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IAC/InterActiveCorp (NASDAQ:IACI)

Q2 2012 Earnings Call

July 25, 2012 11:00 am ET

Executives

Barry Diller – Chairman and Senior Executive

Gregory R. Blatt – Chief Executive Officer

Jeffrey W. Kip – Executive Vice President and Chief Financial Officer

Analysts

Mark Mahaney – Citigroup

Michael Graham – Canaccord Genuity

Jason Helfstein – Oppenheimer & Company

Nat Schindler – Banc of America Merrill Lynch

Kerry Rice – Needham & Company

Heath Terry – Goldman Sachs & Co

Mark May – Barclays

Peter Stabler- Wells Fargo Securities

Gene Munster – Piper Jaffray

Victor Anthony – Topeka Capital

Barry Diller

(Call started abruptly) We’re aware that this change leaves us now unfortunately with three labels searching Applications, Websites and Applications, but we thought it necessary for clarity. Our queries in revenue come primarily from Search-based applications. So it is difficult to pull apart search from applications for those metrics, but they are either come as a result of someone having downloaded an application or from someone having gone to a website without the involvement of an application. So we believe that showing the relative breakdown between the two sources is helpful.

Revenue from Websites grew 44% in the quarter. Websites queries are up 6% year-on-year, driven by our marketing efforts domestically and internationally. Overall revenue for Websites is growing more slowly than queries however, because first last year’s numbers include revenue from the direct sponsored listings business we sold in the fourth quarter of 2011.

And secondly, revenue of Pronto was flat year-over-year, revenue of the Dictionary Website grow only modestly versus the prior year, and we exclude both Pronto and Dictionary from our queries metric. Applications queries grew 26%, while monetization also improved versus the prior year, with revenue for the quarter up 49%.

Looking forward to the second half of the year, we now project greater search in applications revenue growth than we previously expected, with modest sequential growth through the back half of the year. In terms of margin, we now expect the trends we've seen through the first half of the year to continue with OIBA margin in the segment roughly flat to the prior year.

Moving on to our Match segment, our core Match businesses Match, People Media and Chemistry continue to grow with 12% revenue growth in the quarter. The second quarter was also our ninth consecutive quarter year-on-year double digits subscriber growth in the core businesses. Our revenue growth slowed modestly from the first quarter, in large part because we cut back unprofitable marketing on certain properties and delayed marketing spend on others to coincide with new products initiatives. We’re hopeful however that these new initiatives will strengthen that growth going forward.

Developing revenues decreased in the quarter. But that's really the result of the reduced marketing of Singlesnet, which Match real revenue growth at OKcupid and in Canada.

[Media] remains on track with the objectives Greg has laid out on previous calls with full-year revenue expected to be down mid-single digits and full-year EBITDA expected to be flattish to last year on a same currency basis, excluding acquisition related to accounting effect.

For the remainder of the year, we expect overall Match revenue growth to continue approximately its current rate, and we also expect modest margin expansion year-on-year.

Our Local segment grew revenue modestly and OIBA more than 20% in the second quarter. Revenue growth was lower-than-expected as we pull back inefficient marketing dollars, and we expect similarly modest revenue growth and lower, but still double-digit OIBA growth in the third quarter, with lower revenue expectations created again by our efforts to optimize our marketing.

Finally, Media and Other, as we mentioned has now been separate in these two segments to group the businesses together the way we think about and manage them internally. Media includes Electus and Vimeo, both of which saw approximately double or more revenue versus the prior period a year ago, as well as CollegeHumor, Notional and DailyBurn. Media now also includes Newsweek Daily Beast, given our consolidation of that business at the end of May.

Looking forward to the remainder of the year, we expect topline growth in the segment to continue, driven primarily by Electus and Vimeo. Revenue will further increase year-over-year from the addition of Newsweek Daily Beast.

