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Warner Music Group’s double-digit fourth quarter revenue growth served as the capstone in chief executive Stephen Cooper‘s long-term growth strategy, and is a signal more growth to come, Cooper said on Tuesday.
YouTube’s former chief business officer, Robert Kyncl, will replace Cooper as WMG’s new CEO on Jan. 1, though Kyncl will share the top duties with Cooper for his first month.
Cooper’s 12-year-tenure at WMG has been marked by an early embrace of digital streaming, major expansion into markets in Asia, the Middle East and Africa, and taking the company public roughly two-and-a-half years ago, among other things.
“I’m very proud of the progress we’ve made over the past 10 years,” Cooper said on a call with analysts Tuesday. “As I look out on the next 10 years, I believe we’re at the doorstep of a new golden age of music. As the ecosystem becomes more complex and exciting new business models emerge, our role as the connective tissue between artists and fans will only become more prominent and important.”
WMG reported quarterly revenues rose 16% at constant currency to $1.5 billion in the fiscal fourth quarter ended Sept. 30, with solid growth across all business lines, including a 39% and a 48% jump in digital and performance revenues respectively. Investors welcomed the news, pushing Warner’s stock up 15.2% to $31.08 as of 10:30 a.m. in New York.
Cooper said he sees the company’s future momentum coming from continued growth in the number and price of streaming subscriptions, penetrating deeper into new emerging markets and investing more in new digital technologies.
WMG now has partnerships with more than 200 streaming services and operates in 70 countries around the world. While executives decline to put a number on how much WMG may make from recent subscription price hikes by Apple Music and Deezer, they said they expect it to result in other streaming companies raising prices.
“I’ve consistently told you that streaming revenue would continue to have significant runway, that we would have price increases and ongoing subscriber growth, and that emerging platforms would continue to expand,” Cooper said. “We’re now seeing all these come to fruition.”
WMG’s annualized revenue from emerging streaming platforms, include deals like the recent one reached with Meta, topped $370 million this quarter, Cooper said.
The fourth quarter saw big releases Lizzo, whose album Special was her first to hit No. 1 on Billboard’s Top Album Sales chart, as well strong carry-over sucess from some of WMG’s superstars like Ed Sheeran, Dua Lipa and Silk Sonic.
The company’s pipeline remains strong, Cooper said, with first quarter releases expected from Paramore, Aya Nakamura, Cardi B, Roddy Ricch and others.
However, Cooper said he expects the outsized monetary impact of hit singles and albums to continue to decrease in the coming years as the company works with talent in more geographic markets and diversifies its revenue streams.
“As we’ve broadened and deepened our artist roster and prioritized a global approach to domestic music, our revenue composition has evolved,” Cooper said. “A decade ago, our top 5 artists generated over 15% of our recorded music physical and digital revenue. In 2022, they generated just over 5%.”
One new geographic market where Cooper said WMG plans to expand is in Eastern Europe. In recent months, WMG invested in the Polish concert and festival promoter BIG Idea, the Serbian record company Mascom Records, and participated in launching OUT OF ORDER, a new label for Eastern European artists.
Warner Music Group, helped by digital revenue growth across recorded music and publishing, reported quarterly revenues rose 16% at constant currency (9% as reported) to $1.5 billion in the fiscal fourth quarter ended Sept. 30, the company announced Tuesday (Nov. 22). Adjusted earnings before interest, taxes, amortization and depreciation (EBITDA) grew by 16% to $276 million.
In his final quarterly earnings after 12 years as Warner Music’s chief executive, Steve Cooper said, “Against the backdrop of a challenging macro environment, we once again proved music’s resilience, with new commercial opportunities emerging all the time. We’re very well positioned for long-term creative success, and continued top and bottom line growth. We’re excited to have Robert Kyncl joining next year as WMG’s new CEO, as we enter the next dynamic phase of our evolution.”
WMG’s share price edged slightly lower in pre-market trading, down 0.88% to $26.98 on Tuesday at 8:19 a.m. New York time. Warner Music executives will discuss the company’s quarterly and full year results on a call with analysts at 8:30 a.m. ET.
