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What changed in Sphere Entertainment Co.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Sphere Entertainment Co.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+712 added−1020 removedSource: 10-K (2023-06-30) vs 10-K (2022-08-19)

Top changes in Sphere Entertainment Co.'s 2023 10-K

712 paragraphs added · 1020 removed · 443 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

85 edited+86 added−196 removed29 unchanged
Biggest changeIn addition, to the extent any of our websites seek to collect information from children under 13 years of age, they may be subject to the Children’s Online Privacy Protection Act (“COPPA”), which places restrictions on websites’ and online services’ collection and use of personally identifiable information online from children under age 13 without parental consent. 15 Competition Competition in Our Entertainment Business Our Entertainment business competes, in certain respects and to varying degrees, with other live performances, sporting events, movies, home entertainment (including the Internet and online services, social media and social networking platforms, television, video and gaming devices), and the large number of other entertainment and public attraction options available to members of the public.
Biggest changeIn addition, to the extent any of our websites seek to collect information from children under 13 years of age, they may be subject to the Children’s Online Privacy Protection Act, which places restrictions on websites’ and online services’ collection and use of personally identifiable information online from children under age 13 without parental consent.
The increasing amount of sports programming available on a national basis, including pursuant to national media rights arrangements (e.g., NBA on ABC, ESPN and TNT, and NHL on ABC, ESPN, ESPN+ and TNT), as part of league-controlled sports programming networks (e.g., NBA TV and NHL Network), in out-of-market packages (e.g., NBA League Pass and NHL Center Ice), league and other websites, mobile applications and streaming outlets, may have an adverse impact on our competitive position as our programming networks compete for distribution and for viewers.
The increasing amount of sports programming available on a national basis, including pursuant to national media rights arrangements (e.g., NBA on ABC, ESPN and TNT, and NHL on ABC, ESPN, ESPN+ and TNT), as part of league-controlled sports programming networks (e.g., NBA TV and NHL Network), in out-of-market packages (e.g., NBA League Pass and NHL Center Ice), league and 10 other websites, mobile applications and streaming outlets, may have an adverse impact on our competitive position as our programming networks compete for distribution and for viewers.
MSG Networks serves the New York Designated Market Area, as well as other portions of New York, New Jersey, Connecticut and Pennsylvania and features a wide range of sports content, including exclusive live local games and other programming of the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”) and the New York Rangers (the “Rangers”), New York Islanders (the “Islanders”), New Jersey Devils (the “Devils”) and Buffalo Sabres (the “Sabres”) of the National Hockey League (the “NHL”), as well as significant coverage of the New York Giants (the “Giants”) and Buffalo Bills (the “Bills”) of the National Football League (the “NFL”).
MSG Networks serves the New York Designated Market Area, as well as other portions of New York, New Jersey, Connecticut and Pennsylvania and features a wide range of sports content, including exclusive live local games and other programming of the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”) and the New York Rangers (the “Rangers”), New York Islanders (the “Islanders”), New Jersey Devils (the 1 “Devils”) and Buffalo Sabres (the “Sabres”) of the National Hockey League (the “NHL”), as well as significant coverage of the New York Giants (the “Giants”) and the Buffalo Bills (the “Bills”) of the National Football League (the “NFL”).
Once a programming network of ours is carried by a Distributor, that network competes for viewers not only with the other programming networks available through the Distributor, but also with pay-per-view programming and video on demand offerings, as well as Internet and online streaming and on demand services, mobile applications, social media and social networking platforms, radio, print media, motion picture theaters, home video, and other sources of information, sporting events and entertainment.
Once a programming network of ours is carried by a Distributor, that network competes for viewers not only with the other programming networks available through the Distributor, but also with pay-per-view programming and video on demand offerings, as well as Internet and online streaming and DTC and on demand services, mobile applications, social media and social networking platforms, radio, print media, motion picture theaters, home video, and other sources of information, sporting events and entertainment.
In addition to existing direct-to-consumer streaming services such as Amazon Prime, Hulu, Netflix, Apple TV+, Disney+, HBO Max and Peacock, additional services have launched and more will likely launch in the near term, which may include sports-focused services that may compete with our networks for viewers and advertising revenue.
In addition to existing direct-to-consumer streaming services such as Amazon Prime, Hulu, Netflix, Apple TV+, Disney+, Max and Peacock, additional services have launched and more will likely launch in the near term, which may include sports-focused services that may compete with our networks for viewers and advertising revenue.
The variety of laws and regulations governing data privacy and protection, and the use of the internet as a commercial medium are rapidly evolving, extensive and complex, and may include provisions and obligations that are inconsistent with one another or uncertain in their scope or application. The data protection landscape is rapidly evolving in the United States.
The variety of laws and regulations governing data privacy 7 and protection, and the use of the internet as a commercial medium are rapidly evolving, extensive and complex, and may include provisions and obligations that are inconsistent with one another or uncertain in their scope or application. The data protection landscape is rapidly evolving in the United States.
MSG Network and MSG+ collectively air hundreds of live professional games each year, along with a comprehensive lineup of other sporting events and original programming designed to give fans behind-the-scenes access and insight into the teams and players they love.
MSG Network and MSG Sportsnet collectively air hundreds of live professional games each year, along with a comprehensive lineup of other sporting events and original programming designed to give fans behind-the-scenes access and insight into the teams and players they love.
MSG Network and MSG+ feature a wide range of compelling sports content, including exclusive live local games and other programming of the Knicks, Rangers, Islanders, Devils and Sabres, as well as significant coverage of the New York Giants and Buffalo Bills.
MSG Network and MSG Sportsnet feature a wide range of compelling sports content, including exclusive live local games and other programming of the Knicks, Rangers, Islanders, Devils and Sabres, as well as significant coverage of the New York Giants and Buffalo Bills.
This content includes pre- and post-game coverage throughout the seasons, along with team-related programming that features coaches, players and more, all of which capitalizes on the enthusiasm for the teams featured on MSG Network and MSG+. MSG Networks is also positioned as one of the premium destinations for sports gaming content.
This content includes pre- and post-game coverage throughout the seasons, along with team-related programming that features coaches and players, all of which capitalizes on the enthusiasm for the teams featured on MSG Network and MSG Sportsnet. MSG Networks is also positioned as one of the premium destinations for sports gaming content.
These rules may reduce the amount of channel space that is available for carriage of our programming networks and the amount of funds that Distributors have to pay us for our networks. Website and Mobile Application Requirements Our Entertainment and MSG Networks businesses are also subject to certain regulations applicable to our Internet websites and mobile applications.
These rules may reduce the amount of channel space that is available for carriage of our programming networks and the amount of funds that Distributors have to pay us for our networks. Website and Mobile Application Requirements Our Sphere and MSG Networks businesses are also subject to certain regulations applicable to our Internet websites and mobile applications.
In connection with the spinoff of MSG Sports from MSG Networks in September 2015 (the “2015 Sports Distribution”), MSG Networks entered into long-term media rights agreements with the Knicks and Rangers providing MSG Networks with the exclusive live local media rights to their games. MSG Networks also has multi-year media rights agreements with the Islanders, Devils and Sabres.
In connection with the spinoff of MSG Sports from MSG Networks in September 2015 (the “2015 Sports Distribution”), MSG Networks entered into long-term media rights agreements with the Knicks and Rangers providing MSG Networks with the exclusive live local media rights to their games. MSG Networks also has media rights agreements with the Islanders, Devils and Sabres.
Financial Information about Segments and Geographic Areas Substantially all revenues and assets of the Company’s reportable segments are attributed to or located in the United States. A majority of the Company’s revenues and assets are concentrated in the New York City metropolitan area.
Financial Information about Segments and Geographic Areas Substantially all revenues and assets of the Company’s reportable segments are attributed to or located in the United States. A majority of the Company’s revenues and assets are concentrated in the New York City metropolitan area and Las Vegas.
The majority of the CPRA provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required. Further, there are several legislative proposals in the United States, at both the federal and state level, that could impose new privacy and security obligations.
The majority of the CPRA provisions went into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required. Further, there are several legislative proposals in the United States, at both the federal and state level, that could impose new privacy and security obligations.
In addition, our venues are subject to the federal Americans with Disabilities Act (and related state and local statutes), which requires us to maintain certain accessibility features at each of our facilities. We and our venues are also subject to environmental laws and regulations. See “— Item 1A.
In addition, we are subject to the federal Americans with Disabilities Act (and related state and local statutes), which requires us to maintain certain accessibility features at our facilities. We are also subject to environmental laws and regulations. See “ Item 1A.
Today, MSG Networks’ exclusive, award-winning programming continues to be a valuable differentiator for viewers, advertisers and the cable, satellite, fiber-optic and other platforms (“Distributors”) that distribute its networks. MSG Networks is widely 11 distributed throughout all of New York State and significant portions of New Jersey and Connecticut, as well as parts of Pennsylvania.
Today, MSG Networks’ exclusive, award-winning programming continues to be a valuable differentiator for viewers, advertisers and the cable, satellite, fiber-optic and other platforms (“Distributors”) that distribute its networks. MSG Networks and MSG Sportsnet are widely distributed throughout all of New York State and significant portions of New Jersey and Connecticut, as well as parts of Pennsylvania.
In partnership with the Company and MSG Sports, the Foundation provides young people in our communities with access to educational and skills opportunities, mentoring programs, and memorable experiences that enhance their lives, help shape their futures and create lasting joy.
In partnership with the Company, MSG Entertainment and MSG Sports, GDF provides young people in our communities with access to educational and skills opportunities; mentoring programs and memorable experiences that enhance their lives, help shape their futures and create lasting joy.
The Venetian agreed to provide us with $75 million to help fund the construction costs, including the cost of a pedestrian bridge that links MSG Sphere to The Venetian Expo. Through June 30, 2022, The Venetian paid us $65 million of this amount for construction costs.
The Venetian agreed to provide us with $75 million to help fund the construction costs, including the cost of a pedestrian bridge that links Sphere to The Venetian Expo. Through June 30, 2023, The Venetian paid us $65 million of this amount for construction costs.
Additionally, the California Privacy Rights Act (the “CPRA”) will impose additional data protection obligations on covered businesses, including additional consumer rights procedures and obligations, limitations on data uses, new audit requirements for higher risk data, and constraints on certain uses of sensitive data.
Additionally, the California Privacy Rights Act (the “CPRA”) imposes additional data protection obligations on covered businesses, including additional consumer rights procedures and obligations, limitations on data uses, new audit requirements for higher risk data, and constraints on certain uses of sensitive data.
See “— Item 1A. Risk Factors — Economic and Operational Risks — Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations. ” Ticket Sales Our Entertainment business is subject to legislation governing the sale and resale of tickets and consumer protection statutes generally.
Risk Factors — Operational and Economic Risks — Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations. ” Ticket Sales Our Sphere business is subject to legislation governing the sale and resale of tickets and consumer protection statutes generally.
Community: Bridging the Divide through Expansion to Diverse Stakeholders • Focused on connecting with minority-owned businesses to increase the diversity of our vendors and suppliers by leveraging employee resource groups and our community, which creates revenue generating opportunities for diverse suppliers to promote their businesses and products.
