Madison Square Garden Entertainment is moving forward with a spinoff of its traditional live entertainment businesses and plans to launch a new direct-to-consumer streaming offering.
The spinoff, which would include its namesake arena, Radio City Music Hall and the Beacon Theatre and the Chicago Theatre, is expected to be completed by the end of March 2023, subject to final board approval and other conditions. This would separate the group from the company’s other business, which include the MSG Sphere in Las Vegas and the MSG regional sports networks. The company recently announced it is exploring the sale of its majority stake in Tao Group Hospitality.
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Madison Square Garden Entertainment also provided an update on the MSG Sphere, saying that it is expected to open in September and that the company is in “active discussions” with artists for residencies and is targeting four to six headliners a year. The company said it will also share details on its “debut original attraction from a leading Hollywood director” in the coming weeks.
The company is currently in development on a direct-to-consumer streaming offering, MSG+ which is expected to launch over the summer, and will offer annual, monthly and per game subscriptions. MSG Entertainment is in “ongoing discussions with potential distribution, content and advertising partners” for the offering. This joins the existing MSG Go app, which provides live streaming of games to subscribers of cable networks.
For the second quarter, the company reported revenue of $642.2 million, up from $516.5 million a year earlier, and operating income of $74.0 million, up from $35.4 million in the year earlier period. The growth was driven by higher revenue in its live entertainment business, compared to last year which was impacted by interruption from the Omicron variant. Radio City Music Hall Christmas Spectacular saw its revenue increase by $71.1 million this quarter, both due to a greater number of performances and higher paid attendance, and the company saw an increase of $17.1 million at Madison Square Garden Sports Corp., due to higher suite license fee revenues and higher Knicks and Rangers food, beverage and merchandise sales.
The company has also implemented a cost reduction program, which included a reduction in headcount, across entertainment and MSG Networks, and led to a restructuring charge of $13.7 million.
“Our fiscal second quarter results reflect ongoing operating momentum across our portfolio of live experiences. With our proposed spin-off expected to be completed by the end of March, and the anticipated opening of MSG Sphere in Las Vegas in September, we remain confident that the Company is well-positioned to drive long-term shareholder value,” executive chairman and CEO James L. Dolan said in the press release. Dolan did not participate in the earnings call.
Additionally, the company announced Thursday that it submitted an application to the New York City Department of City Planning, seeking a special operating permit for Madison Square Garden in perpetuity, after its ten-year permit expires on July 24, 2023. In the past, city officials had pushed for the arena to move, due to its location over the transit hub of Penn Station.
This comes as the company faces criticism from city officials and lawmakers over its barring of attorneys involved in litigation against the company from entering the areas and its use of facial recognition technology to identify them. The policy has now been lifted against lawyers involved in litigation involving the Tao Group, given its potential sale.
In a separate press release, Madison Square Garden pushed back on any attempts to move the arena, saying it would cost an estimated $8.5 billion in public funding and that “there have been no substantial conversations about moving The Garden since the City granted the last permit ten years ago.” The company also cited an upcoming use.
“We’re the City’s partner on the 2024 Democratic National Convention bid, so the City clearly wants MSG to stay in our location for that event, as well as for the many high-profile events and occasions that bring positive attention, fans, and revenues to New York,” the company said in a statement.
