Sphere Quarterly Revenue Slipped, But Venue is ‘Struggling’ to Accommodate Artist Demand
Total Sphere revenue was $127.1 million in the quarter ended Sept. 30, down from $151.2 million and $170.4 million in the prior two quarters.
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Sphere didn’t announce any new acts during its earnings call on Tuesday (Nov. 12), but the Las Vegas venue has enough interest from artists that the venue is “struggling with how to squeeze everybody in through the fall,” said CEO James Dolan.
Having a long line of artists waiting to perform is a good problem to have. Residencies by U2, Phish, Dead & Co. and The Eagles have changed how artists perform live and turned the state-of-the-art Sphere into a must-see for music fans. But running a one-of-a-kind venue presents unique challenges and requires on-the-fly learning.
To keep the venue busy and generate more revenue, last quarter Sphere increased the number of “side by sides,” the company’s term for running multiple events in a single day—a showing of “Postcards from Earth” before a music concert, for example. “A lot of this has to do with logistics, about about setting up the arena for one and taking it down and then setting it up for the other,” said Dolan.
Still, a full year of operational experience didn’t lead to more business last quarter. Total Sphere revenue was $127.1 million in the quarter ended Sept. 30, down from $151.2 million and $170.4 million in the prior two quarters, respectively. Revenue from events such as concerts was $40.9 million, down from $58.4 million in the previous quarter. The Eagles began a residency in September, and the same month Sphere hosted its first live sports event, UFC 306, which become Sphere’s highest grossing single event to date.
The Sphere Experience, which covers showings of Postcard from Earth and V-U2: An Immersive Concert Film, generated $71.5 million, down from $74.5 million and $100.5 million in the previous two quarters.
Exosphere advertising and suite license fees totaled $8.5 million, down from $15.9 million in the previous quarter. Dolan said Sphere was experiencing “structural” issues in securing advertising on the venue’s 580,000 square-foot exterior. “I wish the day we lit it up that we knew exactly how to run it, and exactly how to sell it, and exactly how to program it, etc.,” he admitted. “But that’s just not the case.”
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The company is also learning how to program its original content such as “V-U2,” which captures U2’s residency at the venue. “How we market it, how we just, you know, how we we schedule it, etc, that I’m not sure of,” said Dolan. “But I do think that the product is valuable. And I also think that it’s going to be evergreen. You’re not going to be able to see Bono 20 years from now.”
Sphere’s operating loss of $125.1 million improved to $16.1 million after adjustments to remove nearly $80 million of depreciation, $13.2 million of share-based compensation and other non-operational items such as amortization, restructuring charges and merger-related costs. The venue’s selling, general and administrative expenses totaled $105 million while direct operating expenses were $62.5 million.
Sphere shares were down 8.7% to $40.22 in morning trading.
MSG Networks, Sphere Entertainment Co.’s other division, had revenue of $100.8 million, down 9% from the prior-year quarter. MSG Networks owns regional sports networks and the streaming platform MSG+. The impact of a 13% drop in subscribers was partially offset by an increase in affiliation rates.
In October, Sphere Entertainment announced plans to build the next Sphere venue in Abu Dhabi, the capitol city of the United Arab Emirates. Unlike the $2.3-billion Las Vegas venue, which was entirely funded by Sphere Entertainment Co., the Abu Dhabi venue will be entirely funded by the government’s Department of Culture and Tourism and operate under a franchise model. Dolan said Sphere Entertainment will receive a franchise initiation fee that grants Abu Dhabi the right to use the company’s intellectual property.
