIONAL MEDIA COMPANIES. TO FOXS DECISION TO AT LEAST ENTERTAIN THE IDEA OF SELLING ITS ENTERTAINMENT ASSET BECAUSE IT CANT GET THE SCALE IT NEEDS
MAFFEI: THE PRESSURE IS EVEN COMPOUNDED WHEN YOU TALK ABOUT TRYING TO GET OUT OF THE TRADITIONAL CABLE BUNDLE WHICH THEY ARE ALL TRYING AND GOING DIRECT TO CONSUMER, YOU NEED EVEN MORE SCALE HOW MANY SUBSCRIPTION SERVICES ARE CONSUMERS GOING TO STEP UP FOR? SO WHEN YOU SEE THINGS LIKE DISNEY FOR FOX, DONT KNOW, BUT MY GUESS IS THAT WAS ABOUT GETTING SCALE, TRYING TO INCREASE THEIR OPPORTUNITY AROUND DIGITAL
FABER: FOR DISNEY
MAFFEI: FOR DISNEY DIRECT TO CONSUMER OFFERING. THROW THAT IN, THOUGH, WITH A CHALLENGE, THE GOVERNMENT BY ENTERING INTO THE TIME WARNER/AT&T MERGER DISCUSSIONS HAS THROWN ALL THAT A WRENCH IN ANYONES PLANS I DONT KNOW HOW YOU COULD ANNOUNCE A BIG MEDIA DEAL TODAY AND HAVE ANY CONFIDENCE YOU KNOW WHAT THE GOVERNMENT IS GOING TO DO OUT OF LEFT FIELD.
FABER: WELL WHAT ARE YOUR THOUGHTS ABOUT THAT WE HAVENT SEEN THE GOVERNMENT YET MAKE THEIR MOVE, ALTHOUGH WE STILL ANTICIPATE, AT LEAST THEY SEEM TO, TIME WARNER, AT&T, MY SOURCES, THAT THEY ARE GOING TO, THEY ARE GOING TO FILE A COMPLAINT BECAUSE THEY DID NOT FEEL BEHAVIORAL REMEDIES WERE ENOUGH TO MEET THEIR OBJECTIONS. WHAT DO YOU THINK?
MAFFEI: I DONT THINK -- FIRST, THE DOJ TENDS NOT TO JUST MAKE NOISE AND NOT FILE COMPLAINTS, SO YOU HAVE TO THINK BEHAVIORAL REMEDIES ARE INSUFFICIENT IS THERE A STRUCTURAL REMEDY IT IS FAR FROM OBVIOUS TO ME THERES SOME SET OF THE NEEDS OF AT&T AND THE NEEDS OF THE GOVERNMENT THAT THERES A MATCH THERE THAT YOU CAN FIND SOMETHING THATS GOING TO HIVE OFF. I DONT KNOW, BUT I BET THIS GOES TO A LAWSUIT.
FABER; ALL RIGHT WHO WINS
MAFFEI: I THINK AT&Ts GOT THE BETTER HAND
FABER: YOU DO?
MAFFEI: YEAH.
FABER: AND TO YOUR POINT ABOUT YOU ARE OBVIOUSLY SOMEBODY WHO IS IN THE BUSINESS TO A CERTAIN EXTENT OF MAKING DEALS, NOT NECESSARILY IN THIS PARTICULAR ARENA ALL THE TIME, DOES IT PUT YOU ON PAUSE DO YOU WATCH CLOSELY TO UNDERSTAND THE RULES OF THE ROAD BEFORE YOU THINK ABOUT DOING ANYTHING ELSE?
MAFFEI: I THINK ALL PARTICIPANTS AND OBSERVERS ARE GOING TO HAVE TO WATCH AND SAY WHAT ARE THE RULES OF THE ROAD, BECAUSE THIS IS OUT OF LEFT FIELD. I DON'T THINK ANYONE SAW THIS. YES, THE PRESIDENT HAD TWEETED SOME THINGS, BUT THE HEAD OF THE ANTITRUST DIVISION THE INCOMING HEAD HAD SUGGESTED THERE WERE NOT PROBLEMS, SO I THINK THIS WAS KIND OF A SURPRISE TO A LOT OF PEOPLE.