Digital revenue grew 12.3% at constant currency or 6.8% as reported to $989 million, including a $38 million settlement related to certain copyright infringement cases. Total streaming revenue increased by 8.9% at constant currency (3.5% as reported) due primarily to driven by music publishing streaming revenue, which rose by 37.0% at constant currency (or 29.8% as reported).
Recorded music streaming revenue increased by 4.7% at constant currency, but decreased by 0.4% as reported. Digital’s share of total revenue comprised 66.1%, compared to 67.3% in the prior-year quarter, due to the double-digit growth of recorded music artist services and expanded-rights and licensing revenue.
Music publishing revenue improved 32.3% at a constant currency (23.9% as reported) to $254 million on the strength of digital and performance revenue. Digital revenues jumped 39.5% at constant currency (32.5% as reported) to $159 million. Streaming revenue increased 37.0% in constant currency (29.8% as reported) helped by streaming services and new digital deals.
In WMG’s recorded music segment, revenues rose 13.1% at constant currency (6.1% as reported) to $1.25 billion. Expanded rights revenue improved 33% to $204 million at constant currency (21.4% as reported) due to an increase in concert promotion revenue following the disruption of the touring business in 2021.
Physical revenue of $123 million was up 6% at constant currency but down 3.1% as reported, primarily due to volatility in exchange rates that offset higher vinyl sales and strong sales in Japan. Digital revenues of $830 million rose 8.1% in constant currency (up 2.9% as reported), and now represents 66.7% of total recorded music revenue compared to 68.9% in the prior-year quarter.
Music publishing contributed nearly 17% of overall company revenues in the quarter, up slightly from the year-ago quarter when music publishing made up 15% of overall revenues. Recorded music revenue contributed 83% of overall revenues in the quarter, down slightly from the year-ago quarter when recorded music revenues comprised 85% of overall company revenues.
A rebound in the live music business helped German concert promoter CTS Eventim improve its revenues to 694.4 million euros in the third quarter ($699.3 million at the average exchange rate in the quarter), 84% higher than the same period in 2019 before the COVID-19 pandemic, the company announced Thursday.
Revenue increased due to contributions from pre-sales, the staging of events and higher income from currency conversion. That was offset by a reduction in COVID-19 economic aide, received as compensation for event cancellations or events with reduced capacity, of 76.8 million euros ($77.3 million) from the prior-year period.
“These excellent results are testimony to the fact that our strategic initiatives are taking us from strength to strength following the post-pandemic restart of live entertainment,” said CEO Klaus-Peter Schulenberg in a statement. “Even in the face of new uncertainties caused by the high level of inflation and geopolitical factors, we will maintain this proven course in order to continue to drive our profitable growth, both at home and abroad.”
The live entertainment segment’s revenue was 563 million euros ($566.9 million) in the third quarter, up 103.6 from the same period in 2019, and 1.11 billion euros ($1.11 billion) in the nine-month period, a 42% improvement. Live entertainment EBITDA was 64 million euros ($64.4 million), about triple the amount in the same period of 2019.
The ticketing segment’s revenue improved to 137 million ($138 million) in the third quarter, up 28% from the same period in 2019, and to 339 million ($341.1 million) for the nine-month period, up 10.4% from 2019. CTS Eventim sold 17.2 million tickets in the quarter and 45.1 million tickets in the nine-month period, increases of 31% and 23%, respectively, from the pre-pandemic periods in 2019.
The company’s staff, including part-time workers, grew from 2,357 a year ago to 2,956 at the end of the third quarter.
The company sounded an alarm about rising costs stemming from higher personnel costs in security, catering and stage technology “induced by an increasing shortage of specialists in the event industry and at least temporarily higher demand due to the fact that both postponed and new events are currently being held at the same time,” it explained in its earnings release. The fourth-quarter results could be hampered by rising energy prices and a possible pullback of fan spending due to inflation’s impact on household purchasing power.
