MSG Earnings Hold Steady as Company Prepares to Spin Off Entertainment Business

Madison Square Garden
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Madison Square Garden

The Madison Square Garden Company has released its second quarter financial earnings for 2020 that reflects little change in the company's year-over-year earnings, despite significant investments in its new Sphere venues.   

The company reported $628.8 million in revenue during the second fiscal quarter of 2020, a 1% decrease from the same period  last year. The New York-based company also saw a 3% increase in operating income to $80.8 million for the fiscal quarter completed on Dec. 31. According to MSG, the relatively flat numbers are a combination of growth at MSG Sports and MSG Entertainment with, among other things, decreases in signage and sponsorships (Sports) and expiration of the booking agreement with the Wang Theatre in Boston (Entertainment).

While the company anticipates significant revenue from its MSG Sphere location in Las Vegas that's slated to open next year, actual construction costs for MSG Sphere at The Venetian incurred through Dec. 31, 2019, were approximately $248 million, including the $37.5 million received from the Las Vegas Sands Company in 2019. MSG says it has moved into the detailed construction drawings phase of the Vegas Sphere and now expects the building to ultimately cost $1.66 billion to complete. Another Sphere venue is being planned for London as well. 

"We are making significant progress in readying our Company for its next chapter as the proposed spin-off of our Entertainment business nears completion and MSG Sphere in Las Vegas continues to take shape," said MSG Company's executive chairman and CEO James L. Dolan in a release. "We remain confident that the execution of these strategic priorities, coupled with the ongoing strength of our underlying businesses, will set the stage for continued growth and long-term value creation for our shareholders."

MSG is seeking to add value to its portfolio by separating its stable sports business that includes assets like the NBA's New York Knicks and NHL's New York Rangers, from the growing entertainment division that is undertaking bold projects such as the Sphere venues.

Revenue for MSG Entertainment decreased by 1% to $312.7 million during this period. The company attributes the decline to lower event-related revenues from concerts, as well as the impact of the wind-down of its creative studio Obscura Digital's third-party production business. The second financial quarter also took a hit due to the expiration of the company's booking agreement with the Wang Theatre.

MSG Entertainment's loss was minimal thanks to increased revenue from its subsidiary Tao Group Hospitality that operates various nightclubs and restaurants, as well as increased revenue from events including Christmas Spectacular Starring the Radio City Rockettes. According to Billboard Boxscore charts, the Christmas Spectacular shows brought in $98 million between November and December of 2019.

MSG Entertainment's fiscal 2020 second quarter operating income increased by $2.3 million to $95.5 million and AOI increased by $2.5 million to $103.6 million, both as compared to the prior year period.

MSG Sports similarly saw a 1% decrease in revenue to $316.5 million, while operating income increased by $7.3 million to $49.2 million and AOI increased by $6.7 million to $55.3 million year-over-year.