Liberty Media Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Basis of Presentation

Basis of Presentation	12 Months Ended
Dec. 31, 2020
Basis of Presentation	(1) Basis of Presentation The accompanying consolidated financial statements of Liberty Media Corporation (“Liberty,” “we,” “our,” “us” or the “Company” unless the context otherwise requires) represent a consolidation of certain media and entertainment related assets and businesses. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. Liberty, through its ownership of interests in subsidiaries and other companies, is primarily engaged in the media and entertainment industries primarily in North America and the United Kingdom. Our significant subsidiaries include Sirius XM Holdings Inc. (“Sirius XM Holdings”), Formula 1 and Braves Holdings, LLC (“Braves Holdings”). Our significant investment accounted for under the equity method of accounting is Live Nation Entertainment, Inc. (“Live Nation”). On February 1, 2019, Sirius XM Holdings issued shares in conjunction with its acquisition of Pandora Media, Inc., which continues to operate as Pandora Media, LLC (“Pandora”). See note 5 for more information regarding the acquisition of Pandora. Liberty continues to maintain a controlling interest in Sirius XM Holdings following the share repurchases and issuances. As of December 31, 2020, we owned approximately 76% of the outstanding equity interest in Sirius XM Holdings. In 2011, Qurate Retail, Inc. (“Qurate Retail”) completed its split-off from Liberty, and in 2014, Liberty Broadband Corporation (“Liberty Broadband”) completed its spin-off from Liberty. In addition, in 2014, Liberty TripAdvisor Holdings, Inc. (“Liberty TripAdvisor”) completed its spin-off from Qurate Retail, and in 2018, GCI Liberty, Inc. (“GCI Liberty”) completed its split-off from Qurate Retail. These transactions resulted in the separate corporate existence of Liberty, Qurate Retail, Liberty Broadband, Liberty TripAdvisor and GCI Liberty. Following these transactions, each of these companies operates (or in the case of GCI Liberty, prior to its acquisition, operated) as separate publicly traded companies, none of which has any stock ownership, beneficial or otherwise, in the other (except that GCI Liberty owned shares of Liberty Broadband’s Series C non-voting common stock prior to the merger of GCI Liberty and Liberty Broadband in December 2020). In connection with the foregoing transactions, Liberty entered into certain agreements with Qurate Retail, Liberty TripAdvisor, Liberty Broadband, and GCI Liberty, respectively, in order to govern ongoing relationships between the companies and to provide for an orderly transition. As a result, these entities are considered related parties of the Company for accounting purposes through the dates of the respective transactions. These agreements include Reorganization Agreements (in the case of Qurate Retail and Liberty Broadband only), Services Agreements and Facilities Sharing Agreements. The Reorganization, Services and Facilities Sharing Agreements entered into with Qurate Retail were assigned from Liberty’s predecessor to Liberty in 2013 in connection with a prior transaction. The Reorganization Agreements provide for, among other things, provisions governing the relationships between Liberty and each of Qurate Retail and Liberty Broadband, respectively, including certain cross-indemnities. Pursuant to the Services Agreements, Liberty provides Qurate Retail, Liberty TripAdvisor, Liberty Broadband and GCI Liberty (prior to termination) with general and administrative services including legal, tax, accounting, treasury and investor relations support. Qurate Retail, Liberty TripAdvisor, Liberty Broadband and GCI Liberty (prior to termination) reimburse Liberty for direct, out-of-pocket expenses incurred by Liberty in providing these services and in the case of Qurate Retail, Qurate Retail’s allocable portion of costs associated with any shared services or personnel based on an estimated percentage of time spent providing services to Qurate Retail. Liberty TripAdvisor, Liberty Broadband and GCI Liberty (prior to termination) reimburse Liberty for shared services and personnel based on a flat fee. Under the Facilities Sharing Agreements, Liberty shares office space and related amenities with Qurate Retail, Liberty TripAdvisor, Liberty Broadband and GCI Liberty (prior to termination) at Liberty’s corporate headquarters. Under these various agreements, approximately $28 million, $46 million and $30 million of these allocated expenses were reimbursed to Liberty during the years ended December 31, 2020, 2019 and 2018, respectively. In December 2019, Liberty entered into amendments to the Services Agreements with each of Qurate Retail, Liberty TripAdvisor, Liberty Broadband and GCI Liberty in connection with Liberty’s entry into a new employment arrangement with Gregory B. Maffei, its President and Chief Executive Officer. Under the amended Services Agreements, components of his compensation would either be paid directly to him by each of Qurate Retail, Liberty TripAdvisor, Liberty Broadband and GCI Liberty (collectively, the “Service Companies”) or reimbursed to Liberty, in each case, based on allocations among Liberty and the Service Companies set forth in the amended Services Agreements. Following the merger between GCI Liberty and Liberty Broadband in December 2020, GCI Liberty no longer participates in the Services Agreement arrangement due to the termination of its Services Agreement with Liberty. In December 2020, in conjunction with the merger, GCI Liberty made an executive termination payment to Liberty of approximately $6 million. See note 13 for additional information related to termination payments. On January 26, 2021, Liberty Media Acquisition Corporation (“LMAC”) consummated its initial public offering (the “IPO”) of 57.5 million units (the “Units”), including 7.5 million Units sold pursuant to the full exercise of the underwriters’ overallotment option. Each Unit consists of one share of Series A common stock of LMAC and one-fifth of one redeemable warrant of LMAC. Each whole warrant entitles the holder thereof to purchase one share of Series A common stock for $11.50 per share, subject to adjustment, following the later of 30 days after the completion of LMAC's initial business combination and 12 months from the closing of the IPO. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to LMAC of $575 million. Concurrently with the IPO, LMAC completed the private placement of 10 million warrants to its sponsor, Liberty Media Acquisition Sponsor LLC (the “Sponsor”), a wholly-owned subsidiary of the Company, generating gross proceeds of $15 million. Each private placement warrant entitles the holder thereof to purchase one share of LMAC's Series A common stock for $11.50 per share, subject to adjustment, following the later of 30 days after the completion of LMAC's initial business combination and 12 months from the closing of the IPO. A total of $575 million was placed in a U.S.-based trust account. LMAC intends to search for a target in the media, digital media, music, entertainment, communications, telecommunications and technology industries, but may seek to complete a business combination with an operating company in any industry, sector or geographic area. Under the terms of the offering, the Company, through the Sponsor, owns 20% of LMAC’s issued and outstanding common stock and the Sponsor has committed to acquire $250 million of forward purchase units (each consisting of one share of LMAC’s Series B common stock and one-fifth of one redeemable warrant to purchase one share of LMAC’s Series A common stock) pursuant to a forward purchase agreement that will close substantially concurrently with the consummation of LMAC’s initial business combination. In addition, the Company, through the Sponsor’s ownership of LMAC founder shares, has certain governance rights which allow us to control LMAC’s affairs, policies and operations through the initial business combination. The Company’s ownership interest in LMAC will consist primarily of Series B common stock following the consummation of LMAC’s initial business combination, and is initially being attributed to the Formula One Group tracking stock.

