Updated May 8, 2021 - 1:31 pm
The company building the MSG Sphere at The Venetian on Friday said the cost of the 17,000-seat performance venue is likely to climb by 10 percent to $1.826 billion.
The possibility of a higher price tag was no surprise, and company officials had noted the possibility in recent calls.
Madison Square Garden Entertainment Corp. said in a quarterly earnings release that capacity restrictions have continued to ease for the company’s entertainment venues in New York.
Following the company’s third quarter, which ended March 31, New York authorities allowed Madison Square Garden, home of the New York Knicks National Basketball Association team and the National Hockey League New York Rangers to operate at 10 percent capacity — The Garden’s first events with guests since March 2020. Following the end of the quarter, New York state officials announced that indoor venues with capacities of over 1,500, including The Garden and the company’s other New York performance venues, will be permitted to operate at up to 30 percent capacity beginning May 19.
Restaurant capacities also are affecting MSG properties.
The company said that while indoor dining restrictions also eased during the quarter, many of Tao Group Hospitality’s venues continued to operate with significant capacity restrictions and others remained closed throughout the quarter. Since the close of the fiscal 2021 third quarter, Las Vegas restaurant capacity increased to 80 percent on May 1 and it was announced that New York City restaurant capacity was scheduled to increase to 75 percent beginning on Friday, before going to 100 percent on May 19, subject to certain social distancing requirements.
For the fiscal 2021 third quarter, the company reported revenue of $43.1 million, a decrease of $138.8 million as compared with the same period last year. In addition, the company reported an operating loss of $108.6 million and an adjusted operating loss of $69.4 million for the fiscal 2021 third quarter, as compared with an operating loss of $155.6 million and an adjusted operating loss of $18.1 million in the year prior.
“It’s clear that people are eager for opportunities to gather together, and as capacity limits for our venues continue to increase, our company, with its unique collection of live entertainment assets, will be well-positioned to meet this pent-up demand,” said James Dolan, executive chairman and CEO of MSG Entertainment.
“Looking ahead, we also believe the MSG Networks transaction would further strengthen our portfolio and help set the stage for long-term value creation for all shareholders,” he said.
The company said it continues to make significant progress on the construction of MSG Sphere. Last February the company announced that the venue’s cost estimate, inclusive of core technology and soft costs, was around $1.66 billion.
Numerous factors — including the ongoing effects of the global pandemic and its impact on the global supply chain — have affected and will continue to affect that estimate. Associated costs of materials and labor, as well as changes to project design, scope and schedule have also added to the cost, the company said.
As a result, the company estimates the cost of the venue has increased by about 10 percent. Relative to the cost estimate, the company’s actual construction costs for MSG Sphere through March 31 were about $712 million, not counting $65 million paid by Las Vegas Sands Corp. in the 2020 fiscal year and include $62 million of expenses that were unpaid as of March 31.
The company remains committed to bringing MSG Sphere to Las Vegas, which it expects to open in 2023.
The Review-Journal is owned by the family of Sheldon Adelson, the late CEO and chairman of Las Vegas Sands Corp. The Sphere is a project by Madison Square Garden and Las Vegas Sands Corp.