State Champ Radio earnings
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With a slate of new artists and a recently launched North American joint venture, SM Entertainment’s revenue reached 250 billion won ($189.5 million at the period’s average exchange rate) in the fourth quarter of 2023, down 3.4% year over year and 6.1% lower than the third quarter, the company announced Wednesday (Feb. 7). Operating profit dropped 51.7% to 10.9 billion won ($8.3 million) while the company posted a net loss of 19.7 billion won ($14.9 million) compared to a 1.9 billion won ($1.4 million) net profit in the prior-year period.
The company attributed a decline in revenue from its concert-related subsidiaries to smaller-sized concerts and a decline in its content-related subsidiaries to “slow business conditions.” SM Entertainment’s share price rose 0.2% to 73,000 won ($54.77) after the earnings release.
SM Entertainment sold 5.6 million albums in the fourth quarter, up 40% from the prior-year quarter; NCT 127’s album Fact Check sold 1.86 million units and aespa’s Drama EP sold 1.26 million units. As for concerts, NCT Wish performed 24 shows in nine cities in Japan ahead of its debut album’s release later this quarter. SHINee performed for 80,000 fans at four concerts in Japan. NCT 127 had six concerts in Seoul, Korea with a total attendance of 60,000.
For the full year, SM Entertainment released 64 albums that sold a record 20.1 million units, and its artists performed at 340 concerts around the world. RIIZE, the first boy band launched under the company’s new multi-production system — an organizational structure introduced in 2023 to break from the previous system that relied solely on founder and ousted chief producer Lee Soo-man — sold more than 1 million units of its debut album, Get a Guitar, which was released in September.
“The multi-production system, which is the core part of our SM 3.0 strategy, has been operating successfully since its introduction last year, and active musical activities are underway under the guidance of each production SM director,” CEO Jang Cheol Hyuk said during Wednesday’s earnings call. The system is meant to speed the introduction of new artists and material by providing other leaders with decision-making powers.
Looking ahead to 2024, SM Entertainment will launch four new artists: NCT Wish, virtual artist naevis, an unnamed girl group and a U.K.-based boy band. The company also plans to release global albums for major artists at least once a year and expand the scale of global concerts, Jang said.
In the first quarter, SM has EPs from NCT Dream, TEN, Taeyong and Wendy, while NCT 127 is performing 13 dates in Japan, Indonesia, the Philippines, Thailand and Macau. The second quarter will see a new album from aespa and EPs from Red Velvet, RIIZE, SHINee, SUHO and WayV, as well as 15 concert dates for NCT Dream in Korea, Japan and Southeast Asia. Other artists including MINHO, TVXQ!, Super Junior-L.S.S., SHINee, TAEmin and aespa each have a handful of shows in the first or second quarter.
SM Entertainment also expects to see results from its North American partnership with Kakao Entertainment. The two companies are “working to establish and expand local partnerships for artists,” said Jang. He pointed to the joint venture’s strategic agreement with Moon & Back, a U.K.-based entertainment and TV production company, that will cast a five-member boy group in the United Kingdom and perform songs sourced from KMR, SM Entertainment’s new music publishing subsidiary.
Warner Music Group (WMG) revenue reached a record $1.75 billion from October through December, the company announced Wednesday (Feb. 7). That’s up 17.5% from the prior-year quarter (up 15.9% at constant currency), as both the recorded music and publishing divisions posted their best-ever quarterly revenues.
With Spotify and other streaming services having raised prices in 2023, WMG’s digital revenue increased 16% and streaming revenue grew 16.6%. The company also posted gains in physical sales, licensing revenue and music publishing performance royalties, though the company saw declines in recorded music artist services and expanded rights revenue. Net income rose 55.6% to $193 million and operating income improved 33.6% to $354 million.
“These results reflect the impact of our chart-topping artists, hit-making songwriters, iconic catalog, and laser focus on execution by all our teams,” CEO Robert Kyncl said in a statement. “As we deliver our plan to accelerate our growth, we are becoming more efficient, increasing operating leverage, and freeing up more funds to invest in music and tech, which in turn will drive further sustainable growth.”
