Las Vegas Sphere: 478 mio. USD loss in the first year
Sphere Entertainment Co., which consists of the Las Vegas Sphere as well as MSG Networks, which operates two regional sports and entertainment channels and has its own streaming product, has released its financial results for the year from July 1, 2023, to June 30, 2024. For the first time, the company has achieved a total revenue of over 1 bn. USD (approx. 900 mio. EUR), but the operating result shows a negative figure of -341.2 mio. USD (about 306.3 mio. EUR).
The Las Vegas Sphere, which cost over 2 bn. USD (approx. 1.8 bn. EUR), opened in September 2023 with a concert by U2. By July 4th, the National Day, the "exosphere," the outer facade of the venue made up of over 1 mio. LED pucks, was illuminated for the first time. The newly released annual report provides an insight into the first year of this new landmark in Las Vegas.
The company describes The Sphere as "a next-generation entertainment medium that creates multisensory experiences on an unprecedented scale using state-of-the-art technologies. The venue can accommodate up to 20,000 guests and hosts a variety of events throughout the year, including 'The Sphere Experience' with its own immersive productions, concerts, and guest appearances by renowned artists, as well as major sports and corporate events." In addition to its own productions, which could run multiple times a day, The Sphere hosted 74 concerts in the fiscal year (30 of them by U2) and was part of the Formula 1 Grand Prix in Vegas and the NHL Draft 2024.
For 2023/24, the total revenue amounts to 1.03 bn. USD (approx. 930 mio. EUR), of which 497 mio. USD (approx. 450 mio. EUR), or about 48 %, is attributed to The Sphere. The operating business reported a loss of 341.2 mio. USD (approx. 306.3 mio. EUR), with 480.4 mio. USD (approx. 432 mio. EUR) of that attributed to The Sphere. MSG Networks reported a positive operating result of 139.1 mio. USD (approx. 125 mio. EUR). Depreciation and amortization amounted to 256.5 mio. USD (approx. 230 mio. EUR), almost entirely (at 248.2 mio. USD, approx. 223 mio. EUR) attributable to The Sphere.
Exosphere lighting brings in revenue of over 60 mio. USD (approx. 54 mio. EUR)
The revenue from The Sphere is composed as follows: approx. 270 mio. USD (approx. 243 mio. EUR) comes from The Sphere Experience's own productions. Since the premiere on October 6, 2023, 657 performances of "Postcard From Earth" have taken place, generating average revenue of about 408 USD (approx. 368 EUR) per show. Event revenue totals just over 150 mio. USD (approx. 135 mio. EUR), primarily from concert revenues and to a lesser extent from a large corporate event and two sports events (Hewlett-Packard, Formula 1, NHL Draft). Income from sponsorship, digital signage, Exosphere lighting, and suite rentals amounted to approx. 69 mio. USD (approx. 62 mio. EUR). The largest portion of this comes from the lighting of the outer facade.
On the expense side, direct "operating expenses" amounted to 205 mio. USD (approx. 185 mio. EUR), with sales, administrative, and general costs totaling 393 mio. USD (approx. 354 mio. EUR). Additionally, there were impairments and other losses of 121 mio. USD (approx. 109 mio. EUR) and the aforementioned depreciation of almost 250 mio. USD (approx. 230 mio. EUR). The "Postcard From Earth" performances are estimated to have cost about 125 USD (approx. 113 EUR) per show.
Risks and Future Outlook
Aside from the reported loss, the Sphere's operators view high debt and a significant proportion of external capital as risk factors. Given the venue's pioneering role and the scale at which it operates, there are additional essential external risk factors. "Although The Sphere has been well received by guests, artists, organizers, advertisers, and marketing partners, and we anticipate that The Sphere will generate significant revenue and a positive adjusted operating result on an annual basis over time, there is no guarantee that guests, artists, organizers, advertisers, and marketing partners will continue to embrace this new platform."
The next 12 months are therefore crucial for the venue. Will there be "saturation effects"? Can the venue continuously create new, unique, and economically viable in-house productions? Can concert revenue be significantly increased, and is The Sphere still attractive to artists if, as has been the case so far, the majority of the revenue is paid out to them?
The realization of a Sphere in Europe is currently not being pursued further. Although expanding the "Sphere network" remains a goal for the company, with various options such as joint ventures, equity partners, a managed-venue model, and non-recourse financing being explored, the most promising expansion project is on hold. The 2019 building permit application for a purchased site in London was rejected in November 2023. "In light of this decision, the company no longer plans to allocate resources for the development of a Sphere in London." The current only alternative seems to be Abu Dhabi. (stadiaworld, 22.08.2024)