We also now expect OIBA loss for this segment in a range of $20 million to $25 million for the second half of the year, with the majority of the OIBA loss coming in the third quarter, given both expanded investment across our Media businesses and a consolidation of Newsweek Daily Beast.

Finally, in other, which includes Shoebuy as well as some of our early-stage investments like Hatch Labs and (inaudible) we'll continue to invest with second half losses approximating first-half results.

With that we'll take your questions. Operator?

Unidentified Company Speaker

Do we have an operator?

Question-and-Answer Session

Operator

Pardon me. Your first question comes from the line of Mark Mahaney of Citigroup. Your line is open.

Mark Mahaney – Citigroup

Thank you, thanks for the greater disclosure by the way in the Search & Applications segment. So could you just go through why your outlook for the Search revenue in the back half of the year may have changed from flattish to sequentially to a little bit of growth and then, just through those margins, it looks like you're guiding to margins in the back half of the year, maybe down a little bit from the first of the year, but I know flattish year-over-year, is that just a normal seasonal that the investments in the business, is there any particular reason to think that 20%, 21% isn’t the right kind of margin level for the business for long-term? Thank you.

Gregory R. Blatt

Hey Mark, look I think the reason for it is the increased outlook is just performance, we grow this business through developing and launching new products in the application side, new distribution arrangements, on the website side, we do it through, continuing to produce more differentiate Q&A content to finding great ways to market it, and the momentum has been good, and the pace picked up, so it's really nothing more than that, you know this is the business of discrete decisions and outcomes sort of over and over again, and there’s no magic in it, it's just we’ve been able to do a little better than we thought.

On the margin thing, I let Jeff speak, there’s several expect, in general again, our margins in this business are series of discrete decisions, we’re increasing marketing expense here, we’re investing in a new product there, and it bounces around a little bit, so I don't think there is any particular trend is going one way the other, and it will bounce around a little bit within a range, Jeff, do you want to trigger elaborate on that range or at the back half of the year, please do.

Jeffrey W. Kip

Yeah, yeah, I really think Greg covered most of that on a very simple level, we’re increasing some investment in both online and offline marketing through the back half of the year, I don't think your 20% to 21% number is the bad number if you look at sort of the trend line over last several quarters, that's about the middle and essentially with moving our marketing efforts you’re going to see it, move around a little bit, it's not really a seasonality as much as Greg said a series of discrete decisions.

Barry Diller

Next question?

Mark Mahaney – Citigroup

Thank you Greg, thank you Jeff.

Jeffrey W. Kip

Operator?

Operator

Your next question comes from the line of Michael Graham of Canaccord, your line is open.

Michael Graham – Canaccord Genuity

Hey, good morning, thank you. Just on the buybacks and the dividends, it’s great that you increased the dividend. If you give us your updated thinking on how much cash you think is the right amount to keep on hand and how you are thinking about your preference for dividends or repurchases in the future? And then, there’s another question just on Meetic, seems like things are starting to stabilize there, you’ve got another quarter under your belt. So can you give us your updated thinking on when you may expect to see margins and Meetic start to get closer to what you see in the U.S, thanks?

Jeffrey W. Kip

We kind of thinking I say it that way because it’s a bit of a range, but we would like to have $500 million to$750 million of cash readily available cash on hand, and we tend to review that probably every few months and actually in a way we’ve reduced as we’ve had consistent cash flow over such a period of time. We’ve kind of revised that figure somewhat downward, we may continue to do so though we’ll never to get into a situation where we don’t have net cash and that means relatively little debt, we’ve almost no debt, only debt we’ve is our financing for the building of our headquarters, I don’t know $80 million or $90 million at this stage. So we’re never going to be in a position where we’re sort of be cash hungry.

As far as increasing dividend I said it earlier, we’ve got a solid increase today, but certainly more to catch up, and we’ll look to increase it probably on an annual basis as we proceed we’ll also continue opportunistically to purchase stock in the Company for which we’ve also – I’m going to be really (inaudible) today, so I’m sorry, consistent over ten years. So Greg, you want to answer Meetic?