FABER: YEAH. CHARTER, OF COURSE, JOHN MALONE AND I HAD A LONG DISCUSSION ABOUT IT AND HE WENT THROUGH A LOT OF THE DIFFERENT OPPORTUNITIES THAT PRESENTED THEMSELVES TO YOU GUYS AND USUALLY HE SAYS TO GREG.
MAFFEI: JOHN GIVES CREDIT WHEN ITS…
FABER: RIGHT THAT SAID, THE RELATIONSHIP BETWEEN LIBERTY AND CHARTER, AND WERE GOING TO SPEAK TO TOM RUTLEDGE SOON, IS THERE A FRUSTRATION AT ALL ON YOUR PART WHEN SOMEBODY COMES IN WITH POTENTIALLY A LARGE NUMBER AND YET YOU CANT GET ANY MOVEMENT ON THE CHARTER SIDE?
MAFFEI: LOOK, ITS NOT UNUSUAL THAT MANAGEMENT HAS A POSITIVE VIEW ABOUT THEIR BUSINESS AND THAT THEY WANT TO DRIVE THE BUSINESS PLAN, THE STRATEGIC PLAN, THE OPERATING PLAN THEY HAVE GOING FORWARD. YOU KNOW, WERE BIG BELIEVERS IN CHARTER, BUT I THINK AS JOHN LIKELY SAID, YOU KNOW, HE AND I CHAT ABOUT IT, YOU KNOW, WE HAVE AN OBLIGATION TO OUR SHAREHOLDERS TO SEE WHAT OPPORTUNITIES ARE PRESENTED TO US, AND, YOU KNOW, THAT DOESNT MEAN THERE ISNT POTENTIAL FOR DISAGREEMENTS, BUT WE WORK THEM OUT WELL USUALLY.
FABER: YES, I ASSUME YOU DO. LETS GET TO SOME OF THE COMPANIES THE PORTFOLIO COMPANIES, IM MOVING SO QUICKLY HERE TRIP ADVISOR. THATS BEEN A TOUGH ONE.
MAFFEI: IT IS IT IS A TOUGH SPACE
FABER: TRIVAGO KIND OF CAME OUT OF NOWHERE, MAYBE NOT OUT OF NOWHERE
MAFFEI: TRIVAGO CAME UP, THEN CAME DOWN ITS A TOUGH SPACE
FABER: WHAT DO YOU TELL INVESTORS IN TRIP ADVISOR IN TERMS OF WHAT THEY SHOULD BE FOCUSED ON AS HOPEFUL SIGNS HERE
MAFFEI: I THINK IF YOU LOOK AT THE OPPORTUNITIES THAT TRIP HAD, IT HAS 450 MILLION UNIQUES A MONTH, 525 MILLION REVIEWS. THERE IS A CONSUMER LOVE FOR THIS PRODUCT OUR CHALLENGE IS, THERES LESS MONETIZATION FOR THE HOTEL SPACE, HOTEL PILLAR FOR ONLINE TRAVEL IN GENERAL, AND THE PROFITABILITY HAS BEEN SUCKED UP BY GOOGLE, THERE'S CHALLENGES AROUND MOBILE CONVERSION WE HAVE TO ADDRESS THOSE AND FIND NEW WAYS TO MAKE A PROFITABLE ENTERPRISE OUT OF WHAT WE HAVE. SOME OF THAT IS CLEARLY HAPPENING ITS EXCITING WHATS HAPPENING IN ATTRACTIONS, ITS EXCITING WHAT WE ARE DOING IN RESTAURANTS. I THINK WE CAN REINVIGORATE HOTELS, BUT ALSO FIND OTHER WAYS LIKE ADVERTISING, I THINK, TO MONETIZE THAT ENORMOUS AND ENGAGED CUSTOMER BASE.
FABER: ARE YOU THE CHAIRMAN OF TRIP ADVISER.
MAFFEI: I AM.