Still, CTS Eventim is going to have a record year in 2022. The company expects full-year revenue of 1.7 billion euros ($1.71 billion) and earnings before interest, taxes, depreciation and amortization of 330 million euros ($332.3 million). That would represent gains of 17.8% and 16.2% over 2019, which was a record year for CTS Eventim. The company’s tenor improved from a quarter ago, when management was unable to provide a precise forecast for 2022 “owing to uncertainty about the pandemic and the geopolitical situation going forward.”
CTS Eventim shares fell 0.3% to 56.00 euros on Thursday. Year to date, the share price is down 13%.
John Malone’s Liberty Media Corp. said Thursday that its board of directors has authorized management to pursue a split-off of the Atlanta Braves and its associated real estate development project and the creation of a new Liberty Live Group tracking stock, which will house the company’s 31 percent stake in Live Nation Entertainment, among other things.
Tracking stocks are designed to let investors track specific businesses that are part of a larger company. Liberty has used such tracking stocks in the past in the hopes of highlighting the performance and value of parts of its wide-ranging portfolio of assets.
“We plan to split off the Atlanta Braves into an asset-backed stock to better highlight its strong value. Additionally, post-split-off, we plan to recapitalize all of Liberty Media’s remaining common stock into three tracking stock groups,” said Greg Maffei, Liberty Media president and CEO. “These actions will provide greater investor choice and enable targeted investment and capital-raising through more focused currencies, while maintaining an optimal capital structure for Liberty Media and preserving optionality with respect to our subsidiary SiriusXM and our Live Nation stake.”
The split-off will be accomplished “through the redemption of Liberty Media’s existing Liberty Braves common stock in exchange for common stock of a newly formed company to be called Atlanta Braves Holdings Inc.,” the firm said. “Atlanta Braves Holdings would hold all of the businesses, assets and liabilities currently attributed to the Braves Group, including Braves Holdings LLC, which is the direct or indirect owner and operator of the Atlanta Braves Major League Baseball Club, certain assets and liabilities associated with the Atlanta Braves’ stadium and mixed-use development project, The Battery Atlanta, and corporate cash.” In connection with the Split-Off, Liberty Media would redeem each outstanding share of its Series A, Series B and Series C Liberty Braves common stock for one share of the corresponding series of common stock of Atlanta Braves Holdings. As a result of the Split-Off, Liberty Media and Atlanta Braves Holdings would be separate publicly traded companies. It is expected that the intergroup interests in the Braves Group held by Liberty Media’s existing Liberty SiriusXM Group and Formula One Group would be settled and extinguished in connection with the Split-Off in a manner to be determined.”
Following the completion of the split-off, Liberty Media wants to create a new tracking stock group, the Liberty Live Group. It would then have three tracking stocks: the Liberty SiriusXM Group, Formula One Group and the Liberty Live Group. The company said the third one would include “its interest in Live Nation Entertainment Inc., corporate cash, certain public and private assets currently attributed to the Formula One Group, Liberty Media’s 0.50 percent Live Nation exchangeable senior debentures due 2050, margin loan obligations incurred by its wholly owned special purpose subsidiary, which are secured by shares of common stock of Live Nation Entertainment Inc., together with other assets as may be determined from time to time by Liberty Media.”
Liberty Media said it expects to complete the split-off and the tracking stock reclassification in the first half of 2023.
This article was originally published by The Hollywood Reporter.
SM Entertainment, home of such K-pop groups as NCT 127, SuperM and Girls’ Generation, had revenue of 238.1 billion KRW ($165 million at the Sept. 30 exchange rate) from July 1 to Sept. 30 — up 65.4% year-over-year and a 29.1% improvement from the previous quarter, the company announced Monday (Nov. 14).
Operating margin — operating profit as a percentage of revenue — improved to 12.5% in the third quarter of 2022, up from 6.9% in the prior-year period. Net income was 29.2 billion KRW ($20.2 million), up 129.5% year-over-year and 15% higher than the second quarter.