Gregory R. Blatt

Let me step back and sort of reiterate what the objectives were for the year. Because this all gets lost in the margin conversation I think on Meetic. I understand why it’s important from sort of the modeling perspective, but it’s truly not the way we think about the business, which is last year we lost over 120,000 PMC in that business, so almost 15% of the business. And the goal coming in this year was to fix some key internal things on principally conversion, resubscription rates and ROI marketing. The result of that, it’s been a big shift in sort of how much marketing happens and where that marketing happens. So big decline in marketing is what’s half way down which will be a decline in revenue for the year and flattish EBITDA, with most importantly, at the beginning of subscriber growth again, we will grow subscribers this year after having lost significant subscribers last year.

And the operating plan is on to ahead of schedule. We have moved the metrics to be set out to move meaningfully. But the thing about this business is that this year we expanded margin by decreasing revenue and marketing, you can do that a little bit, but pretty soon you don’t have a business anymore. So I don’t think of this as a margin expansion story in the near-term, which I’ve said sort of multiple times.

What I’d expect next year if things go according to plan is that there will be profit growth next year, but there will be more revenue growth, which invariably means margin contraction, and there will be even more subscriber growth, which leads to future growth. This is a business where marketing is by definition ‘Margin Negative’ in any given period. In any business where you recognize revenue over a long period of time, but cost of acquisition immediately, that's the dynamic. And the first half of the year we cut back marketing meaningfully because the metrics weren’t good enough to support it. Now that the metrics are getting good and our marketing is becoming more profitable, we are starting to increase it and we hope that happens over time. So, I don't think it's a margin expansion story; it’s a profit growth story.

In terms of approaching the US again I said in the beginning Meetic will not have the margins that the US business has because of the multi-country nature, there are certain inefficiencies in it, but I would think that it will approach overtime sort of the overall Match business, which includes Match US at very, very high margins and then other businesses within the portfolio with lower margins. So, in a long-term I think you can think about that, but short-term I don't think of this is a margin expansion story at all, it’s a growth story.

Barry Diller

Next question please.

Operator

The next question comes from the line of Jason Helfstein of Oppenheimer. Your line is open.

Jason Helfstein – Oppenheimer & Company

Thank you. I've got a few questions, just one on Search and one on Newsweek Daily Beast. So I think some people may have been possibly surprised just about the revenue growth spread on applications versus queries. So can just talk a bit more, how you are able to generate 49% revenue growth on 26% query growth and obviously, there are some things that are missing from that query, such as downloadable down fees and I think some B2B revenue, but can you just go into a bit more detail about that?

And then my second question, Barry, can you just give us your sense of the outlook for Newsweek Daily Beast, I mean, clearly, there is a whole lot more expenses now you're taking in with the consolidation. Is there a kind of a Plan B to make it perhaps a lighter asset like an online-only business and kind of at what point would you draw that line in the sand. Thanks

Jeffrey W. Kip

So, I'll take you applications question. We saw effectively higher monetization, and there’s actually not that much excluded between queries revenues and the applications side, but as the core it represents both improved optimization, the search results in the monetization there rolling through the business, particularly on the B2B side and mix on the B2B side will require some lower RPQ partners rollout and higher RPQ partners come in and grow over last 12 months or so. And so, it's more a mix issue and optimization issue than anything else.