Moments after WMG released the quarter’s results — an earnings call will take place Thursday morning (Feb. 8) — news broke that the company will eliminate its staff by 10%, primarily through the sale of owned and operated media companies such as Uproxx and HipHopDX. The company will also eliminate its in-house ad sales function and plans to wind down its podcasting brand, The Interval, as well as social media publisher IMGN. The reductions will free up $200 million in cost savings that can be reinvested elsewhere, Kyncl wrote in a memo to staff obtained by Billboard.
WMG shares were up 6.4% to $36.19 in after-hours trading following the late afternoon release of earnings results and staff reductions.
Excluding three extraordinary items, WMG’s revenue growth was 12.1% (10.6% at constant currency). A previously disclosed licensing agreement extension for an artist’s catalog added $68 million of revenue and a digital licensing agreement renewal added $27 million to the quarter. The termination of a distribution agreement with BMG resulted in $13 million less revenue than the prior-year quarter.
Recorded music revenue improved 16.6% to $1.45 billion on the success of Zach Bryan, Bruno Mars, the Barbie soundtrack and Jack Harlow, whose track “Lovin on Me” first reached No. 1 on the Billboard Hot 100 singles chart in December and recently spent its fourth non-consecutive week atop the chart dated Feb. 3. The segment’s digital revenue grew 13.1% to $908 million while physical revenue climbed 15.8% to $154 million. Licensing revenue jumped 84.5% to $179 million.
Music publishing revenue grew 21.6% (19.7% at constant currency) to $304 million thanks to a 32.2% improvement in streaming revenue and a 31.5% gain in digital revenue. Mechanical royalties — which are tied to downloads and physical purchases — rose 7.1% to $15 million. Publishing’s synch revenue was flat at $39 million as lower commercial licensing activity in the United States was offset by the timing of some legal settlements.
WMG’s margins improved nearly across the board in the quarter. Company-wide, the company’s operating margin rose 2.5 percentage points to 20.3% and its adjusted operating income before depreciation and amortization (OIBDA) margin rose 3.3 percentage points to 25.8% (and was flat excluding BMG’s termination, the license extension and digital license renewal). Recorded music’s adjusted OIBDA margin rose 4.4 percentage points to 28.5% and its operating margin improved 3.1 percentage points to 25.9%. The publishing division’s operating margin rose 1.1 percentage points to 20.7% while its adjusted OIBDA margin declined 0.5 percentage points to 28.3%, due primarily to the impact of exchange rates.
Gains in recorded music and improved digital royalties helped Reservoir Media’s revenue increase 19% to $35.5 million in the fiscal third quarter ended Dec. 31, the company announced Wednesday (Feb. 7).
Strong results in the quarter allowed Reservoir Media to raise its guidance for its full fiscal year ending March 31. Guidance for full-year revenue increased from a range of $133 million to $137 million to a range of $140 million to $142 million, implying 15% annual growth at the midpoint. Adjusted guidance on earnings before interest, taxes, depreciation and amortization (EBITDA) increased from a range of $50 million to $52 million to a range of $53 million to $55 million, which would be a 16.5% year-over-year improvement. Reservoir Media also raised its guidance when it released its previous earnings in November.
The results “demonstrate our ability to manage the business and deploy capital to further grow our portfolio,” CEO Golnar Khosrowshahi said during Wednesday’s earnings call. “Along those lines during the quarter, we continued to invest in our business, with an emphasis on further diversifying our portfolio across various music genres.”
Recorded music revenues grew 32%, to $10 million, inclusive of catalog acquisitions. The segment’s digital revenue grew 26% to $6.6 million while physical revenue rose 51% to $1.7 million. Synch revenue doubled to $800,000 and neighboring rights royalties gained 16% to $1 million.
Publishing revenue dominated total revenue, though, improving 15% to $23.1 million. Publishing’s digital revenues grew 30% to $13.9 million and synch revenue gained 9% to $4 million. Performance, mechanical and other revenue fell from the prior-year quarter.