The company’s multi-pronged business, which generates revenue across all facets of its artists’ careers, improved across the board: Recorded music revenues grew 46.6% to 135.1 billion won ($93.6 million). SM Entertainment’s album sales improved from 3.25 million units in the prior-year period to 4.7 million units. It had two standout releases in the quarter: NCT 127’s 2 Baddies peaked at No. 3 on the Billboard 200 albums chart and Aespa’s Girls: The 2nd Mini Album topped Billboard’s Top Album Sales chart.
Concert revenues climbed to 10.9 billion won from virtually nothing a year ago. In the quarter, Revenue from appearances — including television, advertising and events — grew 96.4% to 24.3 billion KRW ($16.8 million). Licensing revenue improved 76.1% to 26.4 billion KRW ($18.3 million).
Revenue at SM Entertainment’s subsidiaries grew 119.5% to 136.9 billion KRW ($94.9 million). These companies include Dream Maker, a Hong Kong-based concert booking agency; SM Culture & Contents, a content production and advertising business; and Keyeast, a Korea-based merchandising and licensing business. According to the release, these subsidiaries benefitted from the reopening of domestic and international touring and increased demand for advertising promotion and business-to-business travel.
Several SM Entertainment artists are on tour in the fourth quarter: NCT 127 has nine dates in Korea, U.S., Thailand and Indonesia; Super Junior has six concerts in Indonesia, Hong Kong and Taiwan; and Ryeowook and NCT Dream have six and five concerts in Japan, respectively.
The company’s fourth-quarter release schedule includes new mini albums by Chen, BoA and Red Velvet and Red Velvet member Seulgi. Red Velvet’s Feel My Rhythm album peaked at No. 20 on the Billboard Global Excl. US chart in April; it also landed on the Indonesia Songs (No. 3), Malaysia Songs (No. 5), Phillippines Songs (No. 15) and Taiwan Songs (No. 16) charts. The group’s The ReVe Festival: Finale EP reached No. 40 on Billboard’s Top Album Sales chart in January 2020.
SM Entertainment’s shares rose 0.5% on Monday to 65,800 KRW. Down just 11.3% in 2022, SM Entertainment’s share price has fared better than Korean music companies HYBE (down 61.2%) and YG Entertainment ( down 26.4%) but lags behind JYP Entertainment (up 12.0%), home of Twice, Stray Kids and iTZY.
SM Entertainment’s shares rose 19% on Sept. 16 after the company announced would prematurely end a contract with a production company owned by the company’s founder and largest shareholder, Lee Soo-man. Its share price, however, has fallen 14% since then.
This past summer, the second-largest U.S. bank, Bank of America, looked at how its customers’ spending on entertainment for the month of May compared with a year ago. What researchers found was surprisingly positive for the touring industry, and there are signs the good news is holding steady, at least for now.
Spending on concert, theater and movie tickets in May was up across all income groups. Moderate- and high-income earners — households bringing in over $50,000 and over $125,000 in annual income, respectively — exhibited the most pent-up demand, with spending levels up more than 40% in May compared with May 2021.
Demand among lower-income consumers — households earning less than $50,000 a year — was up almost as much, rising roughly 38% year to year.
In October, Bank of America surveyed its customers again to ask if they expect to increase spending in the next 12 months in a number of categories including in-home entertainment. With inflation cutting into or erasing most Americans’ pandemic cash buffers, credit card spending is on the rise, and with companies proactively laying off staff in anticipation of a recession, 21% said they plan on reducing what they spend on in-home entertainment either moderately or significantly in the next 12 months. (Sixty percent said they planned no change to their spending.)
Bank of America does not have current data on whether consumers plan to cut back on concerts and other entertainment outside their homes, so the live-music industry will have to hope that consumers will pare down their audio and video streaming service subscriptions so that they can continue seeing their favorite acts at local venues while enjoying their concession fare and buying merchandise.
Goldman Sachs analysts expect they will. Although they predict growth in the global live-music industry to slow somewhat next year, they forecast it will still put up a 4% compound annual growth rate from 2023 to 2030.