Community: Bridging the Divide through Expansion to Diverse Stakeholders 11 • Focused on connecting with minority-owned businesses to increase the diversity of our vendors and suppliers by leveraging ERGs and our community, which creates revenue generating opportunities for diverse suppliers to promote their businesses and products.
We maintain various websites and mobile applications that provide information and content regarding our business, offer merchandise and tickets for sale, make available sweepstakes and/or contests and offer hospitality services.
We maintain various websites and mobile applications that provide information and content regarding our business, offer merchandise and tickets for sale, offer live and on-demand streaming content, make available sweepstakes and/or contests and offer hospitality services.
In July 2018, the Company acquired a 30% interest in SACO Technologies Inc. (“SACO”), a global provider of high-performance LED video lighting and media solutions. The Company is utilizing SACO as a preferred display technology provider for MSG Sphere and is benefiting from agreed-upon commercial terms.
In Fiscal Year 2019, the Company acquired a 30% interest in SACO Technologies Inc. (“SACO”), a global provider of high-performance LED video lighting and media solutions. The Company is utilizing SACO as a preferred display technology provider for Sphere and is benefiting from agreed-upon commercial terms.
Risk Factors — Risks Related to Cybersecurity and Intellectual Property — Theft of Our Intellectual Property May Have a Material Negative Effect on Our Business and Results of Operations .” Other Investments Our Company explores investment opportunities that strengthen its existing position within the entertainment landscape and/or allow us to exploit our assets and core competencies for growth.
Risk Factors — Risks Related to Cybersecurity and Intellectual Property — We May Become Subject to Infringement or Other Claims Relating to Our Content or Technology ” “— Theft of Our Intellectual Property May Have a Material Negative Effect on Our Business and Results of Operations. ” Other Investments Our Company explores investment opportunities that strengthen its existing position within the entertainment landscape and/or allow us to exploit our assets and core competencies for growth.
Risk Factors — General Risk Factors — All of Our Businesses Face Intense and Wide-Ranging Competition That May Have a Material Negative Effect on Our Business and Results of Operations .” and “— Item 1A.
Risk Factors — Operational and Economic Risks — Our Businesses Face Intense and Wide-Ranging Competition That May Have a Material Negative Effect on Our Business and Results of Operations .” and “ Item 1A.
We conduct substantially all of our business activities discussed in this Annual Report on Form 10-K through MSG Entertainment Group, LLC and its direct and indirect subsidiaries. The Company was incorporated on November 21, 2019 as a direct, wholly-owned subsidiary of Madison Square Garden Sports Corp. (“MSG Sports”), formerly known as The Madison Square Garden Company.
We conduct substantially all of our business activities discussed in this Annual Report on Form 10-K through Sphere Entertainment Group, LLC, formerly MSG Entertainment Group, LLC, and MSG Networks Inc., and each of their direct and indirect subsidiaries. The Company was incorporated on November 21, 2019 as a direct, wholly-owned subsidiary of Madison Square Garden Sports Corp.
We believe our ability to maintain and monetize our intellectual property rights, including the technology and content being developed for MSG Sphere and our brand logos, are important to our business, our brand-building efforts and the marketing of our products and services.
We believe our ability to maintain and monetize our intellectual property rights, including the technology and content developed for Sphere, The Sphere Experience, MSG Networks (including our DTC and authenticated streaming product, MSG+), and our brand logos, are important to our business, our brand-building efforts and the marketing of our products and services.
As of June 30, 2022, approximately 38% of our employees were represented by unions. Approximately 7% of such union employees are subject to collective bargaining agreements (“CBAs”) that expired as of June 30, 2022 and approximately 44% are subject to CBAs that will expire by June 30, 2023 if they are not extended prior thereto.
As of June 30, 2023, approximately 29% of our employees were represented by unions. Approximately 10% of such union employees are subject to collective bargaining agreements (“CBAs”) that expired as of June 30, 2023 and approximately 67% are subject to CBAs that will expire by June 30, 2024 if they are not extended prior thereto.
Talent As of June 30, 2022, we had approximately 2,200 full-time union and non-union employees and 8,700 part-time union and non-union employees. We aim to attract top talent through our prestigious brands and venues, as well as through the many benefits we offer.
Talent As of June 30, 2023, we had approximately 690 full-time union and non-union employees and approximately 410 part-time union and non-union employees. We aim to attract top talent through our prestigious brands and venues, as well as through the many benefits we offer.
As we explore selectively extending the MSG Sphere network beyond Las Vegas to other markets around the world, the Company’s intention is to utilize several options, such as non-recourse debt financing, joint ventures, equity partners and a managed venue model.
As we explore selectively extending the Sphere network beyond Las Vegas to other markets around the world, the Company’s intention is to utilize several options, such as joint ventures, equity partners, a managed venue model, and non-recourse debt financing. In February 2018, we announced the purchase of land in Stratford, London.
In the jurisdictions in which these venues are located, the operator is subject to statutes that generally provide that serving alcohol to a visibly intoxicated or minor guest is a violation of the law and may provide for strict liability for certain damages arising out of such violations.
We are also subject to statutes that generally provide that serving alcohol to a visibly intoxicated or minor guest is a violation of the law and may provide for strict liability for certain damages arising out of such violations.
Risk Factors — Economic and Operational Risks — We Are Subject to Extensive Governmental Regulation and Our Failure to Comply with These Regulations May Have a Material Negative Effect on Our Business and Results of Operations. ” Labor Our Entertainment and Tao Group Hospitality businesses are also subject to regulation regarding working conditions, overtime and minimum wage requirements.
Risk Factors — Operational and Economic Risks — We Are Subject to Extensive Governmental Regulation and Changes in These Regulations and Our Failure to Comply with Them May Have a Material Negative Effect on Our Business and Results of Operations. ” Labor Our business is also subject to regulation regarding working conditions, overtime and minimum wage requirements. See “Item 1A.
In addition, content providers (such as certain broadcast and cable networks) and new content developers, Distributors and syndicators are distributing programming directly to consumers on an “over-the-top” (“OTT”) basis.
In addition, content providers (such as certain broadcast and cable networks) and new content developers, Distributors and syndicators are distributing programming directly to consumers on a DTC basis.
The FCC imposes regulations directly on programming networks and also on certain Distributors that affect programming networks indirectly. Closed Captioning Our programming networks must provide closed captioning of video programming for the hearing impaired and meet certain captioning quality standards. The FCC and certain of our affiliation agreements require us to certify compliance with such standards.
Closed Captioning Our programming networks must provide closed captioning of video programming for the hearing impaired and meet certain captioning quality standards. The FCC and certain of our affiliation agreements require us to certify compliance with such standards.
Throughout its history, MSG Networks has been at the forefront of the industry, pushing the boundaries of regional sports coverage. In the process, its networks have become a powerful platform for some of the world’s greatest athletes and entertainers. MSG Networks’ commitment to programming excellence has earned it a reputation for best-in-class programming, production, marketing, and technical innovation.
In the process, its networks have become a powerful platform for some of the world’s greatest athletes and entertainers. MSG Networks’ commitment to programming excellence has earned it a reputation for best-in-class programming, production, marketing, and technical innovation.
Such direct-to-consumer OTT distribution of content has contributed to consumers eliminating or downgrading their pay television subscription, which results in certain consumers not receiving our programming networks. See “— Item 1A.
Such DTC distribution of content has contributed to consumers eliminating or downgrading their pay television subscription, which results in certain consumers not receiving our programming networks.
These technologies will come together to create a powerful platform, which we believe will make MSG Sphere the venue of choice for a wide variety of content — including original immersive attractions, concerts, residencies, and corporate and marquee events.
These technologies will come together to create a powerful platform, which we believe will make Sphere the venue of choice for a wide variety of content – including original immersive productions from leading Hollywood directors; concerts and residencies from the world’s biggest artists; marquee sporting and corporate events.
The Company is building its first MSG Sphere in Las Vegas, a 17,500-seat venue, on land adjacent to The Venetian Resort leased from a subsidiary of Venetian Las Vegas Gaming, LLC (“The Venetian”).
The Company is building its first Sphere in Las Vegas, a 17,600-seat venue with capacity to hold up to 20,000 guests, on land adjacent to The Venetian Resort leased from a subsidiary of Venetian Las Vegas Gaming, LLC (“The Venetian”).
As we explore selectively extending the MSG Sphere network beyond Las Vegas to other markets around the world, we intend to utilize several options such as non-recourse debt financing, joint ventures, equity partners and a managed venue model. • Unique approach to marketing and sales.
As we explore selectively extending Sphere’s network beyond Las Vegas to other markets around the world, we intend to utilize several options such as joint ventures, equity partners, a managed venue model, and non-recourse debt financing. A Continued Commitment to Innovation in Media.
Workplace: Building an Inclusive and Accessible Community • In Fiscal Year 2022, we launched the MSG Diversity & Inclusion Heritage Month enterprise calendar to acknowledge and celebrate culturally relevant days and months of recognition, anchored by our six employee resource groups: AAPI, Black, LatinX, PRIDE, Veterans, and Women.
Workplace: Building an Inclusive and Accessible Community • Redoubled our efforts with the MSG Diversity & Inclusion Heritage Month enterprise calendar to acknowledge and celebrate culturally relevant days and months of recognition, anchored by our six employee resource groups (“ERGs”): Asian Americans and Pacific Islanders (AAPI), Black, LatinX, PRIDE, Veterans, and Women.
On March 31, 2020, MSG Sports’ board of directors approved the distribution of all the outstanding common stock of the Company to MSG Sports stockholders (the “Entertainment Distribution”) which occurred on April 17, 2020 (the “Entertainment Distribution Date”).
(“MSG Sports”), formerly known as The Madison Square Garden Company. On March 31, 2020, MSG Sports’ board of directors approved the distribution of all the outstanding common stock of the Company to MSG Sports stockholders (the “2020 Entertainment Distribution”) which occurred on April 17, 2020 (the “2020 Entertainment Distribution Date”).
For example, California passed a comprehensive data privacy law, the California Consumer Privacy Act of 2018 (the “CCPA”), and other states including Virginia and Colorado have also passed similar laws.
For example, California passed a comprehensive data privacy law, the California Consumer Privacy Act of 2018 (the “CCPA”), and other states including Virginia, Colorado, Utah and Connecticut have also passed similar laws, and various additional states may do so in the near future.
Each of the following competitive factors is important to our networks: the prices we charge for our programming networks, the variety, quantity and quality (in particular, the performance of the sports teams whose media rights we control), of the programming offered on our networks, and the effectiveness of our marketing efforts.
Each of the following competitive factors is important to our networks: the prices we charge for our programming networks; the variety, quantity and quality (in particular, the performance of the sports teams whose media rights we control), of the programming offered on our networks; and the effectiveness of our marketing efforts. 9 Our ability to successfully compete with other programming networks for distribution may be hampered because the Distributors may be affiliated with those other programming networks.
Risk Factors — 16 Risks Related to Our MSG Networks Business — We May Not Be Able to Adapt to New Content Distribution Platforms and to Changes in Consumer Behavior Resulting From Emerging Technologies, Which May Have a Material Negative Effect on Our Business and Results of Operations.” See also “Part II — Item 7.
