Updated August 19, 2022 - 5:30 pm
The company building the 20,000-seat MSG Sphere at The Venetian is considering spinning off its live entertainment divisions to focus on its Sphere and Tao Hospitality Group operations.
Madison Square Garden Entertainment Corp. first announced plans to explore the spinoff on Thursday, later elaborating on the details during its fourth-quarter earnings call on Friday. There’s no timeline for when a spinoff would be completed.
During its call with industry analysts, company executives said the Sphere project is less than a year from completion and the construction cost estimate was upped from $1.87 billion to $2 billion.
“With respect to MSG Sphere, our project to-date construction costs through June 30 were approximately $1.53 billion, which includes approximately $190 million of accrued costs that were not paid as of June 30 and is net of the $65 million received from The Venetian,” David Byrnes, executive vice president and chief financial officer at MSG Entertainment, said in the call.
The money received from The Venetian occurred when Las Vegas Sands Corp. owned the Strip resort.
Executives cited inflation and higher costs associated with supply-chain issues for the higher estimate.
The company said its new publicly-traded spinoff company would oversee MSGE’s entertainment and sports-booking business, which includes concerts, family shows and special events; the Radio City Rockettes and Christmas Spectacular presentations; arena licensing with the NBA New York Knicks and NHL New York Rangers; and MSG Networks, the broadcast arm handling NBA and NHL games and other sports content.
MSG Entertainment will oversee MSG Sphere, the first of which is being built in Las Vegas and is expected to grow into a franchise; majority interest in Tao Hospitality Group, which includes 15 Las Vegas venues including the Tao, Hakkasan, Marquee and Lavo-branded locations; a one-third interest in the new company; and most of the company’s cash on hand.
Byrne said the process of hiring Sphere staff would occur in the months ahead.
“As we’ve noted in the past several quarters, we have seen increased operating costs related to the Sphere, and that primarily relates to content development, including headcount as we’re building out that team,” he said.
“And then as we look to the year ahead, we do expect headcount related to the Sphere to increase, both for continued content development and to make sure that the venue’s appropriately staffed ahead of the opening, which again, we’re getting into striking distance. That will include staffing up areas like venue management, security, food and beverage teams, merchandise teams, everything you think about just being ready to have the venue open in the second half of ‘23.”
Byrne didn’t confirm other partnerships in the works and what entertainers it has approached for performances. There were unconfirmed reports that Irish rock band U2 would have a residency, making them the first performers at the venue.
“Now that we’re within that time frame, we should soon be in a position to start sharing positive news on sponsorships, corporate partnerships, beginning to announce the first artist to play the Sphere and so on,” he said. “And while we don’t have anything more to say today, we look forward to sharing more in the months ahead and as we get closer to the opening.”
One partnership that has been confirmed is with the operators of the Formula One Las Vegas Grand Prix auto race in November 2023. The course will bring cars near the building, and video from the race is expected to be projected on the building’s exterior screen.
The creative content that is being produced in MSG’s Burbank, California studio — referred to by the company as “Big Dome” — will drive the year-around shows at the building.
“As you know, we’re hard at work with creators, artists, technologists and visionaries to bring the future of entertainment and immersive experiences to life at Sphere,” Byrne said. “The studio features an ultra-high-resolution LED interior screen. It’s a quarter scale of the full resolution MSG Sphere display plane that’s going to be in Vegas.”
The MSG board’s announcement about the proposed company spinoff was made after the market closed Thursday. Stock shares, traded on the New York Stock Exchange, climbed after the market opened Friday. The stock closed Friday up $2.21, 3.5 percent, to $64.91 a share on volume 5½ times the daily average.
After hours, stocks rose 29 cents, 0.5 percent, to end at $65.20 a share.
The Review-Journal is owned by the Adelson family, including Dr. Miriam Adelson, majority shareholder of Las Vegas Sands Corp., and Las Vegas Sands President and COO Patrick Dumont.