FABER: YOU ARE DO YOU FEEL YOU NEED A CHANGE IN MANAGEMENT
MAFFEI: NO I THINK THE BOARD AND I ARE COMMITTED TO DRIVING THIS WITH THE MANAGEMENT TEAM
FABER: THE CURRENT MANAGEMENT TEAM IN PLACE. DESPITE WHAT HAS BEEN A NUMBER OF MISSTEPS
MAFFEI: YES
FABER: THATS THE SIMPLEST ANSWER YOUVE EVER GIVEN.
MAFFEI: I TRY TO BE DIRECT TO YOU
FABER: I APPRECIATE THAT I APPRECIATE THAT. WHEN IT COMES TO QVC, WHICH AGAIN USUALLY WE SIT DOWN WITH MIKE GEORGE, WERE NOT GOING TO TODAY.
MAFFEI: MIKE DIDNT WANT TO SIT WITH YOU?
FABER: WELL I THINK WE MAY NOT HAVE HAD THE TIME. BUT YOU SPOKE ABOUT IT INSIDE TO YOUR INVESTORS THERE WHY SHOULDN'T I THINK QVC IS GOING TO GET STEAM ROLLED BY THE AMAZON DEATH STAR, AS MALONE REFERS TO IT
MAFFEI: FIRST OF ALL WERE IN A DIFFERENT SPACE. NOT TO SAY WERE NOT IN THE SHOPPING SPACE, BUT AMAZON IS THE EVERYTHING STORE 75% OF OUR CUSTOMERS ALREADY SHOP ON AMAZON THEY COME TO US FOR A DIFFERENT EXPERIENCE THEY COME TO US NOT FOR THE RATIONALE I WANT TO BUY IT CHEAP, BUT A CURATED OFFERING, EXPERIENCIAL SHOPPING, COME TO US FOR A COMMUNITY AND VERY DIFFERENT EXPERIENCE AND ITS WORKING LOOK AT THE Q3 RESULTS, THE LONG-TERM PROFITABILITY OF QVC, WERE VERY EXCITED PUT IT TOGETHER WITH WHAT WE CAN DO WITH H, WHAT WE ARE DOING WITH ZOO, I AM BULLISH WHERE QVC IS GOING. ONE OF THE BEST POSITIONED RETAILERS, NUMBER ONE IN VIDEO COMMERCE, NUMBER THREE IN E-COMMERCE, VERY EXCITED
FABER: FINALLY, I HAVENT ASKED YOU THIS IN A WHILE AND I HAVEN'T LOOK AT THE SPREAD BETWEEN LIBERTY SIRIUS AND SIRIUS ITSELF AS TO WHETHER YOU ARE GOING TO TAKE THAT IN
MAFFEI: THERES A SPREAD? WHO KNEW
FABER: IS THAT SORT OF OLD BUSINESS OR STILL A POSSIBILITY
MAFFEI: LOOK, OUR LONG-TERM PLAN IS TO CONTINUE TO DRIVE THE GROWTH OF SIRIUS XM, AND ITS MODESTLY ANNOYING THAT THERES THAT DISCOUNT, BUT ITS REALLY NOT SOMETHING WE NEED TO SOLVE IN ONE DAY. WHEN THE TIMING IS RIGHT, JUST
LIKE WE WAITED FOR Q TO BUY HSN, WE MIGHT DO SOMETHING WITH SIRIUS, BUT NOT SOMETHING THAT NEEDS TO GET FIXED IN ANY ONE DAY.
FABER: YOU FEEL COMFORTABLE WITH THE UNDERLYING BUSINESS AT SIRIUS RIGHT NOW?
MAFFEI: BUSINESS IS DOING GREAT
FABER: GREG, THANK YOU
MAFFEI: THANK YOU, DAVID. THANKS FOR COMING AND BEING HERE ALL DAY.
FABER: I LOOK FORWARD TO IT ALL DAY.
MAFFEI: DID WE FEED YOU GIVE YOU COFFEE
FABER: NOT YET UNLESS YOU HAVE THE SHAKE SHACK BURGERS.
MAFFEI: SHHH DONT TELL ANYBODY.
FABER: KEEP THAT BETWEEN US. GREG MAFFEI, CEO OF LIBERTY. BACK TO YOU GUYS.
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