Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sphere Entertainment Co (SPHR, Financial) generated over $273 million in total company revenues for the fiscal fourth quarter.
- The Sphere Experience featuring 'Postcard from Earth' generated over $300 million in high-margin revenue since its premiere.
- The company has welcomed millions of guests and hosted numerous high-profile events, including Dead & Co. and the Eagles.
- Sphere Entertainment Co (SPHR) is actively developing new cinematic experiences and expects to launch new attractions soon.
- The Exosphere has gained significant global recognition and extensive press and social media coverage, enhancing brand visibility.
Negative Points
- The Sphere segment reported an AOI loss of $5.5 million for the fourth quarter.
- MSG Networks experienced a 5% decrease in revenues due to a 13% decrease in subscribers.
- The company has been unable to reach an agreement with lenders on refinancing MSG Networks' credit facilities, leading to a workout strategy.
- SG&A expenses for the fourth quarter were high at $102 million, reflecting corporate overhead and expenses related to Sphere Studios.
- Advertising revenue from the Exosphere was lower compared to previous quarters, indicating potential challenges in advertiser demand.
Q & A Highlights
Highlights of Sphere Entertainment Co (SPHR) Q4 2024 Earnings Call
Q: How has the new NBA deal and Comcast tiering of RSNs affected MSG Networks and the broader RSN industry?
A: Jim Dolan, Executive Chairman of the Board & CEO: The NBA deal did not help MSG Networks or the regional sports networks (RSNs). Losing high-profile content is detrimental to our business. David Byrnes, CFO, EVP, & Treasurer: We can't speculate on the workout process but will keep you updated.
Q: What is the current advertiser demand for the Exosphere, and how is your approach evolving?
A: Jim Dolan, Executive Chairman of the Board & CEO: Advertiser demand can improve. We are learning about the marketplace and refining our pitches to be more branded, focusing on conventions and product introductions.
Q: Are you planning to partner with other studios or go it alone for Sphere Experience content?
A: Jim Dolan, Executive Chairman of the Board & CEO: Both options are being considered. Branded content has appeal but is more expensive. The focus is on creating an experiential medium, whether through branded or original content.
Q: Any updates on plans for additional Spheres in new markets?
A: Jim Dolan, Executive Chairman of the Board & CEO: We anticipate having something to announce very soon but can't specify exactly when.
Q: How do the costs of new Sphere experiences compare to "Postcards from Earth"?
A: Jim Dolan, Executive Chairman of the Board & CEO: Future experiences may not cost much more and could be less expensive. We learned a lot from "Postcards from Earth" and expect subsequent efforts to be more efficient and appealing.
Q: What role will Sphere Entertainment play in international locations?
A: Jim Dolan, Executive Chairman of the Board & CEO: We bring expertise in building and operating Spheres. Future Spheres will benefit from our learnings, particularly in efficient utilization and side-by-side event management.
Q: What type of interest are you seeing for non-music events like NHL and UFC?
A: Jim Dolan, Executive Chairman of the Board & CEO: The strategy is to ensure events generate at least as much revenue as our base content, "Postcards from Earth." Corporate interest is high, but some are surprised by the cost due to competition with our base content.
Q: Why did the prior refinancing process for MSG Networks not work, and why the new workout strategy?
A: David Byrnes, CFO, EVP, & Treasurer: We had strong support from larger banks but couldn't get sufficient overall support from the full lender group, leading to the current workout strategy.
Q: What drives visitors to the Sphere, and how will this evolve with new content?
A: Jim Dolan, Executive Chairman of the Board & CEO: It's a combination of the building's appeal and the content. Social media has significantly increased awareness. As we introduce new content and events, we expect continued interest.
Q: Can you provide more visibility into the residency pipeline for 2025?
A: Jim Dolan, Executive Chairman of the Board & CEO: Expect something in the country category in 2025. It takes 3-6 months to prepare for a residency. The Eagles may extend their run, and we plan to fill gaps with other high-profile acts.
Q: How are sponsorship talks progressing, and what role does Crown Properties JV play?
A: Jim Dolan, Executive Chairman of the Board & CEO: Crown Properties started actively working on sponsorships six months ago. They are building pitches and client lists, and we expect them to do well.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