Synch revenue from both segments was affected by the writer and actor strikes in 2023, explained CFO Jim Hendlmeyer. A “very promising” ad market helped synch revenue during delays in TV and film production, he added.
The quarter was also helped by Reservoir Media’s numerous signings and acquisitions, including Theo Katzman, the founding member of Vulfpeck and a collaborator with such artists as Carly Rae Jepsen and Teddy Geiger. In December, Reservoir signed singer-songwriter grentperez, for whom it handles administration and creative aspects with its Australian sub-publisher, Mushroom Music. In October, the company signed a global publishing deal with Joe Walsh. Its last announced acquisition was the catalog of Arthur “Boogie” Smith in November.
Reservoir highlighted Grammy success for the songwriters and producers on its roster. Among the winners was best folk album winner Joni Mitchell, who signed a publishing administration deal with the company in 2021. Killer Mike, who signed with Reservoir in 2022, won in three rap categories: Best Rap Song (“Scientists & Engineers”), Best Rap Album (Michael) and Best Rap Performance (“Scientists & Engineers”). Elsewhere, Khris Riddick-Tynes’ collaboration with SZA, “Snooze,” won best R&B song and Blue Raincoat Music client Phoebe Bridgers had a hand in four awards, including best rock song, with her group boygenius.
Shares of Reservoir Media increased 6.1% to $7.26 early Wednesday morning before falling to $6.49, down 5.1%, by midday.
In its first full quarter of operation, Sphere, the next-generation music venue in Las Vegas, lost $193.9 million on revenue of $167.8 million, its owner, Sphere Entertainment Co., announced Monday (Feb. 5). The company posted an adjusted operating gain of $14.1 million if “certain corporate overhead expenses” were excluded.
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In the quarter ended Dec. 31, nearly half of Sphere’s revenue — $92.9 million — came from The Sphere Experience’s 191 performances. (The Sphere Experience includes a tour of the venue and a viewing of the film Postcard From Earth.) Concerts accounted for nearly all of the $55.2 million of event-related revenues. Advertising on the outside of the venue and suite license fees totaled $17.5 million.
After U2’s residency ends on Mar. 2, the venue will host runs by Phish and Dead & Company. Executive chairman/CEO Jim Dolan didn’t announce any new residencies but said during Monday’s earnings call that “pretty much our calendar is full for this calendar year.” Demand from artists continues to grow, Dolan added, and the company expects 2025 to be “another full year.”
Including MSG Networks, Sphere Entertainment had $314.2 million of revenue and an operating loss of $159.7 million. MSG Networks had revenue of $146.4 million, a 12.5% decline from the prior-year period.
Sphere opened on Sept. 29 and posted $4.1 million from two U2 concerts, and $7.8 million in total revenue, in the previous quarter. The venue has received rave reviews and worldwide attention for its captivating audio-visual experience and presence on the Las Vegas skyline. It featured prominently in Las Vegas’s Formula 1 race in November and will grab more attention this weekend as Las Vegas hosts Super Bowl LVIII on Sunday (Feb 11).
Although Sphere ended its bid to expand into London, the company is having “substantive discussions about expanding to international markets,” said Dolan. The plan is to have a franchise model for additional venues that will generate revenues immediately through construction and development, Dolan added.
Shares of Sphere Entertainment rose as much as 10.4% to $39.11 on Monday and closed at $38.97, up 10.1%.
SiriusXM added 131,000 self-pay subscribers in the fourth quarter and beat its full-year guidance for earnings and free cash flow while only slightly missing its revenue goal, the company announced Thursday (Feb. 1). The satellite radio giant lost 445,000 self-pay subscribers for the full year, however.
Full-year revenue declined 0.6% to $8.95 billion, slightly below last quarter’s guidance of $9 billion. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) declined 2% to $2.8 billion, coming in a little above guidance of $2.75 billion. Free cash flow of $1.2 billion was down about 23% but beat guidance by $50 million.
SiriusXM, built on a satellite radio service favored by older consumers, is in re-building mode. The company launched a new app in November and a $9.99-per-month streaming-only subscription service aimed at younger audiences who don’t listen primarily in their cars. The app houses Sirius’ 400-plus channels in addition to an audio library and a growing stable of podcast content that includes such brands as Smartless, which earlier this week left Amazon’s Wondery after striking a $100 million deal with SiriusXM, and Conan O’Brien’s Team Coco, which SiriusXM acquired in 2022.