Risk Factors — Risks Related to Our MSG Networks Business — We May Not Be Able to Adapt to New Content Distribution Platforms or to Changes in Consumer Behavior Resulting From Emerging Technologies, Which May Have a Material Negative Effect on Our Business and Results of Operations.” Sources of Programming We also compete with other networks and other distribution outlets to secure desired programming, including sports-related programming.
We are also required to provide closed captioning on certain video content delivered via the Internet. Commercial Loudness FCC rules require multichannel video programming distributors (“MVPDs”) to ensure that all commercials comply with specified volume standards, and certain of our affiliation agreements require us to certify compliance with such standards.
Commercial Loudness FCC rules require multichannel video programming distributors (“MVPDs”) to ensure that all commercials comply with specified volume standards, and certain of our affiliation agreements require us to certify compliance with such standards.
Segment Information.” Available Information Our telephone number is 212-465-6000, our website is http://www.msgentertainment.com and the investor relations section of our website is http://investor.msgentertainment.com .
Segment Information.” Available Information Our telephone number is (725) 258-0001, our website is http://www.sphereentertainmentco.com and the investor relations section of our website is http://investor.sphereentertainmentco.com .
The ground lease has no fixed rent; however, if certain return objectives are achieved, The Venetian will receive 25% of the after-tax cash flow in excess of such objectives. The lease is for a term of 50 years, commencing upon substantial completion of construction.
The ground lease has no fixed rent; however, if certain return objectives are achieved, The Venetian will receive 25% of the after-tax cash flow in excess of such objectives. The lease is for a term of 50 years, and the Company expects to open the venue on September 29, 2023.
MSG Networks also showcases a wide array of other sports and entertainment programming, which includes Westchester Knicks basketball, New York Riptide lacrosse, as well as horse racing, soccer, poker, tennis, mixed martial arts and boxing programs.
MSG Networks also showcases a wide array of other sports and entertainment programming, which includes Westchester Knicks basketball, New York Riptide lacrosse, NY/ 5 NJ Gotham FC of the National Women’s Soccer League, NCAA basketball, soccer, baseball, softball and other college sporting events, as well as horse racing, soccer, poker, tennis, pickleball, mixed martial arts and boxing programs.
Operating a network of MSG Sphere venues would provide the Company with a number of avenues for potential growth, including driving increased bookings and greater marketing and sponsorship opportunities.
Leveraging the Sphere brand and operating a network of Sphere venues would allow the Company to pursue a number of 3 avenues for potential growth, including driving increased bookings and greater advertising and sponsorship opportunities.
We have registered many of our trademarks and have filed applications for certain others. Additionally, we have filed for patent protection in the United States and other countries where we operate or plan to operate.
We have registered many of our trademarks and have filed applications for certain others in the countries in which we operate or intend to operate. Additionally, we have filed and continue to file for patent protection in the countries where we operate or plan to operate, and we have been issued patents for key elements of Sphere.
Packaging and Pricing The FCC periodically considers examining whether to adopt rules regulating how programmers package and price their networks, such as whether programming networks require Distributors to purchase and carry undesired programming in return for the right to carry desired programming and, if so, whether such arrangements should be prohibited.
Some of these recent changes to the rules could make it more difficult for our programming networks to challenge a Distributor’s decision to decline to carry one of our programming networks or to discriminate against one of our programming networks. 8 Packaging and Pricing The FCC periodically considers examining whether to adopt rules regulating how programmers package and price their networks, such as whether programming networks require Distributors to purchase and carry undesired programming in return for the right to carry desired programming and, if so, whether such arrangements should be prohibited.
The design of MSG Sphere will be flexible to accommodate a wide range of sizes and capacities — from large-scale to smaller and more intimate — based on the needs of any individual market.
Because of the transformative nature of Sphere, we believe there could be other markets — both domestic and international – where Sphere can be successful. The design of Sphere will be flexible to accommodate a wide range of sizes and capacities – from large-scale to smaller and more intimate – based on the needs of any individual market.
By welcoming the diverse perspectives and experiences of our employees, we all share in the creation of a more vibrant, unified, and engaging place to work.
Diversity and Inclusion (“D&I”) We aim to create an employee experience that fosters the Company’s culture of respect and inclusion. By welcoming the diverse perspectives and experiences of our employees, we all share in the creation of a more vibrant, unified, and engaging place to work.
In this annual report on Form 10-K, the fiscal years ended on June 30, 2022, 2021 and 2020 are referred to as “Fiscal Year 2022,” “Fiscal Year 2021” and “Fiscal Year 2020”, respectively, and the fiscal year ending June 30, 2023 is referred to as “Fiscal Year 2023.” Overview MSG Entertainment is a leader in live entertainment comprised of iconic venues, marquee entertainment brands, regional sports and entertainment networks, popular dining and nightlife offerings, and a premier music festival.
In this annual report on Form 10-K, the fiscal years ended on June 30, 2023, 2022, and 2021 are referred to as “Fiscal Year 2023,” “Fiscal Year 2022” and “Fiscal Year 2021”, respectively, and the fiscal year ending June 30, 2024 is referred to as “Fiscal Year 2024.” Overview Sphere Entertainment Co. is a premier live entertainment and media company comprised of two reportable segments, Sphere and MSG Networks.
In partnership with the Knicks and our social impact team, we hosted the 1 st Annual Historically Black Colleges and Universities (“HBCU”) Night highlighting the important contributions of these institutions. In partnership with Chase, we awarded a twenty-five-thousand-dollar scholarship to a Spelman College student.
In partnership with the Knicks and our social impact team, we and MSG Sports hosted the 2nd Annual Historically Black Colleges and Universities (“HBCU”) Night highlighting the important contributions of these institutions and awarded a $60,000 scholarship to a New York City high school student.
MSG Sphere The Company is progressing with its creation of MSG Sphere at The Venetian, adjacent to the Strip in Las Vegas, which will utilize cutting-edge technologies to create immersive experiences on an unprecedented scale.
Our Business Sphere The Company is progressing with its creation of the first Sphere venue, adjacent to the Las Vegas Strip, which will utilize cutting-edge technologies to create immersive experiences on an unparalleled scale. Sphere is an entirely new medium, uniquely built for immersive entertainment experiences.
These laws and regulations apply to the activities of the Company and, in some cases, to individual directors, officers and employees of the Company and agents acting on our behalf.
These laws and regulations apply to the activities of the Company and, in some cases, to individual directors, officers and employees of the Company and agents acting on our behalf. Certain of these laws impose stringent requirements on how we can conduct our foreign operations and could place restrictions on our business and partnering activities.
Tao Group Hospitality has a 17-year history in the Las Vegas market, where — with the acquisition of Hakkasan — it now has 14 branded locations. 12 Intellectual Property We create, own and license intellectual property in the countries in which we operate, have operated or intend to operate, and it is our practice to protect our trademarks, brands, copyrights, inventions and other original and acquired works.
Intellectual Property We create, own and license intellectual property in the countries in which we operate, have operated or intend to operate, and it is our practice to protect our trademarks, brands, copyrights, inventions and other original and acquired works.
We aim to retain and develop our talent by emphasizing our competitive rewards, offering opportunities that support employees both personally and professionally, and our commitment to fostering career development in a positive corporate culture. 18 Our performance management practice includes ongoing feedback and conversations between managers and team members, and talent reviews designed to identify potential future leaders and inform succession plans.
We aim to retain and develop our talent by emphasizing our competitive rewards, offering opportunities that support employees both personally and professionally, and our commitment to fostering career development in a positive corporate culture.
Our registrations and applications relate to trademarks and inventions associated with, among other of our brands, Madison Square Garden, the Radio City Rockettes, MSG Sphere and Tao Group Hospitality brands.
Our registrations and applications relate to trademarks and inventions associated with, among other of our brands, Sphere, The Sphere Experience, Sphere Studios, Sphere Immersive Sound and MSG Networks.
Risk Factors — Risks Related to Our MSG Networks Business — We Derive Substantial Revenues From the Sale of Advertising Time and Those Revenues Are Subject to a Number of Factors, Many of Which Are Beyond Our Control.” Competition in Our Tao Group Hospitality Business Our Tao Group Hospitality business competes with other restaurants and nightlife venues in over 20 markets across five continents.
Risk Factors — Risks Related to Our MSG Networks Business — We Derive Substantial Revenues From the Sale of Advertising and Those Revenues Are Subject to a Number of Factors, Many of Which Are Beyond Our Control.” Supplier Diversity We are committed to fostering an inclusive environment across all areas of our business.
Our key human capital management objectives are to invest in and support our employees in order to attract, develop and retain a high performing and diverse workforce. 17 Diversity and Inclusion (“D&I”) We aim to create an employee experience that fosters the Company’s culture of respect.
See “Human Capital Resources — Diversity and Inclusion.” Human Capital Resources We believe the strength of our workforce is one of the significant contributors to our success. Our key human capital management objectives are to invest in and support our employees in order to attract, develop and retain a high performing and diverse workforce.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II — Item 8. Financial Statements and Supplementary Data — Consolidated and Combined Financial Statements — Notes to Consolidated and Combined Financial Statements — Note 22.
Financial information by business segments for each of Fiscal Years 2023, 2022, and 2021 is set forth in “Part II — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II — Item 8. Financial Statements and Supplementary Data — Consolidated Financial Statements — Notes to Consolidated Financial Statements — Note 18.
MSG Networks: This segment is comprised of the Company’s regional sports and entertainment networks, MSG Network and MSG+, a companion streaming app, MSG GO, and other digital properties.
MSG Networks: This segment is comprised of the Company’s regional sports and entertainment networks, MSG Network and MSG Sportsnet, as well as its direct-to-consumer streaming product, MSG+.
In February 2018, we announced the purchase of land in Stratford, London, which we expect will become home to a future MSG Sphere. The Company submitted a planning application to the local planning authority in March 2019 and that process, which requires various stages of review to be completed and approvals to be granted, is ongoing.
The Company submitted a planning application for a Sphere venue to the local planning authority in March 2019 and that process, which requires various stages of review to be completed and approvals to be granted, is ongoing. Therefore, we do not have a definitive timeline at this time. See “Part II — Item 7.
Item 1. Business Madison Square Garden Entertainment Corp. is a Delaware corporation with our principal executive offices at Two Pennsylvania Plaza, New York, NY, 10121. Unless the context otherwise requires, all references to “we,” “us,” “our,” “MSG Entertainment” or the “Company” refer collectively to Madison Square Garden Entertainment Corp., a holding company, and its direct and indirect subsidiaries.
Unless the context otherwise requires, all references to “we,” “us,” “our,” “Sphere Entertainment” or the “Company” refer collectively to Sphere Entertainment Co., a holding company, and its direct and indirect subsidiaries.
All of the Foundation’s activities target young people facing illness or financial challenges, as well as children of uniformed personnel who have been lost or injured while serving our communities. Since its inception in 2006, the Foundation has impacted more than 400,000 young people and their families.
GDF focuses on young people facing illness or financial challenges, as well as children of uniformed personnel who have been lost or injured while serving our communities.
We value continuous learning and development opportunities for our employees, which include a career development tool, leadership development programs, a learning platform, and tuition assistance.