In 2022 so far, the industry has seen 5% growth in revenue despite a number of high-profile tour cancellations. Growth this year is on par with the 5% compound annual growth rate the industry experienced from 2007 to 2019.
Looking at the numbers on a more granular level reveals that the global live-music industry grew most sharply between 2007 and 2009 at the onset of the global financial crisis.
During that time, industry revenue rose from $17 billion in 2007 to over $20 billion in 2009, according to research by Goldman Sachs. But between 2010 and 2015, the industry had several years of essentially no growth as the effects of the crisis — unemployment above 10%, nationwide foreclosures — caused deep financial pain.
Even then, the live-music industry grew overall by roughly $3 billion, from $22 billion to $25 billion, during that period of austerity.
Music is often called recession-proof, and while that may hold true, the touring industry feels vulnerable, given the on-again, off-again reality that artists, promoters, venues and their support have had to contend with through the pandemic. For now, industry experts say consumers continue to spend, the industry’s revenue will continue to grow, and even in a worsening economic climate, the shows will go on.
Endeavor Group Holdings, the parent company of UFC, WME and IMG, posted revenue of $1.2 billion in its third quarter, as foreign exchange rate headwinds pushed it to a net loss of $12.5 million.
Despite the difficult macroeconomic environment being felt across the tech and media sectors, Endeavor remains bullish on its prospects, touting its exposure to sports and live music, which are still posting strong results.
“Our business performed well in the quarter despite a turbulent macroeconomic environment,” said Endeavor CEO Ari Emanuel, in a statement. “Given our unique positioning relative to a set of highly resilient secular industry trends across premium sports and entertainment content and live events, we remain confident in our ability to continue delivering on our long-term growth strategy while also being good stewards of capital.”
Emanuel elaborated on those comments on the earnings call, saying that the company simply isn’t seeing demand for live events and experiences slow down.
“Spending habits have shifted, but our company has a presence at every point on the purchase chain,” he said. “During COVID people were buying stuff, and post-COVID, they are more focused on experiences, and we are the benefit of that side of the equation.”
Endeavor also adjusted its full-year 2022 guidance, raising its guidance for adjusted EBITDA to between $1.145 billion to $1.175, and indicating that revenue will be between $5.235 billion and $5.325 billion, on the low end of its prior guidance.
During the earnings conference call, Emanuel reitrated the company’s position as a middleman, able to carve out pieces of the content and live sports business, and in its owned and operated segments, to take the entire slice.
“These leading tech companies go head to head with major streaming and media players, including Disney, Netflix, NBCUniversal, Warner Bros. Discovery and Paramount for the best video, podcasts gaming, and social content,” Emanuel said.
On the sports side, Emanuel said that “we’ve positioned ourselves on the supply side of this industry, working directly with rightsholders, and sportsbooks to deliver everything from official data, streaming feeds to betting and mobile apps.”
“In sports, the demand for premium talent-led content and shows no sign of slowing. In fact, opportunities for talent are expanding into new formats,” he added.
The company is also undergoing significant change in its structure, as it completed the acquisition of OpenBet (and prepares to launch a new sports betting division) and with the sale of 80 percent of Endeavor Content, which impacted revenues at the company’s representation unit.
In representation, revenue was $388.3 million, down 42 percent from the same quarter a year ago. That drop was almost entirely due to the loss of Endeavor Content, which was sold to CJ ENM. When excluding revenue tied to Endeavor Content, the company’s representation business was up 17 percent compared to last year, suggesting continued strength in the sector.
In sports, which is led by UFC and Professional Bull Riders, revenue was $402.3 million, up 39 percent, thanks to increased rights fees, an extra live pay-per-view event, and more live attendance at events.
And in Endeavor’s events, experiences and rights segment, revenues were $440.6 million, down 1 percent compared to last year, due to the timing of some events.
Endeavor says it also paid off some $250 million in debt in Q3, and plans to pay down the same amout in Q4.