The strategy isn’t likely to produce results this year, though. “While early indications are showing signs of positive impacts of our business investments, it will take time for these to fully reflect in our subscriber and financial metrics,” said CEO Jennifer Witz during Thursday’s earnings call.
While SiriusXM expects “roughly level” subscriber numbers in 2024, new streaming-only subscribers pay less than satellite radio subscribers and will result in a lower average revenue per user. Those factors, along with an advertising market Witz called “uncertain,” leads the company to expect two of its key financial metrics to fall in 2024. Full-year revenue guidance of $8.75 billion would be a 2.2% decline from $8.95 billion in 2023, while adjusted EBITDA guidance of $2.7 billion would mark a 3.3% year-over-year decline. Free cash flow is expected to remain at $1.2 billion.
Investors appeared to have baked the rebuild process into their forecasts and did not react negatively to Thursday’s earnings results. Shares of SiriusXM rose as much as 5.1% on Thursday morning and closed at $5.23, up 2.8%.
SiriusXM’s satellite radio service generated full-year revenue of $6.8 billion, down 1% year over year. Self-pay subscribers grew 131,000 in the fourth quarter after falling 96,000 in the third quarter. For the full year, self-pay subscribers fell by 445,000 to approximately 34 million. Paid promotional subscribers dropped by 225,000 in the fourth quarter but increased by 15,000 for the full year.
Pandora revenue increased 1% to $1.6 billion, while its subscribers fell 3% to 6.0 million, down from 6.2 million at the end of 2022. The music streaming service finished the year with 46.0 million monthly active users, down 3.4% from 47.6 million in the prior-year period. Total ad-supported listener hours of 10.48 billion in 2023 was down 4% from 10.88 billion in 2022. Pandora’s gross profit dipped 3% to $638 million.
SiriusXM laid off 8% of its staff in March 2023, which resulted in approximately $140 million in cost savings, CFO Tom Barry said on Thursday. This year, the company is targeting nearly $200 million in additional savings, he added, that will be “reinvested” in “more targeted and more performance-oriented marketing on the streaming side.”
SiriusXM’s full-year 2023 financial metrics
Total revenue of $8.95 billion, down 0.6%.
Adjusted EBITDA of $2.8 billion, down 2%.
Free cash flow of $1.2 billion, down 23%.
SiriusXM revenue of $6.8 billion, down 1%.
Pandora revenue of $1.6 billion, up 1%.
SiriusXM satellite radio self-pay subscribers of 34 million.
Pandora subscribers of 6 million.
Hipgnosis Songs Fund has announced a last-second delay in publishing interim results for the six months ended Sept. 30, citing concerns over its valuation following a series of hiccups for the Merck Mercuriadis-led company.
The fund, which owns full or partial rights to the song catalogs of artists ranging from Justin Bieber, Neil Young, Bruno Mars, Jimmy Iovine, 50 Cent, Shakira, Blondie, Justin Timberlake, Lindsey Buckingham and many more, was scheduled to publish it financial results on Tuesday (Dec. 19) but now expects to announce on New Year’s Eve, according to a regulatory filing.
In explaining the delay, the Hipgnosis board said the valuation it received from an independent firm was “materially higher than the valuation implied by proposed and recent transactions in the sector,” namely two deals involving itself: a proposed $417.5 million sale of 29 catalogs to Blackstone-backed Hipgnosis Songs Capital, a price reflecting a 24.3% discount from a valuation dated March 31, and last week’s sale of 20,000 “non-core songs” to an undisclosed buyer for $23.1 million, which it said reflects a 14.2% discount on the songs’ valuation as of early fall.
Due to the disparity between the independent valuation and the “implied” one tied to recent trends and proposed sales, the board sought advice from its in-house investment advisor, Hipgnosis Song Management Limited, which delivered a “heavily caveated” opinion that led to the board’s concerns as to the valuation of HSF listed in the interim results scheduled to be disclosed today.