Our performance management practice includes ongoing feedback and conversations between managers and team members, and talent reviews designed to identify potential future leaders and inform succession plans. We value continuous learning and development opportunities for our employees, which include a career development tool, leadership development programs, a learning platform, and tuition assistance.
It includes two award-winning regional sports and entertainment networks, MSG Network and MSG+, a companion streaming service, MSG GO, and other digital properties.
It includes two award-winning regional sports and entertainment networks, MSG Network and MSG Sportsnet, and as well as its direct-to-consumer and authenticated streaming product, MSG+.
Our Entertainment and Tao Group Hospitality businesses are subject to the general powers of federal, state and local government, as well as foreign governmental authorities, to deal with matters of health and public safety. 13 Venue Licenses Our venues, like all public spaces, are subject to building and health codes and fire regulations imposed by the state and local governments in the jurisdictions in which they are located.
Our Sphere business is subject to the general powers of federal, state and local government, as well as foreign governmental authorities, to deal with matters of health, public safety and operations.
Specific initiatives include the Inspire Scholarship program, which has committed since its inception over $5.8 million in aid to high school seniors to provide financial assistance related to college and trade school expenses, and “MSG Classroom,” an Emmy award-winning educational initiative that teaches high school students about the media industry through hands-on learning opportunities in areas such as broadcasting, script writing and production.
Founded in 2007, MSG Classroom is an Emmy award winning educational initiative that teaches high school students about the media industry through hands-on learning opportunities in areas such as broadcasting, script writing and production, working directly with employees of MSG Networks.
We believe MSG Sphere will become a venue for the next generation of entertainment, combining cutting-edge technology with multi-sensory storytelling to deliver immersive experiences at an unparalleled scale. ◦ Maximizing the live entertainment experience for our customers.
Coupled with our continued commitment to innovation, we believe the Company is positioned to generate long-term value for our stockholders. Key components of our strategy include: Creating a New Entertainment Medium: We believe Sphere will redefine the future of entertainment, combining next generation technologies with multi-sensory storytelling to deliver immersive experiences at an unparalleled scale.
The design of MSG Sphere will be flexible to accommodate a wide range of sizes and capacities — from large-scale to smaller and more intimate — based on the needs of the individual market.
We believe there are other markets — both domestic and international — where Sphere can be successful. The design of Sphere can accommodate a wide range of sizes and capacities based on the needs of the individual market.
We also expect to have significant operations in Las Vegas. Our venues and live offerings outside of New York City similarly compete with other entertainment options in their respective markets and elsewhere. We compete with these other entertainment options on the basis of the quality of our offerings, the public’s interest in our content and the price of our tickets.
We compete with these other entertainment and advertising options on the basis of the quality and pricing of our offerings and the public’s interest in our content and advertising and marketing partnership offerings.
Our Strategy Our strategy is to leverage our Company’s portfolio of marquee assets and brands — which includes renowned venues, entertainment brands and regional sports and entertainment networks —to create world-class live experiences.
Our Strategy Our strategy is to leverage our Company’s unique assets and brands – which includes a next-generation entertainment medium, Sphere, and regional sports and entertainment networks – to create world-class experiences for all key stakeholders, including performers, athletes, content creators, guests, viewers, advertisers and marketing partners.
The portal is for diverse suppliers across all spectrums of identity that are interested is doing business with us. • Strengthened our commitment to higher education institutions to increase campus recruitment pipelines.
The portal is intended to expand opportunities for the Company, MSG Entertainment and MSG Sports to do business with diverse suppliers, including minority-, women-, LGBTQ+- and veteran-owned businesses. • Strengthened our commitment to higher education institutions to increase campus recruitment pipelines.
Established in 2020, MSG Sphere Studios features an interdisciplinary team of creative, production, technology and software experts providing full in-house creative and production services — including strategy and concept, capture, show production and postproduction. ◦ At MSG Sphere Studios, the Company is also working together with artists, directors, and brands to develop and test content for MSG Sphere, enabling them to seamlessly utilize MSG Sphere’s capabilities to bring their creative vision to life.
Sphere Studios is also home to an interdisciplinary team of creative, production, technology and software experts who provide full in-house creative and production services, including strategy and concept, capture, post-production and show production.
Certain of these laws impose stringent requirements on how we can conduct our foreign operations and could place restrictions on our business and partnering activities. 14 FCC Regulations Our MSG Networks business is also subject to regulation by the Federal Communications Commission (the “FCC”).
FCC Regulations Our MSG Networks business is also subject to regulation by the Federal Communications Commission (the “FCC”). The FCC imposes regulations directly on programming networks and also on certain Distributors in a manner that affects programming networks indirectly.
We compete for bookings with a large number of other venues both in the cities in which our venues are located and in alternative locations capable of booking the same productions and events. Generally, we compete for bookings on the basis of the size, quality, expense and nature of the venue required for the booking.
Generally, we compete for bookings on the basis of the size, quality, expense and nature of the venue required for the booking. Some of our competitors may have a larger network of venues and/or greater financial resources. See “Item 1A.
MSG Sphere Studios features proprietary tools developed specifically for MSG Sphere that makes content creation for this powerful platform a seamless experience and maximizes the potential of MSG Sphere’s immersive technologies — whether adapting existing content or developing original attractions purpose-built for MSG Sphere at The Venetian. • A continued commitment to innovation in media.
Developing Original Content: During Fiscal Year 2023, we launched Sphere Studios, which is dedicated to the development of immersive entertainment exclusively for Sphere. Sphere Studios features technology and proprietary tools developed specifically for Sphere that make content creation for this platform a seamless experience.
In addition, the Company also has other investments in various entertainment, hospitality companies and related technology companies, accounted for under the equity method. Our Community The Company actively engages with and supports the communities we serve through a variety of important initiatives.
In addition, the Company also has other investments in various entertainment and related technology companies, accounted for under the equity method. In Fiscal Year 2018, the Company acquired a 25% interest in Holoplot GmbH (“Holoplot”), a global leader in 3D audio technology based in Berlin, Germany.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeEconomic and Operational Risks • Our business has been adversely impacted and may, in the future, be materially adversely impacted by an economic downturn, recession, financial instability, inflation or changes in consumer tastes and preferences. • We do not own all of our venues and our failure to renew our leases on economically attractive terms may have a material negative effect on our business and results of operations. 20 • The geographic concentration of our businesses could subject us to greater risk than our competitors and have a material negative effect on our business and results of operations. • Our business could be adversely affected by terrorist activity or the threat of terrorist activity, weather and other conditions that discourage congregation at prominent places of public assembly. • We are subject to extensive governmental regulation and our failure to comply with these regulations may have a material negative effect on our business and results of operations. • Labor matters may have a material negative effect on our business and results of operations. • The unavailability of systems upon which we rely may have a material negative effect on our business and results of operations. • We face continually evolving cybersecurity and similar risks, which could cause disruption of our business, damage to our brands and reputation, legal exposure and financial losses.
Biggest changeOperational and Economic Risks • Our businesses face intense and wide-ranging competition that may have a material negative effect on our business and results of operations. • Our operations and operating results were materially impacted by the COVID-19 pandemic and actions taken in response by governmental authorities and certain professional sports leagues, and a resurgence of the COVID-19 pandemic or another pandemic or public health emergency could adversely affect our business and results of operations. • Our business has been adversely impacted and may, in the future, be materially adversely impacted by an economic downturn, recession, financial instability, inflation or changes in consumer tastes and preferences. • The geographic concentration of our businesses could subject us to greater risk than our competitors and have a material negative effect on our business and results of operations. • Our business could be adversely affected by terrorist activity or the threat of terrorist activity, weather and other conditions that discourage congregation at prominent places of public assembly. 14 • We are subject to extensive governmental regulation and changes in these regulations and our failure to comply with them may have a material negative effect on our business and results of operations. • Labor matters may have a material negative effect on our business and results of operations. • The unavailability of systems upon which we rely may have a material negative effect on our business and results of operations. • There is a risk of injuries and accidents in connection with Sphere, which could subject us to personal injury or other claims; we are subject to the risk of adverse outcomes in other types of litigation. • We face risks from doing business internationally.
We may not be able to successfully predict interest in proposed new programming and viewer preferences could cause new programming not to be successful or cause our existing programming to decline in popularity.
We may not be able to successfully predict interest in proposed new programming and viewer preferences could cause new programming not to be successful or cause our existing programming to decline in popularity.
Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures and require us to expend significant capital and other resources to respond to or alleviate problems caused by an actual or perceived security breach.
Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures and may require us to expend significant capital and other resources to respond to or alleviate problems caused by an actual or perceived security breach.
In addition, the receipt by MSG Sports’ stockholders of common stock of our Company would be a taxable distribution, and each U.S. holder that received our common stock in the Entertainment Distribution would be treated as if the U.S. holder had received a distribution equal to the fair market value of our common stock that was distributed to it, which generally would be treated first as a taxable dividend to the extent of such holder’s pro rata share of MSG Sports’ earnings and profits, then as a non-taxable return of capital to the extent of the holder’s tax basis in its MSG Sports’ common stock, and thereafter as capital gain with respect to any remaining value.
In addition, the receipt by MSG Sports’ stockholders of common stock of our Company would be a taxable distribution, and each U.S. holder that received our common stock in the 2020 Entertainment Distribution would be treated as if the U.S. holder had received a distribution equal to the fair market value of our common stock that was distributed to it, which generally would be treated first as a taxable dividend to the extent of such holder’s pro rata share of MSG Sports’ earnings and profits, then as a non-taxable return of capital to the extent of the holder’s tax basis in its MSG Sports’ common stock, and thereafter as capital gain with respect to any remaining value.
The Company has renounced its rights to certain business opportunities and the Company’s amended and restated certificate of incorporation provides that no Overlap Person will be liable to the Company or its stockholders for breach of any fiduciary duty that would otherwise occur by reason of the fact that any such individual directs a corporate opportunity (other than certain limited types of opportunities set forth in our amended and restated certificate of incorporation) to one or more of the Other Entities instead of the Company, or does not refer or communicate information regarding such corporate opportunities to the Company.
The Company has renounced its rights to certain business opportunities and the Company’s amended and restated certificate of incorporation provides that no Overlap Person will be liable to the Company or its stockholders for breach of any fiduciary duty that would otherwise occur by reason of the fact that any such individual directs a corporate opportunity (other than certain limited types of opportunities set forth in our amended and restated 34 certificate of incorporation) to one or more of the Other Entities instead of the Company, or does not refer or communicate information regarding such corporate opportunities to the Company.
If the Entertainment Distribution does not qualify for tax-free treatment for U.S. federal income tax purposes, then, in general, MSG Sports would recognize taxable gain in an amount equal to the excess of the fair market value of our common stock distributed in the Entertainment Distribution over MSG Sports’ tax basis therein (i.e., as if it had sold such common stock in a taxable sale for its fair market value).
If the 2020 Entertainment Distribution does not qualify for tax-free treatment for U.S. federal income tax purposes, then, in general, MSG Sports would recognize taxable gain in an amount equal to the excess of the fair market value of our common stock distributed in the 2020 Entertainment Distribution over MSG Sports’ tax basis therein (i.e., as if it had sold such common stock in a taxable sale for its fair market value).
