Sphere Entertainment, owner of the futuristic Sphere venue in Las Vegas, has reported a 1.9% decline in revenue in its latest quarterly report, and issued a warning that its MSG Networks division may declare bankruptcy if it doesn’t manage to refinance its debt.
Nevertheless, the company is forging ahead with the construction of a second Sphere in Abu Dhabi – which is being financed entirely by a local partner – and working on plans to design smaller versions of the Sphere that can be brought to a wide range of markets.
For the three months ended December 31, 2024, Sphere Entertainment reported $308.3 million in revenue, down by $5.9 million from the same period a year earlier.
Its Sphere segment, which operates the Las Vegas Sphere, saw revenue decline by 1% YoY to $169.0 million, which the company said was due to lower average revenue per show and fewer performances of Postcard From Earth and V-U2: An Immersive Concert Film. There were 190 shows in Q4 2024, versus 192 shows in Q4 2023.
Revenue at MSG Networks fell 5% YoY to $139.3 million. While ad revenue at the regional sports TV and radio network rose by $1.8 million, distribution revenues fell by $8.7 million, or 11.5% YoY, due to a decrease in the total number of subscribers.
The segment is also burdened by $804.1 million of debt principal outstanding.
Sphere Entertainment said it had secured a forbearance agreement with some of its lenders last October, under which the lenders agreed not to exercise their remedies for non-payment until the end of the forbearance term. The term has been extended multiple times, and the current deadline is March 25, 2025.
“If MSG Networks is not successful in negotiating a refinancing or work-out of its indebtedness, the company believes it is probable that MSG Networks and/or its subsidiaries would seek bankruptcy protection or the lenders would foreclose on the MSG Networks collateral securing the credit facilities,” Sphere Entertainment said in the earnings report.
The company is also carrying $534 million in debt related to the Sphere in Las Vegas, EVP, CFO and Treasurer Robert Langer said on the company’s earnings call.
For the quarter, the company reported an operating loss of $142.9 million, a narrower loss than the $159.7 it reported in the same quarter a year earlier. Adjusted operating income came in at $32.9 million, versus $51.4 million a year earlier.
The Sphere segment posted an operating loss of $107.9 million, nearly half as large as the $193.9 million loss it posted a year earlier. MSG Networks posted an operating loss of $35.0 million, compared to an operating profit of $34.2 million a year earlier.
On the earnings call, Executive Chairman and CEO Jim Dolan focused on the company’s drive to reduce operating costs and predicted 2025 would be the company’s “best year yet” as a result.
Sphere Entertainment last year gave up on plans to build a Sphere in London, following Mayor Sadiq Khan’s decision to block construction over concerns about its potential “negative impact on residents.” In October, the company confirmed that Abu Dhabi would instead be the location of the second Sphere.
On the earnings call, Dolan said the company is “working on the architecture for a smaller sphere, which we think will be deployable to more markets.” He envisions Spheres in the 5,000-seat range, compared to 17,600 seats at the Las Vegas venue.
Dolan also addressed the problems at MSG Networks, a regional cable and satellite TV and radio network that broadcasts games by New York professional sports teams in the mid-Atlantic US. He attributed the difficulties to declining cable TV subscriptions amid the growing popularity of streaming services.
“But in the end, it comes down to monetization of product and what’s the best way to monetize the product,” he said.
“Clearly, the traditional methods, which really did a great job of monetizing the product, are no longer as viable as they used to be. So we do have to find another way, but I don’t think that path is clear yet.”Music ComeOn