Hipgnosis is comprised of three companies: Hipgnosis Song Management, Hipgnosis Songs Capital and Hipgnosis Songs Fund. The latter of the three has been mired in controversy in recent months after it was announced that the London-listed trust would not pay its investors a dividend because of new, lower projections for revenue. On Oct. 26, investors of the fund overwhelmingly demanded structural changes to the music rights company, with more than 80% of Hipgnosis investors voting in favor of the board drawing up “proposals for the reconstruction, reorganization or winding-up of the company to shareholders for their approval within six months.”
Last month the company announced that the fund will not declare dividends before the new fiscal year, which begins next April, in order to ensure it has enough on its balance sheet to pay contractually-mandated catalog bonuses.
Investors are still processing the news, with the company’s stock only slightly down, roughly 2%, in mid-day trading on the London Stock Exchange.
Warner Music Group reported quarterly revenue was up 6% as of Sept. 30, as the third-largest U.S.-based music rode a solid release slate that included the Barbie soundtrack, Zach Bryan and FIFTY FIFTY to eclipse $6 billion in overall annual revenue for the first time. WMG reported revenue for its fiscal fourth quarter rose to […]
Chinese music streaming company Tencent Music Entertainment saw its paying users grow to 103 million in the third quarter, up 20.8% year over year and 3.6% better than the previous quarter, the company announced Tuesday (Nov. 14).
A 42% gain in subscription revenue to 3.2 billion RMB ($438 million) helped online music revenue grow 32.7% to 4.55 billion RMB ($624 million). Not only has Tencent Music Entertainment gained paying customers, but they’re also paying more: Average revenue per paying user (ARPPU) rose 17% to 10.3 RMB ($1.41) in the third quarter.
“We will continue to drive solid growth of our online music business, with subscription revenue driven by the subscription base growth and also ARPPU expansion as well,” said executive chairman Cussion Pang during Tuesday’s earnings call. “Outside of the subscription revenue, we expected the revenues from advertising and new initiatives, such as artist merchandise, to continue to grow healthily.”
Tencent Music Entertainment’s 103 million subscribers is well behind Spotify’s 226 million subscribers, but its subscriber base has grown steadily from 85.3 million and 71.2 million in the third quarters of 2022 and 2021, respectively. Its ARPPU of 10.3 RMB ($1.41) is also far lower than Spotify’s ARPU of 4.34 euros ($4.72), reflecting the relatively higher prices in the North American and European markets where Spotify is strongest. Still, Tencent Music Entertainment’s ARPPU showed strong growth last quarter after dropping from 8.9 RMB ($1.23) in the third quarter of 2021 to 8.8 RMB ($1.21) in the third quarter of 2022.
Tencent Music Entertainment operates the music streaming apps QQ Music, Kugou and Kuwo. It also owns WeSing, a social karaoke game. The music-focused company additionally offers podcasts and ventured into audiobooks with its 2021 acquisition of audiobook platform Lazy Audio.
The company touts what it calls a “dual-engine” strategy that improves both the content and the platform’s features and technology. In the third quarter, Tencent Music Entertainment expanded its partnership with K-pop company YG Entertainment to include ticketing, which gave subscribers the ability to purchase BLACKPINK concert tickets. A partnership with another South Korean company, Cube Entertainment, gives Tencent Music Entertainment a 30-day window of exclusivity on new song releases. On the technology side, a new music production tool in the Kugou app allows users to create music in multiple languages. “Through a brief training session, it can effectively and efficiently produce songs in Mandarin, Cantonese, English, Korean and Japanese,” said Pang.
Gains from the music side of the company couldn’t make up for steep declines in Tencent Music Entertainment’s social entertainment segment, however. Company-wide revenue declined 10.8% to 6.57 billion RMB ($900 million) due to a 48.8% year-over-year decline in social entertainment revenue and a 16.8% drop in social entertainment mobile monthly average users.
“For the social entertainment services, we will continue to execute our current operational strategy with the backdrop of the macro factors and competition for 2024,” said Pang. “Our primary target is to stabilize the business and better serve our core users.”