These risks include: • laws and policies affecting trade and taxes, including laws and policies relating to currency, the repatriation of funds and withholding taxes, and changes in these laws; • changes in local regulatory requirements, including restrictions on foreign ownership; • exchange rate fluctuation; • exchange controls, tariffs and other trade barriers; • differing degrees of protection for intellectual property and varying attitudes towards the piracy of intellectual property; • foreign privacy and data protection laws and regulations, such as the E.U.
These risks include: • laws and policies affecting trade and taxes, including laws and policies relating to currency, the repatriation of funds and withholding taxes, and changes in these laws; • changes in local regulatory requirements, including restrictions on foreign ownership; • exchange rate fluctuation; 27 • exchange controls, tariffs and other trade barriers; • differing degrees of protection for intellectual property and varying attitudes towards the piracy of intellectual property; • foreign privacy and data protection laws and regulations, such as the E.U.
If We Identify Other Material Weaknesses or Adverse Findings in the Future, Our Ability to Report Our Financial Condition or Results of Operations Accurately or Timely May Be Adversely Affected, Which May Result in a Loss of Investor Confidence in Our Financial Reports, Significant Expenses to Remediate Any Internal Control Deficiencies, and Ultimately Have an Adverse Effect on the Market Price of Our Common Stock.
If We Identify Other Material Weaknesses or 29 Adverse Findings in the Future, Our Ability to Report Our Financial Condition or Results of Operations Accurately or Timely May Be Adversely Affected, Which May Result in a Loss of Investor Confidence in Our Financial Reports, Significant Expenses to Remediate Any Internal Control Deficiencies, and Ultimately Have an Adverse Effect on the Market Price of Our Common Stock.
Under the Stockholders Agreement, the shares of Class B Common Stock owned by members of the Dolan Family Group (representing all the 43 outstanding Class B Common Stock) are to be voted on all matters in accordance with the determination of the Dolan Family Committee (as defined below), except that the decisions of the Dolan Family Committee are non-binding with respect to the Class B Common Stock owned by certain Dolan family trusts that collectively own approximately 40.5% of the outstanding Class B Common Stock (“Excluded Trusts”).
Under the Stockholders Agreement, the shares of Class B Common Stock owned by members of the Dolan Family Group (representing all the outstanding Class B Common Stock) are to be voted on all matters in accordance with the determination of the Dolan Family Committee (as defined below), except that the decisions of the Dolan Family Committee are non-binding with respect to the Class B Common Stock owned by certain Dolan family trusts that collectively own approximately 40.5% of the outstanding Class B Common Stock (“Excluded Trusts”).
Cresitello, also serves as Senior Vice President, Associate General Counsel and Secretary of MSG Sports. As a result, these individuals do not devote their full time and attention to the Company’s affairs. The overlapping directors, officers and employees may have actual or apparent conflicts of interest with respect to matters involving or affecting each company.
Cresitello, also serves as Senior Vice President, Associate General Counsel and Secretary of MSG Sports and MSG Entertainment. As a result, these individuals do not devote their full time and attention to the Company’s affairs. The overlapping directors, officers and employees may have actual or apparent conflicts of interest with respect to matters involving or affecting each company.
We have entered into a Tax Disaffiliation Agreement with MSG Sports (the “Tax Disaffiliation Agreement”), which sets out each party’s rights and obligations with respect to federal, state, local or foreign taxes for periods before and after the Entertainment Distribution and related matters such as the filing of tax returns and the conduct of IRS and other audits.
We have entered into a Tax Disaffiliation Agreement with MSG Sports (the “Tax Disaffiliation Agreement”), which sets out each party’s rights and obligations with respect to federal, state, local or foreign taxes for periods before and after the 2020 Entertainment Distribution and related matters such as the filing of tax returns and the conduct of IRS and other audits.
Even in the absence of a general recession or downturn in the economy, an individual business sector that tends to spend more on advertising than other sectors might be forced to reduce its advertising expenditures if that sector experiences a downturn. In such case, a reduction in advertising expenditures by such a sector may adversely affect our revenues.
Even in the absence of a general recession or downturn in the economy, an individual business sector that tends to spend more on advertising than other sectors may be forced to reduce its advertising expenditures if that sector experiences a downturn. In such case, a reduction in advertising expenditures by such a sector may adversely affect our revenues.
For example, as we extend MSG Sphere beyond Las Vegas, our intention is to utilize several options, such as non-recourse debt financing, joint ventures, equity partners and a managed venue model. There is no assurance that we will be able to successfully complete these plans.
For example, as we extend Sphere beyond Las Vegas, our intention is to utilize several options, such as joint ventures, equity partners, a managed venue model and non-recourse debt financing. There is no assurance that we will be able to successfully complete these plans.
If our programming does not gain or maintain the level of audience acceptance we, our 23 advertisers or Distributors expect, it could negatively affect advertising or affiliation fee revenues. An increase in our costs associated with programming, including original programming, may materially negatively affect our business and results of operations.
If our programming does not gain or maintain the level of audience acceptance we, our advertisers or Distributors expect, it could negatively affect advertising or affiliation fee revenues. An increase in our costs associated with programming, including original programming, may materially negatively affect our business and results of operations.
Certain transactions related to the Entertainment Distribution that are not addressed by the opinion could result in the recognition of income or gain by MSG Sports The opinion relied on factual representations and reasonable assumptions, which, if incorrect or inaccurate, may jeopardize the ability to rely on such opinion.
Certain transactions related to the 2020 Entertainment Distribution that are not addressed by the opinion could result in the recognition of income or gain by MSG Sports The opinion relied on factual representations and reasonable assumptions, which, if incorrect or inaccurate, may jeopardize the ability to rely on such opinion.
For example, the potential for a conflict of interest when we on the one hand, and MSG Sports and/or AMC Networks and their respective subsidiaries and successors on the other hand, look at certain acquisitions and other corporate opportunities that may be suitable for more than one of the companies.
For example, the potential for a conflict of interest when we on the one hand, and MSG Sports, MSG Entertainment and/or AMC Networks and their respective subsidiaries and successors on the other hand, look at certain acquisitions and other corporate opportunities that may be suitable for more than one of the companies.
Legislative enactments, court actions, and federal regulatory proceedings could materially affect our programming business by modifying the rates, terms, and conditions under which we offer our content or programming networks to Distributors and the public, or otherwise materially affect the range of our activities or strategic business alternatives.
Legislative enactments, court actions, and federal and state regulatory proceedings could materially affect our programming business by modifying the rates, terms, and conditions under which we offer our content or programming networks to Distributors and the public, or otherwise materially affect the range of our activities or strategic business alternatives.
In addition, inflation, which has significantly risen, has and may continue to increase operational costs, including labor costs, and continued increases in interest rates in re sponse to concerns about inflation may have the effect of further increasing economic uncertainty and heightening these risks.
In addition, inflation, which has significantly risen, has increased and may continue to increase operational costs, including labor costs, and continued increases in interest rates in re sponse to concerns about inflation may have the effect of further increasing economic uncertainty and heightening these risks.
Pursuant to the Tax Disaffiliation Agreement, we are required to indemnify MSG Sports for losses and taxes of MSG Sports resulting from the breach of certain covenants and for certain taxable gain recognized by MSG Sports, including as a result of certain acquisitions of our stock or assets.
Pursuant to the Tax Disaffiliation Agreement, we are required to indemnify MSG Sports for losses and taxes of MSG Sports resulting from the breach of certain covenants and for certain taxable gain recognized by MSG Sports, including as a result of certain acquisitions of our stock or 32 assets.
The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. Annually, we perform activities 39 that include reviewing, documenting and testing our internal control over financial reporting.
The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. Annually, we perform activities that include reviewing, documenting and testing our internal control over financial reporting.
The Company’s amended and restated certificate of incorporation acknowledges that directors and officers of the Company (the “Overlap Persons”) may also be serving as directors, officers, employees or agents of an Other Entity, and that the Company may engage in material business transactions with such Other Entities.
The Company’s amended and restated certificate of incorporation acknowledges that directors and officers of the Company (the “Overlap Persons”) may also be serving as directors, officers, employees, consultants or agents of an Other Entity, and that the Company may engage in material business transactions with such Other Entities.
The substantial cost of building MSG Sphere in Las Vegas, as well as the costs and/or financing needs with respect to MSG Sphere in London, may constrain the Company’s ability to undertake other initiatives during these multi-year construction periods.
The substantial cost of building Sphere in Las Vegas, as well as the costs and/or financing needs with respect to Sphere in London, may constrain the Company’s ability to undertake other initiatives during these multi-year construction periods.
From time to time, we may continue to explore opportunities to purchase or invest in other businesses, venues or assets that we believe will complement, enhance or expand our current business or that might otherwise offer us growth opportunities, including opportunities that may differ from the Company’s current businesses.
From time to time, we may explore opportunities to purchase or invest in other businesses, venues or assets that we believe will complement, enhance or expand our current business or that might otherwise offer us growth opportunities, including opportunities that may differ from the Company’s current businesses.
Our Overlapping Directors and Officers with MSG Sports and/or AMC Networks May Result in the Diversion of Corporate Opportunities to MSG Sports and/or AMC Networks and Other Conflicts and Provisions in Our Amended and Restated Certificate of Incorporation May Provide Us No Remedy in That Circumstance.
Our Overlapping Directors and Officers with MSG Sports, MSG Entertainment and/or AMC Networks May Result in the Diversion of Corporate Opportunities to MSG Sports, MSG Entertainment and/or AMC Networks and Other Conflicts and Provisions in Our Amended and Restated Certificate of Incorporation May Provide Us No Remedy in That Circumstance.
Our MSG Networks business competes, in certain respects and to varying degrees, for viewers and advertisers with other programming networks, pay-per-view, video-on-demand, online streaming or on-demand services and other content offered by Distributors and others.
Our MSG Networks business competes, in certain respects and to varying degrees, for viewers and advertisers with other programming networks, pay-per-view, video-on-demand, online streaming and on-demand services and other content offered by Distributors and others.
We May Not Be Able to Adapt to New Content Distribution Platforms and to Changes in Consumer Behavior Resulting From Emerging Technologies, Which May Have a Material Negative Effect on Our Business and Results of Operations.
We May Not Be Able to Adapt to New Content Distribution Platforms or to Changes in Consumer Behavior Resulting From Emerging Technologies, Which May Have a Material Negative Effect on Our Business and Results of Operations.
A prolonged period of reduced consumer or corporate spending, including with respect to advertising, such as those during the COVID-19 pandemic, could have an adverse effect on our business and our results of operations.
A prolonged period of reduced consumer or corporate spending, including with respect to advertising, such as during the COVID-19 pandemic, could have an adverse effect on our business and our results of operations.
Any such activity or threatened activity at or near one of our venues or other similar venues, including those located elsewhere, could result in reduced attendance at our venues and a material negative effect on our business and results of operations.
Any such activity or threatened activity at or near one of our venue or other similar venues, including those located elsewhere, could result in reduced attendance at our venue and a material negative effect on our business and results of operations.
