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 cram everybody into the fall,” he said. the CEO James Dolan.
Having a long line of artists waiting to play is a good problem to have. The Residences of U2, Phish, Dead & Co. and The Eagles changed the way artists perform live and turned the state-of-the-art Sphere into a must-see for music lovers. However, operating a unique concert venue presents unique challenges and requires on-site training.
To keep the venue busy and generate more revenue, last quarter Sphere increased the number of “side by sides,” the company's term for holding multiple events in one day—eg. a screening of “Postcards from Earth” before a music concert. “A lot of it has to do with logistics, about setting up the arena for one and taking it down and then setting it up for the other,” Dolan said.
However, a full year of operating experience did not lead to more business in the last quarter. Sphere's total revenue was $127.1 million in the quarter ended Sept. 30, up from $151.2 million and $170.4 million in the two previous quarters, respectively. Revenue from events such as concerts was $40.9 million, up from $58.4 million in the previous quarter. The Eagles began a residency in September, and that same month the Sphere hosted its first live sporting event, UFC 306, which became the Sphere's highest-grossing single event to date.
The Sphere Experience, which covers screenings of Postcard from Earth and V-U2: An Immersive Concert Filmit brought in $71.5 million, up from $74.5 million and $100.5 million in the previous two quarters.
Exosphere advertising and suite license fees totaled $8.5 million, up from $15.9 million in the prior quarter. Dolan said Sphere was having “structural” problems securing advertising in the venue's 580,000 square feet of outdoor space. “I wish the day we got it on we knew exactly how to run it, exactly how to sell it and exactly how to program it, etc.,” he admitted. “But that's not exactly the case.”
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 program it, etc, I'm not sure,” Dolan said. “But I think the product is valuable. And I also think they will be evergreen. You won't 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 write off nearly $80 million in depreciation, $13.2 million in stock-based compensation and other non-operating items such as depreciation, restructuring charges and costs related to mergers. Site selling, general and administrative expenses were $105 million, while direct operating expenses were $62.5 million.
Shares of Sphere fell 8.7% to $40.22 in morning trading.
MSG Networks, the other division of Sphere Entertainment Co., had revenue of $100.8 million, down 9% from the year-ago quarter. MSG Networks owns local sports networks and the MSG+ streaming platform. The impact of a 13% decline in subscribers was partially offset by an increase in partnership rates.
In October, Sphere Entertainment announced plans to build the next Sphere venue in Abu Dhabi, the capital of the United Arab Emirates. Unlike the $2.3 billion Las Vegas concert venue, which was funded entirely by Sphere Entertainment Co., the Abu Dhabi venue will be funded entirely by the government's Ministry of Culture and Tourism and will operate under a franchise model. Dolan said Sphere Entertainment will receive a franchise initiation fee that gives Abu Dhabi the right to use the company's intellectual property.
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