Gross margin improved by 3.1 percentage points to 35.7% due to growth of music subscriptions and the company’s use of its own content. “Looking forward [to] Q4, we expect subscription revenue and advertisement revenue will continue to be strong,” said CFO Shirley Hu. “On the cost side, we expect our in-house made content will have a positive impact on gross margin continually and we will continue to increase our operational efficiency and monitor cost items.”
Shares of Tencent Music Entertainment rose 3.1% to $7.66 on Tuesday. That was slightly better than the gains most stocks posted following a report that inflation was flat in October and up 3.2% from the previous year. The news sparked hope amongst investors that the Federal Reserve would stop hiking interest rates to help tame inflation. The Nasdaq composite gained 2.4% and the S&P 500 gained 1.9%.
Tencent Music Entertainment third-quarter financial and user metrics:
Total revenue of 6.57 billion RMB ($900 million), down 10.8% year over year.
Music subscription revenue of 3.19 billion RMB ($438 million), up 42% year over year.
Social entertainment revenue of 2.02 billion ($276 million), down 48% year over year.
Net profit of 1.26 billion RMB ($173 million), up 15.6% year over year.
Monthly active users (online music) of 594 million, down 4.2% year over year.
Mobile monthly active users (social entertainment) of 129 million, down 16.8% year over year.
Paying users, online music of 103 million, up 20.8% year over year.
Paying users, social entertainment of 7.8 million, up 5.4% year over year.
Releases by Travis Scott, SZA, Harry Styles and Luke Combs, along with continued paid subscription growth, helped Sony Music Entertainment revenues hit a record 408 billion yen ($2.83 billion at the quarter’s average exchange rate) in its fiscal second quarter ended Sept. 30, up 13.7% from the prior-year period, parent company Sony Corp. announced Thursday.
The company’s previous high for quarterly revenue was 363.7 billion yen ($2.57 billion) in the third quarter of fiscal 2022 (the quarter ended Dec. 31, 2022).
Adjusted operating income grew 10.9% to 97 billion ($672 million). Adjusted OI excludes the impact of a $41.2 million one-time benefit recognized in the prior-year quarter related to settlements of copyright infringement lawsuits. The appreciation of the yen contributed some of the revenue growth in the quarter. Of the 49.4 billion yen ($342 million) revenue increase, foreign exchange accounted for a 12.7 billion yen ($88 million) gain — about a quarter of the improvement.
Recorded music revenues grew 13.3% to 253.8 billion yen ($1.76 billion) on the strength of subscription streaming services such as Spotify, Apple Music and YouTube Music. Streaming revenue grew 14.4% to 173.9 billion yen ($1.2 billion), accounting for 69% of recorded music revenues. Other revenues, which encompass merchandise, licensing and live performances, jumped 51.6% to 50.9 billion yen ($352 million). Physical revenues dropped 14.4% to 20.8 billion yen and download sales fell 42.2% to 8.2 billion yen ($57 million), although the two categories combined accounted for only 11.4% of recorded music sales.
Miley Cyrus’s Endless Summer Vacation, Beyoncé’s Renaissance, Lil Durk’s Almost Healed, Doja Cat’s Scarlet and Luke Comb’s This One’s For You were also among Sony Music’s top ten recorded music releases ranked by revenue. In Japan, Sony Music Entertainment’s top title was Social Path, a Japanese-language EP by K-pop group Stray Kids released with JYP Entertainment. Social Path hit No. 1 on the Billboard Japan Hot Albums chart for two weeks in September.
In the music publishing division, a 14.8% increase in streaming revenue helped total publishing revenue increase 12.6% to 82.7 billion yen ($573 million). Other publishing revenue, which includes mechanical, performance royalties and synch licensing, grew 9.6% to 34.3 billion yen ($237 million).
The visual media and platform division rose 5.7% to 62.9 billion yen ($436 million) and accounted for 15.7% of Sony Music’s total revenue. The division includes mobile games, software for PCs and game consoles, and sales related to software development contracts.