Barry Diller

Newsweek Daily Beast, yes, the consolidation does put us squarely on our heads, we knew this really shortly after Sidney Harmon died that the indication wasn't any kind of absolute – no it isn’t absolute today that the Harmon’s family didn’t think that they were going to contribute to the losses in the business and neither by the way are we going to contribute to the losses of the business as they have been this year or investment next year will be considerably less than it is this year. The Brand-News we go is much better, much stronger than it was when we acquired it. And probably, over the last 3, 4 years, there has been a true improvement in the book. Tina Brown and her editorial staff have done a superb job. And Newsweek around the world in terms of the events that we do for which we have quite large demand and events are profitable business for us in many places in and outside the United States. So the brand is good. What is the problem? The problem is in manufacturing, producing a weekly news magazine, and that has to be solved. If everybody is going to face the same problem rather than I think luxury brands over a period of time. Because advertising in this categories entirely elective, and the transition will happen, I believe, I'm not saying it will happen totally, but the transition to online from hard print will take place, we’re examining all our options, our plan is that by September or October and certainly firmly planned in place for next year is going to be different than it is this year, can’t tell you in what ways it will be different, but it will be different.

Jason Helfstein – Oppenheimer & Company

And just quick follow-up, Jeff, could you tell us about the revenue and why the impact of Newsweek was of the consolidation on the quarter, maybe just back it out for us, we know their organic growth is Media excluding Newsweek.

Jeffrey W. Kip

It’s not something we disclosed in the release so.

Jason Helfstein – Oppenheimer & Company

Okay thank you.

Barry Diller

Next question please.

Operator

Your next question comes from the line of Nat Schindler of Banc of America. Your line is open.

Nat Schindler – Banc of America/Merrill Lynch

Yes, hello. Thank you for the additional disclosure and search, but there’s a question, can you give us a little more color on, how you’re able to grow your Search Websites business so much faster than any peer out there, and also why it differs so markedly from the numbers that comScore reports for Ask?

Gregory R. Blatt

Sure, a couple of things. First of all, on the comScore issues, I think as I’m not sure clear in the release or not but we talk about queries, the way we describe, the way we define queries is really online action that lead to delivering a search result page. So it’s possible that some of those can come off of display advertising, can come off of search engine optimization on other search engines or off of search engine marketing sponsored listings. So for some of the things that we count as queries there could also be Bing Queries or Google queries which probably don’t show up in comScore. They’re very helpful looking at our growth sort of comparatively over time, but not necessarily comparatively to other people, I think there could be some noise in that.

In terms of how we can do it, I think it goes back to what we said, which is we’ve sort of abandoned our approach of trying to compete with the search engine head on, okay, that’s not what we do. We’ve a search engine but increasingly what we’ve done is we’ve figured out areas of search, they’re specially resonate with our brand, Ask, and our ability to overlay Q&A content on it. So, for example, the query, what is the best exercise for burning calories is the query that people enter. We’ve a great experience for that, we’ve Q&A content, it is differentiated and great. And we effectively take that page and we mark it across the web in a targeted way, the way we market Match and other things across the web. We display advertising search engine marketing etcetera. You take the query but wheat pancake and we don’t’ have a particularly differentiated experience. We don’t go out and we market, we don’t market that. So we’ve sort of gone vertical-to-vertical and we figured out that we got carbohydrates, I’m but we are not.

And so, I think it’s important to understand that what we’re doing is a strategy that is going after a particular part of the search market, but to compare it to Google and their growth rate, which represents the entire search market which doesn’t have marketing comps, so it’s a flawed comparison. We’ve gotten very good at creating this differentiated experience in categories that we’ve identified where our brand really works. We’ve provided offline marketing to support that and right now it’s going great. You look at our offline marketing, what we market at, we market the Q&A experience. I mean it is a different experience in search generally and a subset of it, which makes it probably less likely that we will ever supplant Google as the number one search engine, but it is a much clear path to meaningful growth and a solid business than what we pursued before. So we feel really good about it, but we think the broader comparisons probably don’t make sense.

Barry Diller

Thank you.

Nat Schindler – Banc of America/Merrill Lynch

Okay, thanks.

Barry Diller

Next question please?

Operator

Your next question comes from…

Barry Diller

Since you’re not thoroughly alert to us on this call -- let’s do the next question please?

Operator

Your next question comes from the line of Kerry Rice of Needham & Comp. Your line is open.