This article was originally published by The Hollywood Reporter.
U.S. radio companies aren’t exactly struggling through post-pandemic recoveries, but economic conditions are preventing a stronger comeback.
The earnings releases of four U.S.-based, publicly traded radio companies – iHeartMedia, Cumulus Media, Audacy and Townsquare Media – reveal an industry in flux. While the music streaming and satellite radio businesses enjoy some security from subscription-based models that can withstand economic upheaval, the radio industry depends on advertising dollars that can fluctuate greatly. Ongoing economic problems caused some advertisers to pull back in the third quarter and cloud radio’s future.
According to Cumulus Media CEO Mary Berner, “starting in late Q2, national advertisers reduced marketing to mitigate the headwinds they face from inflationary pressures, persistent supply chain issues, finance, market turmoil and overall recession risks,” she explained during the company’s Oct. 28 earnings call. Collectively, the macroeconomic pressures resulted in a decline in broadcast revenues of roughly 5% in the third quarter, said Berner, and was the “main driver” in the company’s 2% decline in total revenue to $233.5 million.
iHeartMedia CEO Bob Pittman lamented during the company’s Nov. 3 earnings call that the business “doesn’t have the robustness that we expected.” Still, iHeartMedia, the country’s largest radio company, landed at the high end of its revenue guidance with total revenue of $989 million, up 7% from the prior-year period. Revenue of its multi-platform group — which includes broadcast radio — was $659.0 million, up 0.1% year-over-year, with the help of political advertising. “This will be the best non-presidential political year that we’ve had,” said president, COO and CFO Rich Bressler.
Townsquare Media’s third-quarter revenue of $120.6 million came in at the low end of its guidance range — $120 million to $127 million — and its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $30.9 million hit the midpoint of its guidance range of $30 million to $32 million.
Audacy was hurt by advertisers’ pullback in the third quarter. Revenue dropped 3.8% to $317 million, and radio revenues dropped 6%, due to “a substantial deterioration of market conditions,” president and CEO David Field said on the company’s Tuesday (Nov. 8) earnings call. “This has obviously taken a toll on our EBITDA and [debt] leverage and has raised concerns.”
Digital remains radio companies’ growth engines. S&P Global Market Intelligence forecasts radio digital revenues to climb 4.8% next year. iHeartMedia’s digital audio segment, which includes its podcasting business, grew 23.4% year-over-year to $254 million in the third quarter. That accounted for 26% of the company’s consolidated revenue, up from 12% in the first quarter of 2020. Podcasting revenue alone accounted for $91.3 million, up 42.1% year-over-year. At Cumulus, digital revenue growth of 20% far outstripped overall revenue growth of 5% in the third quarter. Within its digital segment, podcasting revenue grew 27% year-over-year. Townsquare Media’s digital revenue increased 17%, accounting for half of total revenues, and helped the company set records for third-quarter net revenue and adjusted EBITDA.
Radio companies have taken measures to weather financial uncertainty that will extend into 2023. Cost-cutting remains popular after companies sharply reduced expenses in 2020. IHeartMedia saved about $250 million from 2020 to 2021 — a reduction of historical annualized cost base of about 10% — and targeted an additional $75 million of annual savings this year, said Bressler. Cumulus is “on track to be more than $75 million below the 2019 baseline” of fixed costs, said Berner. Audacy added to its cash reserves by selling real estate worth $56 million in the third quarter and has plans for additional sales.
S&P Global Market Intelligence expects radio local spot advertising to improve by 3% and national ad revenues to grow 1.5%, both down significantly from 2022 growth levels. Solomon Partners estimates 0.8% audio ad spending growth in 2023 based on major advertising agency forecasts from Dentsu, GroupM, Zenith and Magna.
Whatever happens in 2023, radio companies are better prepared than they were for the pandemic in 2020. That downturn “was probably the swiftest and worst downturn I’ve ever lived through,” said iHeartMedia’s Pittman. “And even in that year we had positive free cash flow.”