Sony Music increased its full-year guidance for revenue by 5%, or 70 billion yen ($485 million), and adjusted operating income before depreciation and amortization by 4%, or 15 billion yen ($104 million). The upward revisions were due to the impact of foreign exchange, increased streaming revenues in the music publishing division and higher mobile game sales in the visual media and platform division.
Financial metrics for Sony Music’s second fiscal quarter ended Sept. 30, 2023:
Revenue of 408.7 billion yen ($2.83 billion), up 13.7% year over year.
Adjusted operating income of 97 billion yen ($672 million), up 10.9% year over year.
Recorded music revenue of 253.7 billion yen ($1.76 billion), up 13.3% year over year.
Music publishing revenues of 82.7 billion yen ($573 million), up 12.6% year over year.
Visual media and platform revenue of 62.9 billion yen ($436 million), up 5.7% year over year.
Sphere, the stunning venue that has transformed the Las Vegas skyline and redefined the concert-going experience, generated $4.1 million from U2’s first two concerts in September, its owner, Sphere Entertainment Co., reported in its quarterly earnings release on Wednesday (Nov. 8).
The $2.3 billion Sphere is a 366-foot tall, 516-foot wide spherical venue with a wrap-around video screen that envelopes a seated audience of 17,600. Sphere’s external skin — called Exosphere — is covered in 580,000 square feet of programmable LED exterior lights that advertises the venue’s technological capabilities.
Sphere also made $2.6 million in additional revenue, primarily from advertising on the Exosphere that began in September.
With only two concerts under its belt through the end of September, Sphere’s earnings release was about the venue’s potential, not its revenue to date. “Our journey with Sphere is just beginning,” said executive chairman/CEO James Dolan during Wednesday’s earnings call. “And while it will take some time for Sphere to realize its full potential, we’re off to a great start.”
U2’s original 25-show residency has been extended by an additional 11 shows that will occur in January and February 2024. The company expects to host two additional residencies in the second half of the fiscal year that ends June 30, 2024, according to Dolan. “We’re having conversations with artists across a wide variety of genres, including discussing runs of varying lengths,” he said.
Sphere had an adjusted operating loss of $83.1 million in the quarter, an increase of $19 million from the prior-year period. It also had $2.8 million of venue operating expenses in the quarter and $2.2 million of event-related expenses. An additional $2.1 million in advertising costs were related to the Oct. 6 launch of The Sphere Experience featuring the film Postcard from Earth by Darren Aronofsky. Selling, general and administrative expenses amounted to $84.2 million.
The Las Vegas venue is the first of what Sphere Entertainment expects to be multiple Sphere venues. Dolan was light on specifics but said there is “a great deal of interest and substantive discussions” in several additional markets. “I will say that it does look like Sphere will be a global brand,” he said, “and so we should expect the expansion globally rather than just in the U.S.”
Sphere Entertainment had total revenue of $118 million in its fiscal first quarter ended September 30, down 4% from the prior-year period. MSG Networks contributed $110.2 million of revenue, down 10% year over year. MSG Networks, which operates two regional sports networks, joined Sphere following a spin-off of MSG Entertainment in April. That same month, Sphere reached an agreement to sell its stake in Tao Group Hospitality to global luxury lifestyle company Mohari Hospitality for about $300 million.
Shares of Sphere Entertainment fell as much as 8.4% to $30.58 on Wednesday morning before recovering to $31.90, down 4.4%, by mid-afternoon. The stock price took a bigger hit on Monday, however, dropping 9.6% following the company’s announcement late on Friday that CFO Gautam Ranji had left the company. Dolan attributed Ranji’s departure to Sphere being a new type of business. “It’s pretty challenging,” he said. “I think we both came to the conclusion that it probably wasn’t a great fit.”
Financial metrics for the first fiscal quarter:
Total revenue of $118 million, down 4% year over year.
Adjusted operating loss of $57.9 million, up 88% year over year.
Net income of $66.4 million, up from a $44 million net loss in the prior-year period.
Sphere revenue of $7.8 million.
Sphere event-related revenue of $4.1 million.
MSG Networks revenue of $110.2 million, down 10% year over year.
