State Champ Radio Sphere Entertainment
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%.
The Billboard Global Music Index — a diverse collection of 20 publicly traded music companies — finished 2023 up 31.3% as Spotify’s share price alone climbed 138% thanks to cost-cutting and focus on margins. Spotify is the single-largest component of the float-adjusted index and has one of the largest market capitalizations of any music company.
The music index was outperformed by the tech-heavy Nasdaq composite, which gained 43.4% with the help of triple-digit gains from chipmaker Nvidia Corp (+239%) and Meta Platforms (+194%). But the Billboard Global Music Index exceeded some other major indexes: the S&P 500 gained 24.2%, South Korea’s KOSPI composite index grew 18.7% and the FTSE 100 improved 3.8%.
Other than Spotify, a handful of major companies had double-digit gains in 2023 that drove the index’s improvement. Universal Music Group finished the year up 14.7%. Concert promoter Live Nation rode a string of record-setting quarters to a 34.2% gain. HYBE, the increasingly diversified K-pop company, rose 34.6%. SM Entertainment, in which HYBE acquired a minority stake in March, gained 20.1%.
A handful of smaller companies also finished the year with big gains. LiveOne gained 117.4%. Reservoir Media improved 19.4%. Chinese music streamer Cloud Music improved 15.8%.
The biggest loser on the Billboard Global Music Index in 2023 was radio broadcaster iHeartMedia, which fell 56.4%. Abu Dhabi-based music streamer Anghami finished 2023 down 34.8%. After a series of large fluctuations in recent months, Anghami ended the year 69% below its high mark for 2023. Hipgnosis Songs Fund, currently undergoing a strategic review after shareholders voted against continuation in October, finished the year down 16.6%.
Sphere Entertainment Co., which split from MSG Entertainment’s live entertainment business back in April, ended 2023 down 24.4%. Most of that decline came before the company opened its flagship venue, Sphere, in Las Vegas on September 29, however. Since U2 opened the venue to widespread acclaim and earned Sphere global media coverage, the stock dropped only 8.5%.
For the week, the index rose 1.1% to 1,534.07. Fourteen of the index’s 20 stocks posted gains this week, four dropped in price and one was unchanged.
LiveOne shares rose 15.7% to $1.40 after the company announced on Friday (Dec. 29) it added 63,000 new paid memberships in December and surpassed 3.5 million total memberships, an increase of 29% year over year. iHeartMedia shares climbed 14.6% to $2.67. Anghami continued its ping-pong trajectory by finishing the week up 16.9%.
Sphere Entertainment provided the first inside glimpse at the finances of James Dolan‘s $2 billion Sphere project in Las Vegas in a new Securities and Exchange Commission filing on Tuesday (Dec. 5).
Spun off from Madison Square Garden Entertainment in April and now trading on the NYSE as SPHR, the company is expected to report positive adjusted income this quarter thanks to the opening of the venue and a successful run of shows including U2:UV’s Achtung Baby Live At Sphere.
According to Billboard Boxscore, U2‘s 17-show run beginning in September at Sphere generated nearly $110 million in ticket sales. The SEC filing notes that those shows generated a total of $30.7 million in revenue for Sphere Entertainment through Nov. 30. Meanwhile, Sphere Entertainment’s own content offering, Darren Aronofsky’s Postcard from Earth, has generated approximately $44.5 million in total revenue from ticket sales from 111 showings.
U2 played its first show at Sphere on Sept. 29, 2023, kicking off a multi-month run at the venue. Due to the strong demand, 15 more shows have been added in January, February and March 2024, bringing the band’s planned number of performances to 40.
Also in the SEC filing, the company announced plans to raise money through the sale of $225 million in convertible senior notes that are due to mature in 2028, as well as the option for purchasers to buy an additional $33.75 million in notes.
Sphere Entertainment plans to use a portion of the proceeds from the notes sale to fund capped call transactions designed to reduce the potential dilution of its common stock from the conversion of debt into equity. The remainder of the net proceeds will be used for general corporate purposes, including capital for Sphere-related growth initiatives, according to a release announcing the offering. The initial conversion rate, interest rate and certain other terms of the notes will be negotiated between Sphere Entertainment and the initial purchasers.
Sphere Entertainment began the quarter (starting Sept. 30) with $433.5 million in cash on hand, with $123 million coming from advance ticket sales. The principal balance of the company’s total debt at the beginning of the quarter was approximately $1.2 billion, including $932.3 million of debt under the MSGN Credit Facilities. Under the terms of the MSGN deal, $103.1 million in required quarterly amortization payments are due between Sept. 30, 2023, and Oct. 11, 2024.
Shares of Sphere Entertainment dropped nearly 20% in trading after the company announced the debt offering, but bounced back slightly and were down 15.5% to $28.41 at the market’s close.
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.
Sphere Entertainment Co. shares rose 11.1% to $41.99 on Monday (Oct. 2) — and reached a high of $43.59, up 17.3% from Friday’s closing price — after the world got its first glimpses of the revolutionary concert venue over the weekend. The $2.3 billion venue opened on Friday (Sept. 29) with the first of 25 […]
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