Sphere Entertainment is growing revenues rapidly

A Member of Pat McKeough’s Inner Circle recently asked for his advice on Sphere entertainment company that’s best-known for the Sphere live entertainment venue in Las Vegas.

Pat likes the strong revenue growth and ambitious plans for a solid growth trajectory. The company also benefits from diverse revenue streams.

Sphere Entertainment Co. (Symbol SPHR on New York; www.sphereentertainmentco.com), is one of the leading live entertainment and media companies in the U.S.

The company was spun off from Madison Square Garden Entertainment Corp. (symbol MSGE) in April 2023. MSGE shareholders got one share in the new company for every share held in the parent.

The spinoff’s highest-profile asset is the Sphere live entertainment venue in Las Vegas. The $2.3 billion, technologically advanced arena was officially opened by the Irish rock band U2 on September 29, 2023.

The Sphere is 111 meters high and 157 meters wide, and it aims to host immersive concerts and residencies of some of the world’s greatest entertainers. It may also work as a world-famous advertising space—the ultimate electronic billboard thanks to its unique size, design and location.

In early September 2023, Sphere launched its first-ever brand campaign on the “Exosphere” (the outside of the Sphere) with YouTube’s NFL Sunday Ticket, which ran into some technical problems. The venue has since featured a number of additional campaigns with prominent global brands.

The company recently reached an agreement with Abu Dhabi, United Arab Emirates to open a second Sphere.

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Sphere and DCT Abu Dhabi, the organization aiming to drive the growth of Abu Dhabi’s culture and tourism sectors and promoting the city as a global destination, have agreed to collaborate on building the next Sphere venue in Abu Dhabi, which welcomed more than 24 million visitors in 2023. Under the terms of the partnership, which is subject to finalization of definitive agreements, DCT Abu Dhabi will pay Sphere Entertainment a franchise initiation fee for the right to build the venue, utilizing Sphere’s proprietary designs, technology, and intellectual property. Construction will be funded by DCT Abu Dhabi, with Sphere’s team of experts providing services related to development, construction, and pre-opening of the venue.

Following the venue’s opening, Sphere plans to maintain ongoing arrangements with DCT Abu Dhabi that are expected to include annual fees for creative and artistic content licensed by Sphere Entertainment, such as Sphere Experiences; use of Sphere’s brand, patents, proprietary technology, and intellectual property; and operational services related to venue operations and technology, as well as commercial and strategic advisory support.

Inner Circle: Growth for Sphere Entertainment is coming from multiple areas

In addition to the Sphere, the company’s current assets include MSG Networks, which operates two regional sports and entertainment networks, MSG Network and MSG Sportsnet; it also operates a direct-to-consumer and authenticated streaming product, MSG+, delivering a wide range of live sports content and other programming.

In the three months ended June 30, 2024, Sphere Entertainment’s total revenue was $273.4 million, up 111.8% from $129.1 million a year earlier. The company reported total adjusted operating income of $25.7 million, compared to a loss of $59.8 million.

The gains came from MSG Networks’ coverage of sporting events while live concert performances and other events at the Sphere continue to add up with $74.5 million generated from 208 performance in the latest quarter.

Recommendation in Pat’s Inner Circle: Sphere Entertainment Co. is okay to hold.

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Scott Clayton

Scott is an associate editor at TSI Network. He is the lead reporter and analyst for Dividend Advisor, Power Growth Investor and Canadian Wealth Advisor and a member of the Investment Planning Committee. Scott began his investment and financial career working with Pat McKeough at The Investment Reporter in the 1980s. Subsequently, he worked at the Financial Post Corporation Service for 10 years. He joined TSI Network in 1998. He is a Bachelor of Economics graduate of York University, and he also has an M.B.A. from the Schulich School of Business.

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