Basis of Presentation

12 Months Ended

Dec. 31, 2020

(1) Basis of Presentation

The accompanying consolidated financial statements of Liberty Media Corporation (“Liberty,” “we,” “our,” “us” or the “Company” unless the context otherwise requires) represent a consolidation of certain media and entertainment related assets and businesses. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Liberty, through its ownership of interests in subsidiaries and other companies, is primarily engaged in the media and entertainment industries primarily in North America and the United Kingdom. Our significant subsidiaries include Sirius XM Holdings Inc. (“Sirius XM Holdings”), Formula 1 and Braves Holdings, LLC (“Braves Holdings”). Our significant investment accounted for under the equity method of accounting is Live Nation Entertainment, Inc. (“Live Nation”).

On February 1, 2019, Sirius XM Holdings issued shares in conjunction with its acquisition of Pandora Media, Inc., which continues to operate as Pandora Media, LLC (“Pandora”). See note 5 for more information regarding the acquisition of Pandora. Liberty continues to maintain a controlling interest in Sirius XM Holdings following the share repurchases and issuances. As of December 31, 2020, we owned approximately 76% of the outstanding equity interest in Sirius XM Holdings.

In 2011, Qurate Retail, Inc. (“Qurate Retail”) completed its split-off from Liberty, and in 2014, Liberty Broadband Corporation (“Liberty Broadband”) completed its spin-off from Liberty. In addition, in 2014, Liberty TripAdvisor Holdings, Inc. (“Liberty TripAdvisor”) completed its spin-off from Qurate Retail, and in 2018, GCI Liberty, Inc. (“GCI Liberty”) completed its split-off from Qurate Retail. These transactions resulted in the separate corporate existence of Liberty, Qurate Retail, Liberty Broadband, Liberty TripAdvisor and GCI Liberty. Following these transactions, each of these companies operates (or in the case of GCI Liberty, prior to its acquisition, operated) as separate publicly traded companies, none of which has any stock ownership, beneficial or otherwise, in the other (except that GCI Liberty owned shares of Liberty Broadband’s Series C non-voting common stock prior to the merger of GCI Liberty and Liberty Broadband in December 2020). In connection with the foregoing transactions, Liberty entered into certain agreements with Qurate Retail, Liberty TripAdvisor, Liberty Broadband, and GCI Liberty, respectively, in order to govern ongoing relationships between the companies and to provide for an orderly transition. As a result, these entities are considered related parties of the Company for accounting purposes through the dates of the respective transactions. These agreements include Reorganization Agreements (in the case of Qurate Retail and Liberty Broadband only), Services Agreements and Facilities Sharing Agreements. The Reorganization, Services and Facilities Sharing Agreements entered into with Qurate Retail were assigned from Liberty’s predecessor to Liberty in 2013 in connection with a prior transaction.

