Updated November 9, 2022 - 7:03 pm
The price tag for the MSG Sphere at The Venetian climbed another $175 million to $2.18 billion, executives with Madison Square Garden Entertainment Corp. reported Wednesday.
The cost of the 17,500-seat entertainment venue being built east of The Venetian Expo — due to open in the second half of 2023 — has gone up because of the ongoing impact of inflation, global supply chain pressures and the overall complexity of the project, MSGE officials said during the company’s fiscal first-quarter earnings call.
The news resulted in shares of MSGE, traded on the New York Stock Exchange, to fall $3.85, 8.5 percent, to $41.31 in early trading Wednesday.
David Byrnes, executive vice president and chief financial officer of MSGE, said the company would handle the added expense with cash on hand and cash flow.
“We’re confident that we have sufficient liquidity from cash on hand and cash flow from operations to complete the construction of The Sphere at The Venetian,” Byrnes said. “We’re now in the midst of the seasonally strongest point of the fiscal year with our ‘Christmas Spectacular’ (at Radio City Music Hall), the best months coming up for our bookings business and the impact of the (NBA New York) Knicks and (NHL New York) Rangers seasons and we’re anticipating that we’ll generate substantial cash flow from our core operations which we expect to continue to utilize for MSG Sphere.”
Byrnes also said the company is strategizing a cost-reduction program that would reduce or defer certain discretionary capital projects and that it has its revolving credit accounts at its disposal.
And, once the Sphere is running next year, Byrnes said the company expects to cash in on sponsorship opportunities.
“The inventory is meaningful when you think about the brand inclusion opportunities for the largest LED screen in the world as well as traditional suites, the atrium, which will be incredible, and gallery spaces,” Byrnes said.
“The exosphere will also be covered with 580,000 square feet of fully programmable LED panels, which will be seen not only by the millions of people who live in and visit Las Vegas and come to our events but really as an iconic landmark that offers tremendous opportunities for content that reaches far beyond Las Vegas. It’ll be a unique and powerful platform for brands,” he said.
Byrnes said it is difficult to conceive the Sphere’s potential until one sees it.
“Some of this is hard to visualize without having seen the Sphere in person and experiencing it, but we anticipate strong demand for all the sponsorship and inventory opportunities,” he said. “Las Vegas is the No. 1 destination for entertainment and, in our opinion, Sphere will be the No. 1 immersive experience there. Companies and brands are going to want to be associated with this experience.”
MSGE is in the midst of spinning off its traditional live entertainment and MSG Networks businesses from a public company that will focus on operations of the Sphere.
The company has submitted Securities and Exchange Commission registration filings to form MSG Sphere Corp.
MSGE, which operates on a July-to-June fiscal year, reported a net loss of $44 million, $1.30 a share, on revenue of $401.2 million for the quarter that ended Sept. 30. A year earlier, the company reported a net loss of $76.7 million, $2.32 a share, on revenue of $294.5 million.
MSGE shares closed down $3.76, 8.33 percent, to $41.40 a share, on volume nearly twice the daily average. After hours, shares fell another $1.80, 4.35 percent, to end at $39.60.
Madison Square Garden Entertainment Corp.
First-quarter revenue and earnings for New York-based Madison Square Garden Entertainment Corp., which is building the MSG Sphere at The Venetian, and is operator of Tao Group Hospitality. (Nasdaq: MSGE).
1Q 2023: $401.2 million
1Q 2022: $294.5 million
1Q 2023: ($44 million)
1Q 2022: ($76.7 million)
(Loss) per share
1Q 2023: ($1.30)
1Q 2022: ($2.32)