Sphere Entertainment revenue rises as MSG Networks revenue falls

Sphere Entertainment Co. (NYSE: SPHR) reported $274.3 million in revenue and $39.2 million in adjusted operating income for the September quarter, CFO Robert Langer said, as The Wizard of Oz strengthened Las Vegas operations and offset weaker MSG Networks results.

Sphere segment revenue rose 14% year over year to $198.9 million. Adjusted operating income increased to $32.4 million from $17.1 million, Langer said.

How did Las Vegas drive the quarter?

The Sphere Experience hosted 241 performances of The Wizard of Oz during the quarter, compared with a combined 220 performances by three productions in the year-earlier period. Langer said “growth also came from Exosphere advertising, sponsorships, suite license fees and concert residencies.”

Since its debut last year, The Wizard of Oz has sold more than 4.3 million tickets and generated approximately $540 million in ticket sales, Dolan said. An enhanced version has been showing since late September.

Takeaway: Oz performances and broader venue spending made the Las Vegas operation the quarter’s main growth engine.

What new content can fill the slate?

Executive Chairman and CEO Jim Dolan said, “production of The Rocky Horror Picture Show is well underway and is expected to debut by the end of March.” He described the schedule as the fastest a Sphere Experience has gone from concept to market, reflecting production-technology advances and lessons from The Wizard of Oz.

Dolan expects The Wizard of Oz to continue playing alongside Rocky Horror. Because Rocky Horror is more adult-oriented, the company may schedule it later in the day.

The company reaffirmed its expectation that three to four Sphere Experiences would be playing by the end of 2027.

Sphere changed course on From the Edge because its original concept was not strong enough or well executed enough to justify venue slots. The company has completed a substantial portion of production and is exploring how to repurpose the footage into an immersive experience.

Sphere remains in discussions with Hollywood studios about using existing intellectual property. Dolan said the company evaluates content based on the experience it can create rather than primarily on the underlying property’s popularity.

Takeaway: Rocky Horror adds a launch by March, while From the Edge moves toward reuse rather than a regular venue slot.

Where will the next Sphere open?

Construction of the Abu Dhabi Sphere remains on track for completion by the end of 2029. Underground infrastructure is being installed, and the general contractor has begun awarding key contracts.

At National Harbor, a local county government passed a public incentive package last week, while another county vote is expected no later than February. Sphere is working through remaining open items before returning to financing for the balance of the project.

Dolan said an expansion announcement is likely in the current quarter rather than the next. His prepared remarks said the next Sphere project is anticipated to be in the U.S.

Executive Vice President Digger Granville-Smith said interest rates had not slowed or paused expansion discussions. Dolan said site reviews consider market size, the governmental environment, construction time and cost.

Takeaway: Abu Dhabi and National Harbor remain active, while a next-project announcement is likely this quarter.

Why did MSG Networks weigh on results?

MSG Networks revenue fell to $75.4 million from $88.4 million a year earlier, while adjusted operating income declined to $6.8 million from $19.3 million. Langer attributed the year-over-year results primarily to an approximately 15.5% decrease in subscribers.

The company also recorded a non-cash goodwill impairment charge after reassessing MSG Networks’ fair market value during its annual impairment test. Langer cited ongoing challenges facing the business but did not state the charge amount on the call.

As of September 30, the Sphere business had approximately $501 million in unrestricted cash and cash equivalents, $259 million in convertible debt and a $275 million term loan related to the Las Vegas venue. MSG Networks had approximately $80 million in net debt, including $106 million outstanding on a term loan recourse only to MSG Networks.

Takeaway: MSG Networks’ subscriber decline and impairment offset stronger venue results, while Sphere balances $501 million of unrestricted cash with $259 million of convertible debt and a $275 million term loan.

What can Sphere expect in Las Vegas?

Dolan said Sphere’s performance remains sensitive to the Las Vegas market, which he described as having a weaker-than-expected summer. Company models point to a strong fourth quarter and first quarter, although forecasts and scheduling remain under refinement.

Asked whether the Las Vegas business could grow in calendar 2027, Dolan said he expects growth as the company improves utilization and ticket sales. Chief Operating Officer Jen Koester also cited a strong sponsorship pipeline and substantial growth opportunity for 2027 and beyond.

Takeaway: Las Vegas enters 2027 with more content, a stronger sponsorship pipeline and expectations for higher utilization and ticket sales.

What businesses sit inside Sphere Entertainment?

Sphere Entertainment formed in 2023 through the separation of businesses from Madison Square Garden Entertainment Corp. The live entertainment and media company operates the Las Vegas Sphere, a large-scale venue for concerts, films and other events featuring immersive visuals and sound.

Sphere Studios develops content and technology for the venue and other applications. MSG Networks operates regional sports and entertainment networks serving the New York metropolitan area, with live professional sports coverage, news, original content and related streaming services.

Takeaway: The company’s results now combine a growing Las Vegas venue with a shrinking regional network business and a multi-market expansion program.