Further material changes in the law and regulatory requirements may be proposed or adopted in the future. Our business and our results of operations may be materially negatively affected by future legislation, new regulation or deregulation. Data Privacy .
Further material changes in the law and regulatory requirements may be proposed or adopted in the future. Our business and our results of operations may be materially negatively affected by future legislation, new regulation or deregulation. 25 • Data Privacy .
Similarly, a major epidemic or pandemic, such as the COVID-19 pandemic, or the threat or perceived threat of such an event, could adversely affect attendance at our events and venues by discouraging public assembly at our events and venues.
Similarly, a major epidemic or pandemic, such as the COVID-19 pandemic, or the threat or perceived threat of such an event, could adversely affect attendance at our events and venues by discouraging public assembly at our events and venue.
See “ — Economic and Operational Risks — We Are Subject to Extensive Governmental Regulation and Our Failure to Comply with These Regulations May Have a Material Negative Effect on Our Business and Results of Operations.” Despite our efforts, the risks of a security incident cannot be entirely eliminated and our information technology and other systems that maintain and transmit consumer, sponsor, partner, Distributor, advertiser, Company, employee and other confidential and proprietary information may be compromised due to employee error or other circumstances such as malware or ransomware, viruses, hacking and phishing attacks, denial-of-service attacks, business email compromises, or otherwise.
See “ — Economic and Operational Risks — We Are Subject to Extensive Governmental Regulation and Changes in These Regulations and Our Failure to Comply with Them May Have a Material Negative Effect on Our Business and Results of Operations.” Despite our efforts, the risks of a security incident cannot be entirely eliminated and our information technology and other systems that maintain and transmit consumer, sponsor, partner, Distributor, advertiser, Company, employee and other confidential and proprietary information may be compromised due to employee error or other circumstances such as malware or ransomware, viruses, hacking and phishing attacks, denial-of-service attacks, business email compromises, or otherwise.
Subsequent to the filing of the Fiscal Year 2021 Form 10-K, management of the Company evaluated an immaterial accounting error related to interest costs that should have been capitalized for the MSG Sphere in Las Vegas in Fiscal Years 2021, 2020 and 2019 and in the fiscal quarter ended September 30, 2021, as prescribed by Accounting Standards Codification (“ASC”) Topic 835-20 ( Capitalization of Interest ).
Subsequent to the filing of the Fiscal Year 2021 Form 10-K, management of the Company evaluated an immaterial accounting error related to interest costs that should have been capitalized for Sphere in Las Vegas in Fiscal Years 2021, 2020 and 2019 and in the fiscal quarter ended September 30, 2021, as prescribed by Accounting Standards Codification Topic 835-20 ( Capitalization of Interest ).
Congress and the FCC currently have under consideration, and may in the future adopt, amend, or repeal, laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect our business. The regulation of Distributors is subject to the political process and has been in constant flux over the past two decades.
Congress and the FCC currently have under consideration, and may in the future adopt, amend, or repeal, laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect our business. The regulation of Distributors and programming networks is subject to the political process and has been in constant flux over the past two decades.
If the equity and credit markets continue to deteriorate, or the United States enters a recession, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Our Entertainment business has been characterized by significant expenditures for properties, businesses, renovations and productions.
If the equity and credit markets continue to deteriorate, or the United States enters a recession, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Our Sphere business has been characterized by significant expenditures for properties, businesses, renovations and productions.
Our MSG Networks business has historically been, and we expect will continue to be, dependent on the popularity of the NBA and NHL teams whose local media rights we control and, in varying degrees, those teams achieving on-court and on-ice success, which can generate fan enthusiasm, resulting in increased viewership and advertising revenues.
Our MSG Networks segment has historically been, and we expect will continue to be, dependent on the popularity of the NBA and NHL teams whose local media rights we control and, in varying degrees, those teams achieving on-court and on-ice success, which can generate fan enthusiasm, resulting in increased viewership and advertising revenues.
However, the determination of whether we are a USRPHC turns on the relative fair market value of our United States real property interests and our other assets, and because the USRPHC rules are complex and the determination of whether we are a USRPHC depends on facts and circumstances that may be beyond our control, we can give no assurance as to our USRPHC status after the Entertainment Distribution.
However, the determination of whether we are a USRPHC turns on the relative fair market value of our United States real property interests and our other assets, and because the USRPHC rules are complex and the determination of whether we are a USRPHC depends on facts and circumstances that may be beyond our control, we can give no assurance as to our USRPHC status after the MSGE Distribution.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — MSG Spheres.” In light of the ambitious and unique design of MSG Sphere, including the use of technologies that have not previously been employed in major entertainment venues, the risk of delays and higher than anticipated costs are elevated.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Sphere.” In light of the ambitious and unique design of Sphere, including the use of technologies that have not previously been employed in major entertainment venues, the risk of delays and higher than anticipated costs are elevated.
These risks may not be covered by insurance or could involve exposures that exceed the limits of any applicable insurance policy. Incidents in connection with events at any of our venues could also reduce attendance at our events and may have a negative impact on our revenue and results of operations.
These risks may not be covered by insurance or could involve exposures that exceed the limits of any applicable insurance policy. Incidents in connection with events at Sphere could also reduce attendance at our events and may have a negative impact on our revenue and results of operations.
Such compromise could affect the security of information on our network or that of a third-party service provider. Additionally, outside parties may attempt to fraudulently induce employees, vendors or users to disclose sensitive, proprietary or confidential information in order to gain access to data and systems.
A compromise of our or our vendors’ systems could affect the security of information on our network or that of a third-party service provider. Additionally, outside parties may attempt to fraudulently induce employees, vendors or users to disclose sensitive, proprietary or confidential information in order to gain access to data and systems.
Additional companies, some with significant financial resources, continue to enter or are seeking to enter the video distribution market either by offering OTT streaming services or selling devices that aggregate viewing of various OTT services, which continues to put pressure on an already competitive landscape.
Additional companies, some with significant financial resources, continue to enter or are seeking to enter the video distribution market either by offering DTC streaming services or selling devices that aggregate viewing of various DTC services, which continues to put pressure on an already competitive landscape.
If traditional MVPD service offerings are not attractive to consumers due to pricing, increased competition from OTT services, increased dissatisfaction with the quality of traditional MVPD services, poor economic conditions or other factors, more consumers may (i) cancel their traditional MVPD service subscriptions or choose not to subscribe to traditional MVPD services, (ii) elect to instead subscribe to OTT services, which in some cases may be offered at a lower price-point and may not include our programming networks or (iii) elect to subscribe to smaller bundles of programming which may not include our 28 programming networks.
If traditional MVPD service offerings are not attractive to consumers due to pricing, increased competition from DTC and other services, dissatisfaction with the quality of traditional MVPD services, poor economic conditions or other factors, more consumers may (i) cancel their traditional MVPD service subscriptions or choose not to subscribe to traditional MVPD services, (ii) elect to instead subscribe to DTC services, which in some cases may be offered at a lower price-point and may not include our programming networks or (iii) elect to subscribe to smaller bundles of programming which may not include our programming networks.
Additionally, our planned MSG Sphere in Las Vegas will have the benefit of easements with respect to the planned pedestrian bridge to The Venetian. Our ability to continue to utilize these and other easements, including for advertising and promotional purposes, requires us to comply with a number of conditions.
Sphere in Las Vegas will have the benefit of easements with respect to the planned pedestrian bridge to The Venetian. Our ability to continue to utilize these and other easements, including for advertising and promotional purposes, requires us to comply with a number of conditions.
If the Rate of Decline in the Number of Subscribers to Traditional MVPD Services Increases or These Subscribers Shift to Other Services or Bundles That Do Not Include the Company’s Programming Networks, There May Be a Material Negative Effect on the Company’s Affiliation Revenues.
If the Rate of Decline in the Number of Subscribers to Traditional MVPD Services Continues or These Subscribers Shift to Other Services or Bundles That Do Not Include the Company’s Programming Networks, There May Be a Material Negative Effect on the Company’s Affiliation Revenues.
We and our venues are subject to environmental laws and regulations relating to the use, disposal, storage, emission and release of hazardous and non-hazardous substances, as well as zoning and noise level restrictions which may affect, among other things, the operations of our venues.
We and our venue are subject to environmental laws and regulations relating to the use, disposal, storage, emission and release of hazardous and non-hazardous substances, as well as zoning and noise level restrictions which may affect, among other things, the operations of our venue.
We Depend on Licenses from Third Parties for the Performance of Musical Works at Our Venues, the Loss of Which or Renewal of Which on Less Favorable Terms May Have a Negative Effect on Our Business and Results of Operations.
We Depend on Licenses from Third Parties for the Performance of Musical Works at Our Venue, the Loss of Which or Renewal of Which on Less Favorable Terms May Have a Negative Effect on Our Business and Results of Operations.
As a result of their control, the Dolan family has the ability to prevent or cause a change in control or approve, prevent or influence certain actions by the Company. • We share certain key directors, and officers and employees with MSG Sports and/or AMC Networks, which means those officers do not devote their full time and attention to our affairs.
As a result of their control, the Dolan family has the ability to prevent or cause a change in control or approve, prevent or influence certain actions by the Company. • We share certain directors, officers and employees with MSG Sports, MSG Entertainment and/or AMC Networks, which means those individuals do not devote their full time and attention to our affairs.
For a discussion of certain procedures we have implemented to help ameliorate such potential conflicts that may arise, see our Definitive Proxy Statement filed with the SEC on October 26, 2021.
For a discussion of certain procedures we have implemented to help ameliorate such potential conflicts that may arise, see our Definitive Proxy Statement filed with the SEC on October 26, 2022.
The majority of the CPRA provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required. Further, there are several legislative proposals in the United States, at both the federal and state level, that could impose new privacy and security obligations.
The majority of the CPRA provisions went into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required. Further, there are several legislative proposals in the United States, at both the federal and state level, that could impose new privacy and security obligations.
The Company may be required to incur significant expenses in order to address any actual or potential security incidents that arise and we may not have insurance coverage for any or all of such expenses.
We may be required to incur significant expenses in order to address any actual or potential security incidents that arise and we may not have insurance coverage for any or all of such expenses.
As a result, the Dolan Family Group has the power to prevent such issuance or amendment. The Dolan Family Group also controls MSG Sports and AMC Networks Inc. (“AMC Networks”) and, prior to the Merger, the Dolan Family Group also controlled MSG Networks.
As a result, the Dolan Family Group has the power to prevent such issuance or amendment. 33 The Dolan Family Group also controls MSG Sports, MSG Entertainment and AMC Networks Inc. (“AMC Networks”) and, prior to the Networks Merger, the Dolan Family Group also controlled MSG Networks.
An increase in the royalty rate and/or the revenue base on which the royalty rate is applied could substantially increase the cost of presenting concerts and certain other live events at our venues.
An increase in the royalty rate and/or the revenue base on which the royalty rate is applied could substantially increase the cost of presenting concerts and certain other live events at our venue.
Economic and Operational Risks Our Business Has Been Adversely Impacted and May, in the Future, Be Materially Adversely Impacted by an Economic Downturn, Recession, Financial Instability, Inflation or Changes in Consumer Tastes and Preferences.