Still, economic pressures have weighed heavily on radio companies’ share prices. Barrington lowered its price target for iHeartMedia shares from $18 to $13 in an investor note issued Monday. iHeartMedia shares fell 15.1% over Tuesday and Wednesday, to $6.61. Year to date, iHeartMedia shares are down 68.6%.
Shares of Cumulus Media rose 8.9% following its third-quarter earnings release on Oct. 28 — although the stock gave back those gains and more over the next week and a half. As of Wednesday, Cumulus shares are down a relatively mild 38.7% year-to-date. Investors pushed up the share price 39.9% on April 14 on news of a takeover bid by a consortium led by radio veteran Jeff Warshaw. Cumulus rejected the offer and instead offered shareholders a $50 million stock repurchase program. In June, Cumulus spent $25 million to purchase 1.7 million shares, or 8.7% of outstanding Class A shares.
Audacy shares fell 6.3% to $0.298 on Wednesday following the company’s third-quarter earnings release, bringing the year-to-date decline to 88.3%. Audacy shares were trading at $0.59 per share on Aug. 1 when the company was notified by the New York Stock Exchange that it was not in compliance with a listing standard that requires a minimum closing price of $1 over 30 consecutive trading days.
Madison Square Garden Entertainment’s quarterly revenues surged by 36% to $401.2 million, an increase of nearly $107 million over last year, thanks to a packed calendar for its performance venues that included Harry Styles‘ 15 sold-out concerts at the company’s namesake venue in New York City.
However, those revenues were not enough to offset a total operating loss of $44 million and a 73% decline in adjusted operating income to $2.8 million, as expenses related to the return of live events and increased construction costs for MSG Sphere caused company-wide operating expenses to climb $88.1 million.
On a call with analysts on Wednesday, executives were optimistic saying that the company is moving into the lucrative holiday season– a boom time for MSG performances like Radio City Christmas Spectacular.
“This is expected to be the first full year of events at our venues since fiscal 2019,” James Dolan, executive chairman and chief executive, said. “The best months are coming up for our events business.”
Revenues from the company’s entertainment business quadrupled to $147.1 million in the first fiscal quarter of 2023, which ended Sept. 30. That is compared to $34.2 million last year.
Investors were not swayed by executives comments that the company hosted a record 1 million guests at events over the quarter. Madison Square Garden Entertainment Corp’s stock was down 10.47% to $40.43 by 11 a.m. in New York.
Executives disclosed that the cost of building MSG Sphere, the state-of-the-art venue under construction in Las Vegas, rose again to $2.75 billion from $2 billion on higher costs from inflation and global supply chain issues. The project has rougly 8-9 months of construction remaining.
Dolan briefly commented on the proposed spin-off of the company’s live entertainment and MSG Networks business. If the plan is approved, he said, the venues and networks business would be named Madison Square Garden Entertainment Corp, while the business encompassing MSG Sphere and Tao Group Hospitality, owner of TAO, Hakkasan, LAVO and Beauty & Essex, would be named MSG Sphere Corp.
MSG Entertainment’s board approved the plan in August, and it now faces review by the U.S. Securities and Exchange Commission. Under the plan, the new, publicly traded company would house MSG Entertainment’s venues — including Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre — and MSG Networks, which broadcasts five basketball and hockey teams on MSG Network and MSG+. Also in that new company would be MSG Entertainment’s sports and entertainment booking business, the Radio City Rockettes and the Christmas Spectacular production and arena license agreements with the NBA Knicks and NHL Rangers.
Executives and analysts have said the spin-off could provide investors with more clarity on the company’s many businesses and a clearer choice between the type of investment they want to make. The venues and networks businesses have long-term track records as stable revenue generators, while the Sphere and Tao Group businesses are more speculative but provide an opportunity for higher returns.
Below is a greater breakdown of the company’s earnings for the quarter.