Kerry Rice – Needham & Company

Thanks a lot. I was hoping Barry or Greg, can you talk about ServiceMagic and seen it looks like a little bit of slowdown in the domestic business, what would you owe that to, because I think this would be one of the strongest quarters here in the summer for that business?

Gregory R. Blatt

Yeah, I think we changed management a year ago, there was a reason that we did it, which we articulated very clearly, which is it’s a great business that was built, but it was a business that was not built on consumer experience, brand resonance, etcetera. It was a – buy every customer every time business and we brought in management with a very different focus. And what we’ve done over the last few quarters is – you’ve heard this across a number of our businesses, because it’s a common theme is, we basically optimize fair amount of marketing, which means, you cut out unprofitable marketing, which has the impact of making web revenue grow slower, but also expand margins in and makes business stronger.

We’re simultaneously working on a whole host of initiatives that we feel very really good about and which have taken a while to get going but they will roll out over the next couple of quarters that we think will really attack the consumer resident story in a way that we’re going to invest behind, so I don't want to call a treading water because there is tons and tons of work going on under the hood, but I think we’re going to be looking to sort of Q4 and 2013 to start showing the fruits of those efforts, and we’re very optimistic, but I don't think there is any macro trend or anything else is going on that’s affecting us, I think it's just around operational priorities in the scheduling with which they hit market.

Barry Diller

We review on the other day their plans for the future, which were as good as any plan and that’s a plan, but it is good and ambitious as any plan that I feel more optimistic about ServiceMagic since the day we bought it, and I think it has to be proven, but it has really great prospects.

Next question.

Operator

Your next question comes from the line of Heath Terry of Goldman Sachs, your line is open.

Heath Terry – Goldman Sachs & Co

Great, thanks. On the Search business, if you could, can you give us a sense of what your strategy is for mobile, particularly, with respect to the toolbars, I know we’ve talked about this a bit in the past, but given how quickly that market is evolving would appreciate and a bit of an update.

Gregory R. Blatt

Sure, so on the website side, for instance or what we think of this – maybe this doesn't exactly holding well, we’ll have to figure out how to talk about these various metrics as we go forward but, Ask as a mobile product and it works the same way it does on websites. It has a similar Q&A experience, they seek out marketing and other things in the similar way and the growth has been quite good although off a very small base.

In terms of the Applications business, mobile is a huge area for applications, and we have only begun to scratch the surface. Now, the extent to which in mobile applications will provide the same distribution opportunities for our Search business, that desktop has is unclear. But what we know about Mobile Applications is there is a whole bunch of ways to monetize in addition to that the easier micro payments and everything else. So, because of the huge growth in desktop search we’ve not yet allocated that much resources to the Mobile Applications business, but we are starting to, we’ve just launched our first, we’re powering search on a new android browser, for instance, that is downloadable which is our first big sort of Search and Applications deal in mobile other than our O&O. So, we’re just scratching the surface, we think a big opportunity there and again cautioned by the fact that we’re going after it with some aggression, but it’s slow because the opportunity in desktop is still so overwhelmingly large. Your desktop search and applications continue to grow meaningfully despite the growth in mobile, so we are playing in both areas, but the heavy focus is still on desktop.

Barry Diller

Next question please.

Operator

Your next question comes from the line of Mark May of Barclays. Your line is open.

Mark May – Barclays

Thanks for taking my questions. Good morning. I had two. The first one was on Meetic, if I understood what you were saying earlier, a lot of the sluggish growth there is sort of intentional, if you will, from pull back on inefficient marketing channels. I wonder if you can also isolate any impact that you are seeing from more than macro environment on that business and or the competitive environment, my impression is that the competitive landscape in Europe and UK might be more so in the US? And then second question on the Media segment, which outperformed our expectations, I believe some of that was driven by the Electus business. To what extent will the Electus business be lumpy from quarter-to-quarter, if that’s the case, how much of visibility do you have in Electus revenue going forward? Thanks.