Our Business Has Been Adversely Impacted and May, in the Future, Be Materially Adversely Impacted by an Economic Downturn, Recession, Financial Instability, Inflation or Changes in Consumer Tastes and Preferences.
Our business is, and may in the future be, subject to a variety of other laws and regulations, including licensing, permitting, and historic designation and similar requirements; working conditions, labor, immigration and employment laws; health, safety and sanitation requirements; and compliance with the Americans with Disabilities Act (and related state and local statutes).
Our business is, and may in the future be, subject to a variety of other laws and regulations, including licensing, permitting, working conditions, labor, immigration and employment laws; health, safety and sanitation requirements; and compliance with the Americans with Disabilities Act (and related state and local statutes).
We Are Subject to Extensive Governmental Regulation and Our Failure to Comply with These Regulations May Have a Material Negative Effect on Our Business and Results of Operations. Our business is subject to the general powers of federal, state and local governments, as well as foreign governmental authorities.
We Are Subject to Extensive Governmental Regulation and Changes in These Regulations and Our Failure to Comply with Them May Have a Material Negative Effect on Our Business and Results of Operations. Our business is subject to the general powers of federal, state and local governments, as well as foreign governmental authorities.
Additionally, certain laws and regulations could hold us strictly, jointly and severally responsible for the remediation of hazardous substance 34 contamination at our facilities or at third-party waste disposal sites, as well as for any personal injury or property damage related to any contamination. Zoning and Building Regulations.
Additionally, certain laws and regulations could hold us strictly, jointly and severally responsible for the remediation of hazardous substance contamination at our facilities or at third-party waste disposal sites, as well as for any personal injury or property damage related to any contamination.
The success of our business depends in part on our ability to maintain and monetize our intellectual property rights, including the technology being developed for MSG Sphere, our brand logos, our programming, technologies, digital content and other content that is material to our business.
The success of our business depends in part on our ability to maintain and monetize our intellectual property rights, including the technology being developed for Sphere, MSG Networks (including our DTC product), our brand logos, our programming, technologies, digital content and other content that is material to our business.
For example, future governmental regulations adopted in response to the COVID-19 pandemic may impact the revenue we derive and/or the expenses we incur from the events that we choose to host, such that events that were historically profitable would instead result in losses.
For example, future governmental regulations adopted in response to a pandemic may impact the revenue we derive and/or the expenses we incur from the events that we choose to host, such that events that were historically profitable would instead result in losses.
If not resolved through business discussions, such disputes could result in litigation and/or actual or threatened termination of an existing agreement.
If not resolved through business discussions, such disputes could result in administrative complaints, litigation and/or actual or threatened termination of an existing agreement.
These agreements include the allocation of employee benefits, taxes and certain other liabilities and obligations attributable to periods prior to, at and after the Entertainment Distribution.
These agreements include the allocation of employee benefits, taxes and certain other liabilities and obligations attributable to periods prior to, at and after the applicable distribution.
See “— We May Have a Significant Indemnity Obligation to MSG Sports if the Entertainment Distribution Is Treated as a Taxable Transaction.” 42 We May Have a Significant Indemnity Obligation to MSG Sports if the Entertainment Distribution Is Treated as a Taxable Transaction.
See “— We May Have a Significant Indemnity Obligation to MSG Sports if the 2020 Entertainment Distribution Is Treated as a Taxable Transaction.” We May Have a Significant Indemnity Obligation to MSG Sports if the 2020 Entertainment Distribution Is Treated as a Taxable Transaction.
Additionally, the California Privacy Rights Act (the “CPRA”), will impose additional data protection obligations on covered businesses, including additional consumer rights procedures and obligations, limitations on data uses, new audit requirements for higher risk data, and constraints on certain uses of sensitive data.
Additionally, the California Privacy Rights Act (the “CPRA”), imposes additional data protection obligations on covered businesses, including additional consumer rights procedures and obligations, limitations on data uses, new audit requirements for higher risk data, and constraints on certain uses of sensitive data.
From time to time, third parties may assert against us alleged intellectual property infringement claims (e.g., copyright, trademark and patent) or other claims relating to our productions, dining and nightlife venues and brands, programming, technologies, digital content or other content or material, some of which may be important to our business.
From time to time, third parties may assert against us alleged intellectual property infringement claims (e.g., copyright, trademark and patent) or other claims relating to our productions, brands, programming, technologies, digital products and/or content or other content or material, some of which may be important to our business.
This leverage also exposes us to significant risk by limiting our flexibility in planning for, or reacting to, changes in our business (whether through competitive pressure or otherwise), the entertainment, hospitality, cable and telecommunications industries and the economy at large. Although our cash flows could decrease in these scenarios, our required payments in respect of indebtedness would not decrease.
This leverage also exposes us to significant risk by limiting our flexibility in planning for, or reacting to, changes in our business (whether through competitive pressure or otherwise), the entertainment and video programming industries and the economy at large. Although our cash flows could decrease in these scenarios, our required payments in respect of indebtedness would not decrease.
Moreover, the governing bodies of the NBA and the NHL have imposed, and may impose in the future, various rules, regulations, guidelines, bulletins, directives, policies and agreements (collectively, “League Rules”) that we may not be able to control, which could affect the value of these agreements, including a decision to alter the number of games played during a season.
The governing bodies of the NBA and the NHL have imposed, and may impose in the future, various rules, regulations, guidelines, bulletins, directives, policies and agreements (collectively, “League Rules”) that we may not be able to control, which could affect the value of our media rights agreements, including a decision to alter the number of games played during a season.
Our Executive Chairman and Chief Executive Officer, James L. Dolan, also serves as the Executive Chairman of MSG Sports and Non-Executive Chairman of AMC Networks. Furthermore, ten members of our Board of Directors (including James L. Dolan) also serve as directors of MSG Sports, and six members of our Board of Directors (including James L.
Dolan, also serves as the Executive Chairman and Chief Executive Officer of MSG Entertainment, the Executive Chairman of MSG Sports and as Non-Executive Chairman of AMC Networks. Furthermore, ten members of our Board of Directors (including James L. Dolan) also serve as directors of MSG Sports, nine members of our Board of Directors (including James L.
In order to respond to these developments, we may need to implement changes to our business models and strategies and there can be no assurance that any such changes will prove to be successful or that the business models and strategies we develop will be as profitable as our current business models and strategies.
In order to respond to these developments, we have in the past needed, and may in the future need, to implement changes to our business models and strategies and there can be no assurance that any such changes will prove to be successful or that the business models and strategies we develop will be as profitable as our current business models and strategies.
If the rate of decline in the number of traditional MVPD service subscribers increases or if subscribers shift to OTT services or smaller bundles of programming that do not include the Company’s programming networks, this may have a material negative effect on the Company’s revenues.
If the rate of decline in the number of traditional MVPD service subscribers continues or if subscribers shift to DTC services or smaller bundles of programming that do not include the Company’s programming networks, this may have a material negative effect on the Company’s revenues.
MSG Sports received an opinion from Sullivan & Cromwell LLP substantially to the effect that, among other things, the Entertainment Distribution qualified as a tax-free distribution under the Internal Revenue Code (the “Code”). The opinion is not binding on the IRS or the courts.
MSG Sports received an opinion from Sullivan & Cromwell LLP substantially to the effect that, among other things, the 2020 Entertainment Distribution qualified as a tax-free distribution under the Code. The opinion is not binding on the IRS or the courts.
In addition, we are party to an agreement with AMC Networks Inc. (“AMC Networks”), pursuant to which AMC Networks provides us with certain origination, master control and technical services which are necessary to distribute our programming networks. If a disruption occurs, we may not be able to secure alternate distribution facilities in a timely manner.
(“AMC Networks”), pursuant to which AMC Networks provides us with certain origination, master control and technical services which are necessary to distribute our programming networks. If a disruption occurs, we may not be able to secure alternate distribution facilities in a timely manner.
A decline in the economic prospects of advertisers or the economy in general could alter current or prospective advertisers’ spending priorities, which could cause our revenues and operating results to decline significantly in any given period.
A decline in the economic prospects of advertisers or the economy in general has in the past altered, and could in the future alter, current or prospective advertisers’ spending priorities, which could cause our revenues and operating results to decline significantly in any given period.
For example, the CCPA, which provides a private right of action (in addition to statutory damages) for California residents whose sensitive personal information is breached as a result of a business’ violation of its duty to reasonably secure such information, took effect on January 1, 2020 and will be expanded by the CPRA once it takes effect in January 2023.
For example, the CCPA, which provides a private right of action (in addition to statutory damages) for California residents whose sensitive personal information is breached as a result of a business’ violation of its duty to reasonably secure such information, took effect on January 1, 2020 and was expanded by the CPRA in January 2023.
The stated contractual rights fees under such rights agreements increase annually and are subject to adjustments in certain circumstances, including if MSG Sports does not make available a minimum number of games in any year. The Company and MSG Sports each rely on the other to perform their obligations under these agreements.
The stated contractual rights fees under such rights agreements increase annually and are subject to adjustments in certain circumstances, including if MSG Sports does not make available a minimum number of exclusive live games in any year. Each Company, MSG Sports and MSG Entertainment rely on the others to perform their respective obligations under these agreements.
In April 2020, the Company announced that it was suspending construction of MSG Sphere at The Venetian due to COVID-19 related factors that were outside of its control, including supply chain issues. This is a complex construction project with cutting-edge technology that relies on subcontractors obtaining components from a variety of sources around the world.
In April 2020, the Company announced that it was suspending construction of Sphere in Las Vegas due to COVID-19 related factors that were outside of its control, including supply chain issues. This is a complex construction project with cutting-edge technology that relied on subcontractors obtaining components from a variety of sources around the world.
To the extent that any efforts at expanding or enhancing productions or creating new productions or content do not result in a viable show or attraction, or to the extent that any such productions do not achieve expected levels of popularity among audiences, we may not recover the substantial expenses we previously incurred for non-capitalized investments, or may need to write-off all or a portion of capitalized investments.
To the extent that any efforts at creating new immersive productions do not result in a viable offering, or to the extent that any such productions do not achieve expected levels of popularity among audiences, we may not recover the substantial expenses we previously incurred for non-capitalized investments, or may need to write-off all or a portion of capitalized investments.
As the ongoing effects of the pandemic continued to impact its business operations, in August 2020, the Company disclosed that it resumed full construction with a lengthened timetable in order to better preserve cash through the COVID-19 pandemic.
As the ongoing effects of the pandemic continued to impact its business operations, in August 2020, the Company disclosed that it had resumed full construction with a lengthened timetable in order to better preserve cash through the COVID-19 pandemic. The Company expects to open the venue in September 2023.
Our business depends upon the ability and willingness of consumers and businesses to purchase tickets at our venues, license suites and club memberships at The Garden, spend on food and beverages and merchandise, subscribe to packages of programming that includes our networks, and drive continued advertising, sponsorship and affiliate fee revenues, and these revenues are sensitive to general economic conditions, recession, fears of recession and consumer behavior.
Our business depends upon the ability and willingness of consumers and businesses to purchase tickets and license suites at Sphere, spend on food and beverages and merchandise, subscribe to packages of programming that includes our networks, and drive continued advertising, marketing partnership and affiliate fee revenues, and these revenues are sensitive to general economic conditions, recession, fears of recession and consumer behavior.