Q1 fiscal 2023 earnings for Entertainment division:
Revenues of $147.1 million, up $112.9 million from last year
Event related revenues rose $80.6 million
Arena license agreements with MSG Sports revenues rose $18.3 million
Suite license fee revenues rose $8.4 million
Direct operating expenses rose $65.5 million to $101.8 million from last year driven by expenses from events and arena license agreements with MSG Sports.
Selling, general, administrative costs rose 11% to $103.4 million on higher employee compensation, benefits.
Operating losses totaled $75.3 million for the quarter, a 34% improvement from the year-ago period when operating losses totales $114.7 million. Adjusted operating losses totaled $44.4 million.
Q1 fiscal 2023 earnings for MSG Networks division:
Revenues fell 13% to $122.5 million from last year on $19-million-decrease in affiliation fee revenues.
Direct operating expenses rose 10% to $75.4 million, driven by $5.9 million increase in rights fees and $1.1 million increase in other programming and production costs.
Selling, general and administrative expenses fell by 63% from a year ago to $17.8 million.
Q1 fiscal 2023 earnings for Tao Group division:
Revenues rose 11% to $132.7 million, including $7.5 from new venue openings.
Direct operating expenses rose 25% to $76.6 million driven by a $7.9-million-increase in employee compensation and related benefits.
Food and bevereage costs rose $4.1 milion on inflation, new venue openings
Wasserman Media Group received an investment from private equity firm Providence Equity Partners that will provide capital for the talent agency’s growth initiatives and buy out two existing Wasserman investors, RedBird Capital Partners and Madrone Capital Partners. Financial terms of the deal were not disclosed.
Wasserman’s founder, chairman and CEO, Casey Wasserman, who continues to own a controlling ownership stake, said in a statement “there is no better partner to help us accelerate and scale this purpose-driven model than Providence. Their long relationship with our executive management group plus their extensive experience and established investment approach across the sports, media and entertainment sectors, and a shared commitment to culture will help accelerate the next phase of Wasserman’s expansion.”
Providence Equity Partners has experience in the music and entertainment space. In 2019, the firm created a $650 million investment platform — Tempo Music Investments — with Warner Music Group to invest in music publishing and recorded music catalogs. With interest rates rising in 2022, however, Providence is shopping its stake in Tempo and wants out of the music catalog market, according to reports.
Wasserman is a natural fit for Providence’s numerous investments in the live entertainment space. Providence has a portfolio of music festivals through its Superstruct Entertainment division, including International Concert Service, organizers of the Wacken Open Air metal festival, Dutch promoter ID&T, and Advanced Music SL, which operates Spanish music festival Sónar. Providence also owns majority stakes of U.S.-based music instrument retailer Sweetwater and U.K.-based Ambassador Theatre Group, which owns and operates 58 venues in the U.S. and Europe. Providence also owns a stake in Sofar Sounds through its investment in The Chernin Group.
Scott Marimow, managing director at Providence, complimented Wasserman’s “client-first approach” and influence in sports and music talent representation. “Wasserman is a natural fit with our firm, and we look forward to partnering with Casey and the entire Wasserman team to help fuel the Company’s next phase of growth and success,” he said in a statement.
“Wasserman has the potential to set the bar for the future of talent representation and brand and marketing consultancy,” said Davis Noell, senior managing director and co-head of North America at Providence, in a statement. “With our strong existing relationship, similar cultures and shared passion for media, sports, and entertainment, we are pleased to have reached this agreement to partner together.”
Wasserman became a powerhouse in music through its acquisitions of Paradigm’s North American live music roster in 2021 and U.K. live music business in April from Platinum Equity. Artists on the Wasserman roster include Coldplay, Kenny Chesney, Billie Eilish, Imagine Dragons, The Lumineers, Dave Matthews Band, Janelle Monáe, Kacey Musgraves, Old Dominion, Phish, Ed Sheeran, Lorde, Sturgill Simpson, Black Pumas, Brandi Carlile, Tyler Childers, Kaytranada, Normani, Run the Jewels, Tash Sultana, Diplo, DJ Snake, Flume, Jack Harlow, ODESZA and Skrillex.