Sphere Earnings, the Good and the Bad

_{The Las Vegas Sphere continues to dazzle, but its parent company experiences financial challenges. (Image: Sipa US / Alamy)}

While the Sphere at the Venetian Resort continues to wow and amaze, Sphere Entertainment, the public company that owns the Las Vegas venue, had a rough quarter.

Fear not, fans of Sphere itself—Sphere Entertainment consists of two distinct business segments. One is the eponymous venue, connected to the Venetian by a walking bridge and heavily marketed within the resort. The other is MSG Networks, known to New York Rangers and Knicks fans as the broadcaster of their favorite winter teams. And it is problems at the latter that are causing issues for the parent company.

Altogether, Sphere Entertainment saw revenue drop 2% year over year to $302 million. Sphere (the venue) saw revenue grow 1% to $169 million, partly due to booking six fewer concerts than in the fourth quarter of 2023. 

Also weighing down growth was lower revenue from “Postcard from Earth” and “V-U2: An Immersive Concert Film.” That decline was somewhat expected, as the shows are no longer new.

Company CEO James Dolan says there’s no room for fear: “As we enter a new fiscal year, we see significant opportunities to drive our Sphere business forward in Las Vegas and beyond. We believe we are on a path toward realizing our vision for this next-generation medium and generating long-term shareholder value.”

As for the Venetian, the business is separate from Sphere, although it benefits from traffic boosts during big events due to its direct connection via the walking bridge. The resort also markets itself as the closest venue to Sphere.

Network Revenues Trending Down, Debt Issues Trending Up

While growth at Sphere has slowed, the real issue for the parent company lies with MSG Networks. The segment has $804 million in outstanding debt, which it has managed to roll over—essentially deferring interest payments—since last October as it seeks to renegotiate with lenders. 

_{Sphere Entertainment (SPHR) stock took a sharp dive amid earnings concerns. (Image: via StockCharts.com)}

Why can’t it pay the money back? While I’d like to blame it on the lack of Islanders and Devils fans watching MSG, it’s actually part of a nationwide issue with regional sports networks (RSNs), which are caught in the cord-cutting trend. Total subscribers declined 11.7% year over year.

MSG’s debt comes due again on March 26, and if the company cannot agree to a restructuring, it may land in bankruptcy.

The Good News for Sphere

The silver lining? Due to the way the company is structured, the RSN debt burden falls solely on MSG Networks. It does not impact Sphere, which operates as a separate entity under the same corporate umbrella. Cord-cutting will not affect future Sphere residencies or the foot traffic at the Venetian—unless, of course, someone plans to pay for a show and a night at the hotel by cashing in shares of Sphere Entertainment stock. 

Those visitors may feel a little queasy—Sphere Entertainment’s stock has taken a hit in response to the news and has been on a rollercoaster ride lately.