Gregory R. Blatt

On Meetic, yeah, the big revenue decline at Meetic is driven by, as you can see from the numbers, pretty substantial declines in marketing, which are planned, which are being offset by improvements in conversion and the rest of things, but that's the big driver there. I think the macro climate, the online dating business is proven to be relatively insulated from economic crisis, nothing is certain what happens over there and what may happen over there, maybe unprecedented, but the place you typically see it is in sort of shorter durations of subscriptions. We started to see a small amount of that in certain areas, akin to what we saw in the US back in ‘08 and ‘09, but nothing that yet has the alarms goes up on in terms of the macro environment.

In terms of competition, I actually don’t think the landscape is different. I think its country-to-country. In Germany, the competition is very intent. In France, Meetic has a more dominant position as Match does here. So, it's very much country-to-country. And I think the competitive environment always plays a role, but I don't think the year-over-year decline is being impacted by any increase in competitive environment, the competitive environment sort of help contribute to the situation that we inherited, but it's certainly not deteriorated since then. And if anything I think that the competitive environment maybe improving over there.

Barry Diller

On Electus, as we continue to build up our series production, those agreements usually cover season. So I don’t think there would be particular lumpiness that we don’t think about Electus nor much else on a quarterly basis. But

Electus’ work led by Ben Silverman and Chris Grant and Drew Buckley has been actually I think better than anybody either far expected, and its growing in almost every area, it has series on broadcast networks and cable networks, and I don’t really think that it’s certainly nothing so to speak in our financial reporting is troublesome. It were deficiting to a small degree, I would say much smaller investment than any of us had anticipated. The reason we are willing to make an investment because we bought that the market was there and that we could achieve some things and build a substantial business. But their progress has been so good that it has taken far less capital than we had anticipated.

Mark May – Barclays

Thanks.

Barry Diller

Thank you, next question please.

Operator

Your next question comes from the line of Peter Stabler of Wells Fargo Securities. Your line is open.

Peter Stabler- Wells Fargo Securities

Good morning. Thanks for taking. Two quick questions please. First of all, could you describe for us or give any color around the duration of your distribution agreements on the B2B application partnerships and whether there are any significant ads in the quarter?

Gregory R. Blatt

Yeah, the agreement for getting distribution agreement, they can negotiate partner-to-partner, so they can be anywhere from one to three years, they often get re-negotiated before the end. So, in any given quarter, you probably have one or two aspiring, you maybe renegotiating one or two early, but we're certainly not facing any cliff or anything like that in the near future. There’s no moment where we got some issue. So I think we're pretty secure in that regard.

Peter Stabler- Wells Fargo Securities

And then, quickly on ServiceMagic, I wonder, if you could provide some color around the service provider population where that’s there and whether that's been stable or growing? Thank you very much.

Gregory R. Blatt

The Ask Kids service provider network has been stable over the last couple of quarters, up a little bit, down a little bit. I think some of the initiatives that we're launching are going to help drive that up along the consumer demand that you need to match each other, and we've got good initiatives in that direction.

Peter Stabler- Wells Fargo Securities

Thanks very much

Barry Diller

Next question please.

Operator

Your next question comes from the line of Gene Munster of Piper Jaffray. Your line is open.

Gene Munster – Piper Jaffray

Good morning. I want to talk a little bit about a story here, seen more TV ads around it, just want to know how should we think about what you're doing I guess in other verticals around daily in the systems and that couldn't led up to be something that’s measurable, or is that kind of a one-off just to drive sub growth?

Gregory R. Blatt

We've really launched, we announced back in May that we are launching in June and July too particularly take initiatives in Match, which I think have the potential to be transformative in the industry. Stir which are events for members is one of the areas, and sort of a new form of communication online that take the part of games really between two people. Together I think they really start to transform the experience and you need to astute scale in order to do them and fair amount of investment and logistics and everything else like, I think it’ll be hard for others to match.