The Reorganization Agreements provide for, among other things, provisions governing the relationships between Liberty and each of Qurate Retail and Liberty Broadband, respectively, including certain cross-indemnities. Pursuant to the Services Agreements, Liberty provides Qurate Retail, Liberty TripAdvisor, Liberty Broadband and GCI Liberty (prior to termination) with general and administrative services including legal, tax, accounting, treasury and investor relations support. Qurate Retail, Liberty TripAdvisor, Liberty Broadband and GCI Liberty (prior to termination) reimburse Liberty for direct, out-of-pocket expenses incurred by Liberty in providing these services and in the case of Qurate Retail, Qurate Retail’s allocable portion of costs associated with any shared services or personnel based on an estimated percentage of time spent providing services to Qurate Retail. Liberty TripAdvisor, Liberty Broadband and GCI Liberty (prior to termination) reimburse Liberty for shared services and personnel based on a flat fee. Under the Facilities Sharing Agreements, Liberty shares office space and related amenities with Qurate Retail, Liberty TripAdvisor, Liberty Broadband and GCI Liberty (prior to termination) at Liberty’s corporate headquarters. Under these various agreements, approximately $28 million, $46 million and $30 million of these allocated expenses were reimbursed to Liberty during the years ended December 31, 2020, 2019 and 2018, respectively.

In December 2019, Liberty entered into amendments to the Services Agreements with each of Qurate Retail, Liberty TripAdvisor, Liberty Broadband and GCI Liberty in connection with Liberty’s entry into a new employment arrangement with Gregory B. Maffei, its President and Chief Executive Officer. Under the amended Services Agreements, components of his compensation would either be paid directly to him by each of Qurate Retail, Liberty TripAdvisor, Liberty Broadband and GCI Liberty (collectively, the “Service Companies”) or reimbursed to Liberty, in each case, based on allocations among Liberty and the Service Companies set forth in the amended Services Agreements. Following the merger between GCI Liberty and Liberty Broadband in December 2020, GCI Liberty no longer participates in the Services Agreement arrangement due to the termination of its Services Agreement with Liberty.

In December 2020, in conjunction with the merger, GCI Liberty made an executive termination payment to Liberty of approximately $6 million. See note 13 for additional information related to termination payments.

On January 26, 2021, Liberty Media Acquisition Corporation (“LMAC”) consummated its initial public offering (the “IPO”) of 57.5 million units (the “Units”), including 7.5 million Units sold pursuant to the full exercise of the underwriters’ overallotment option. Each Unit consists of one share of Series A common stock of LMAC and one-fifth of one redeemable warrant of LMAC. Each whole warrant entitles the holder thereof to purchase one share of Series A common stock for $11.50 per share, subject to adjustment, following the later of 30 days after the completion of LMAC's initial business combination and 12 months from the closing of the IPO. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to LMAC of $575 million. Concurrently with the IPO, LMAC completed the private placement of 10 million warrants to its sponsor, Liberty Media Acquisition Sponsor LLC (the “Sponsor”), a wholly-owned subsidiary of the Company, generating gross proceeds of $15 million. Each private placement warrant entitles the holder thereof to purchase one share of LMAC's Series A common stock for $11.50 per share, subject to adjustment, following the later of 30 days after the completion of LMAC's initial business combination and 12 months from the closing of the IPO. A total of $575 million was placed in a U.S.-based trust account. LMAC intends to search for a target in the media, digital media, music, entertainment, communications, telecommunications and technology industries, but may seek to complete a business combination with an operating company in any industry, sector or geographic area. Under the terms of the offering, the Company, through the Sponsor, owns 20% of LMAC’s issued and outstanding common stock and the Sponsor has committed to acquire $250 million of forward purchase units (each consisting of one share of LMAC’s Series B common stock and one-fifth of one redeemable warrant to purchase one share of LMAC’s Series A common stock) pursuant to a forward purchase agreement that will close substantially concurrently with the consummation of LMAC’s initial business combination. In addition, the Company, through the Sponsor’s ownership of LMAC founder shares, has certain governance rights which allow us to control LMAC’s affairs, policies and operations through the initial business combination. The Company’s ownership interest in LMAC will consist primarily of Series B common stock following the consummation of LMAC’s initial business combination, and is initially being attributed to the Formula One Group tracking stock.