The primary driver right now is to drive sub-growth to drive sub-duration to drive conversion, all those things. But I do think if they start to have the potential to expand beyond that, we were in very hard in fact and launch something which is relatively low. And we launched it scale, I mean it’s the current pace we’ll have several 100,000 people at events this year, which is pretty amazing and like nothing that that anybody’s ever done. We’re doing without major investment. I mean if you look at our margins, it’s not like there is big compression and that we’re staffing up with teams of thousands, we really figure out a good way to do it. Our members love that. I think we’re just starting to nail the marketing on it into a whole bunch of features we haven’t yet enabled.

So, I think the first objective is to really make Match truly, truly different and identify a result in all the competition. And then I think from there, I think it had many opportunities. We got scale across all our properties that nobody else has. We’ve got a huge audience of people, Singles are generally high consumers, and we’re figuring out interesting things to do with that, and this is the beginning.

Barry Diller

We’ll take one last question. Thank you.

Operator

The last question comes from the line of Victor Anthony of Topeka Capital. Your line is open.

Victor Anthony -- Topeka Capital

Yeah, thanks a lot on putting me around it. Congratulations on a great quarter. There were several assets within a portfolio (inaudible) that have got in a lot of investor interest, Electus being one of them you just talked about, [Cemio] being the other Urbanspoon, to lesser degree, Pronto. Wanted if you could just discuss the overall strategy for those businesses, is it just to groom down, and ultimately spin them out or sell them, or do we just see them – you just keep them within the portfolio over the next several years?.

And Barry, second if you could any thoughts you have on the [Areal Quad] victory, I would love to hear them. Thanks.

Gregory R. Blatt

On those businesses you mentioned, I think each has its own story, where we’re investing in them because we believe in their potential. I think we said several times before, that we tend to look at a bunch of these businesses along with certain businesses that we are developing inside our other segments is IAC’s version of R&D, we are in the business of creating businesses and we have good ideas that we believe in, we like to reinvest part of our capital on a relative base, a very small part of our capital measured as against our own cash flows or against with any of our competition would term R&D. And we do that for as long as we believe in the prospects of the business. What we do over time is very circumstance-dependent, I mean Pronto may have a different end than Urbanspoon than Vimeo, they are just all different things you have seen in the past that we have a willingness to do things that our configuration to drive shareholder value, but we also don't feel any urgency to do anything, because again we think these investments are manageable we believe in their prospects and we'll see over time.

Barry Diller

On areal we’ve passed the first hurdle, which was the injunction was denied, this will go on for, I would expect some while, the litigation although, I'm hopeful that the – we’re at a defense, that the plaintiffs would at some point say – actually affirm, this basic right to receive over-the-air broadcast signals free without any middleman, essentially co-opting the process and areal system is one that allows people far better than being able to get it through an antenna. To receive their lights, their broadcast signals, basis of which communications law has existed for endless period of time, I recognize the world has changed than broadcasters, because it weren’t for retransmission concept. If it weren’t for that broadcasters being able to get extra revenue from the distribution of their signals on cable, broadcasters ought to cheer off, because we’re sensibly adding audience. They, of course, at this point they’ll see a ramp so they will. I think it’s a wonderful product. and so those of you who live in New York or were just getting up to kind of scale, go to areal.com and a tablet or on a mobile or on a PC and look at that. I think you’ll be surprised that how this DVR and the cloud so to speak, the ability to, no wires, no anything, ubiquitous, take it with you wherever you go and whatever device you have, I think it’s a very appealing consumer product. So my response for areal.

with that, on behalf of my colleagues, thank you very much. hope you have a restful or exciting summer, whichever it is you desire or both. And we will be back with you in three months.

Gregory R. Blatt

Thanks.

Jeffrey W. Kip

Thank you.

Operator

This concludes today's conference call. You may now disconnect.

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