Content providers (such as certain broadcast and cable networks) and new content developers, Distributors and syndicators are distributing programming directly to consumers on an OTT basis.
Content providers (such as certain broadcast and cable networks) and new content developers, Distributors and syndicators are distributing programming directly to consumers on a DTC basis.
All of Our Businesses Face Intense and Wide-Ranging Competition That May Have a Material Negative Effect on Our Business and Results of Operations.
Operational and Economic Risks Our Businesses Face Intense and Wide-Ranging Competition That May Have a Material Negative Effect on Our Business and Results of Operations.
Our Variable Rate Indebtedness Subjects Us to Interest Rate Risk, Which Could Cause Our Debt Service Obligations to Increase Significantly. Borrowings under our facilities are at variable rates of interest and expose us to interest rate risk.
Our Variable Rate Indebtedness Subjects Us to Interest Rate Risk, Which Has Caused, and May Continue to Cause, Our Debt Service Obligations to Increase Significantly. Borrowings under our facilities are at variable rates of interest and expose us to interest rate risk.
We have two classes of common stock: • Class A Common Stock, par value $0.01 per share (“Class A Common Stock”), which is entitled to one vote per share and is entitled collectively to elect 25% of our Board of Directors; and • Class B Common Stock, par value $0.01 per share (“Class B Common Stock”), which is entitled to 10 votes per share and is entitled collectively to elect the remaining 75% of our Board of Directors.
We have two classes of common stock: • Class A Common Stock, which is entitled to one vote per share and is entitled collectively to elect 25% of our Board of Directors; and • Class B Common Stock, which is entitled to 10 votes per share and is entitled collectively to elect the remaining 75% of our Board of Directors.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSignificant properties that are leased in New York City include approximately 373,000 square feet housing Madison Square Garden Entertainment Corp.’s administrative and executive offices with approximately 47,000 square feet of space that is subleased to MSG Sports, approximately 64,000 square feet housing MSG Networks’ administrative and executive offices and approximately 18,000 square feet of studio space, approximately 697,000 square feet comprising Boston Calling Events LLC, approximately 577,000 square feet comprising Radio City Music Hall (approximately 6,000 seats) and approximately 57,000 square feet comprising the Beacon Theatre (approximately 2,800 seats).
Biggest changeItem 2. Properties We lease properties in New York City of approximately 64,000 square feet housing MSG Networks’ administrative and executive offices and approximately 18,000 square feet of studio space.
Additionally, our planned MSG Sphere in Las Vegas will have the benefit of easements with respect to the planned pedestrian bridge to The Venetian. Our ability to continue to utilize these and other easements requires us to comply with certain conditions.
Sphere in Las Vegas will have the benefit of easements with respect to the planned pedestrian bridge to The Venetian. Our ability to continue to utilize these and other easements requires us to comply with certain conditions.
For more information on our venues, see “Item 1. Business — Our Business — Our Performance Venues.” We also lease property in Las Vegas, Nevada and own property in Stratford, London, where we are currently building and expect to build new venues — known as “MSG Sphere.” See “Item 1.
We also lease approximately 810,000 square feet in Las Vegas, Nevada, under a ground lease for the land where Sphere in Las Vegas is being constructed, and own approximately 205,000 square feet of property in Stratford, London, where we have announced plans to build another Sphere venue, pending necessary approvals.” See “Item 1.
Removed
Item 2. Properties We own the Madison Square Garden Complex, which includes The Garden (with a maximum capacity of approximately 21,000 seats) and Hulu Theater (approximately 5,600 seats) in New York City, comprising approximately 1,100,000 square feet; and The Chicago Theatre (approximately 3,600 seats) in Chicago comprising approximately 72,600 square feet.
Added
Business — Our Business — Sphere.” In addition, we lease approximately 67,000 square feet in Las Vegas, Nevada, related to office space and approximately 153,000 square feet in Burbank, California, where Sphere Studios has office space and content creation and testing facilities.
Removed
Business — Our Business — Our Performance Venues — MSG Sphere.” In addition, we lease approximately 202,000 square feet in Burbank, California, where MSG Sphere Studios, a creative studio that brings together expertise from across the entertainment industry to develop, record and produce content for the MSG Sphere, has office space, as well as studio space, and content creation and testing facilities. 45 Our Madison Square Garden Complex is subject to and benefits from various easements, including over the “breezeway” into Madison Square Garden from Seventh Avenue in New York City (which we share with other property owners).
Removed
In addition, Tao Group Hospitality is engaged in the management and operation of restaurant, nightlife and hospitality venues primarily in New York City, Las Vegas, Southern California, and London. 37% of Tao Group Hospitality’s branded locations are under leased properties.
Removed
This includes branded locations in New York City (10%), Las Vegas (9%), London (5%), Los Angeles (6%), San Diego (3%), Chicago (3%) and Hawaii (1%).
Removed
The size of Tao Group Hospitality’s leases ranges from approximately 6,000 to 77,000 square feet and totals approximately 445,000 square feet. 62% of Tao Group Hospitality’s branded locations are under management or other contracts, which are not owned or leased properties (including 23% in New York, 9% in Las Vegas, 5% in India, 5% in Singapore, 5% in Mexico, 3% in the United Arab Emirates, and 1% in each of Miami, Connecticut, Australia, China, Saudi Arabia, Qatar, Turkey, Morocco and Norway).
Removed
Additionally, Tao Group Hospitality, in partnership with the Company, operates Suite Sixteen at The Garden.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe Company is not named as a defendant but has been subpoenaed to produce documents and testimony related to the Merger. Plaintiffs seek, among other relief, monetary damages for the putative class and plaintiffs’ attorneys’ fees. Defendants to the MSG Networks Inc. consolidated action filed answers to the complaint on December 30, 2021.
Biggest changePlaintiffs allege that the MSG Networks Inc. board of directors and controlling stockholders breached their fiduciary duties in negotiating and 35 approving the Networks Merger. The Company is not named as a defendant but has been subpoenaed to produce documents and testimony related to the Networks Merger.
Item 3. Legal Proceedings Fifteen complaints were filed in connection with the Merger by purported stockholders of the Company and MSG Networks Inc. Nine of these complaints involved allegations of materially incomplete and misleading information set forth in the joint proxy statement/prospectus filed by the Company and MSG Networks Inc. in connection with the Merger.
Item 3. Legal Proceedings Fifteen complaints were filed in connection with the Networks Merger by purported stockholders of the Company and MSG Networks Inc. Nine of these complaints involved allegations of materially incomplete and misleading information set forth in the joint proxy statement/prospectus filed by the Company and MSG Networks Inc. in connection with the Networks Merger.
As a result of supplemental disclosures made by the Company and MSG Networks Inc. on July 1, 2021, all of the disclosure actions were voluntarily dismissed with prejudice prior to or shortly following the consummation of the Merger.
As a result of supplemental disclosures made by the Company and MSG Networks Inc. on July 1, 2021, all of the disclosure actions were voluntarily dismissed with prejudice prior to or shortly following the consummation of the Networks Merger.
The complaint, which names the Company as only a nominal defendant, retains all of the derivative claims and alleges that the members of the board of directors and controlling stockholders violated their fiduciary duties in the course of negotiating and approving the Merger.
The complaint, which names the Company as only a nominal defendant, retains all of the derivative claims and alleges that the members of the board of directors and controlling stockholders violated their fiduciary duties in the course of negotiating and approving the Networks Merger.
Although the outcome of these other lawsuits cannot be predicted with certainty (including the extent of available insurance, if any), management does not believe that resolution of these other lawsuits will have a material adverse effect on the Company. Item 4. Mine Safety Disclosures Not applicable. 47 PART II
Although the outcome of these other lawsuits cannot be predicted with certainty (including the extent of available insurance, if any), management does not believe that resolution of these other lawsuits will have a material adverse effect on the Company. Item 4. Mine Safety Disclosures Not applicable. 36 PART II
Six complaints involved allegations of fiduciary breaches in connection with the negotiation and approval of the Merger and have since been consolidated into two remaining litigations. On September 10, 2021, the Court of Chancery entered an order consolidating two derivative complaints filed by purported Company stockholders. The consolidated action is captioned: In re Madison Square Garden Entertainment Corp.
Six complaints involved allegations of fiduciary breaches in connection with the negotiation and approval of the Networks Merger and have since been consolidated into two remaining litigations. On September 10, 2021, the Court of Chancery of the State of Delaware (the “Court”) entered an order consolidating two derivative complaints filed by purported Company stockholders.
On September 27, 2021, the Court of Chancery entered an order consolidating four complaints filed by purported stockholders of MSG Networks Inc. The consolidated action is captioned: In re MSG Networks Inc. Stockholder Class Action Litigation , C.A. No. 2021-0575-KSJM. The consolidated plaintiffs filed their Verified Consolidated Stockholder Class Action Complaint on October 29, 2021.
The MSGE Settlement Agreement was approved by the Court on August 14, 2023. On September 27, 2021, the Court entered an order consolidating four complaints filed by purported stockholders of MSG Networks Inc. The consolidated action is captioned: In re MSG Networks Inc. Stockholder Class Action Litigation , C.A. No. 2021-0575-KSJM (the “MSG Networks Litigation”).
The complaint asserts claims on behalf of a putative class of former MSG Networks Inc. stockholders against each member of the board of directors of MSG Networks Inc. prior to the Merger. Plaintiffs allege that the MSG Networks Inc. board of directors and controlling stockholders breached their fiduciary duties in negotiating and approving the Merger.
The consolidated plaintiffs filed their Verified Consolidated Stockholder Class Action Complaint on October 29, 2021. The complaint asserts claims on behalf of a putative class of former MSG Networks Inc. stockholders against each member of the board of directors of MSG Networks Inc. and the controlling stockholders prior to the Networks Merger.
Stockholders Litigation , C.A. No. 2021-0468-KSJM. The consolidated plaintiffs filed their Verified Consolidated Derivative Complaint on October 11, 2021.
The consolidated action is captioned: In re Madison Square Garden Entertainment Corp. Stockholders Litigation , C.A. No. 2021-0468-KSJM (the “MSG Entertainment Litigation”). The consolidated plaintiffs filed their Verified Consolidated Derivative Complaint on October 11, 2021.
Pursuant to the indemnity rights in its bylaws and Delaware law, the Company is advancing the costs incurred by defendants in this action, and defendants may assert indemnification rights in respect of any adverse judgment or settlement of the action.
Plaintiffs seek, among other relief, an award of damages to the Company including interest, and plaintiffs’ attorneys’ fees. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company has advanced the costs incurred by defendants in this action, and defendants have asserted indemnification rights in respect of any adverse judgment or settlement of the action.
Pursuant to the indemnity rights in its bylaws and Delaware law, the Company is advancing the costs incurred by defendants in this action, and defendants may assert indemnification rights in respect of any adverse judgment or settlement of the action.
Plaintiffs seek, among other relief, monetary damages for the putative class and plaintiffs’ attorneys’ fees. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company has advanced the costs incurred by defendants in this action, and defendants have asserted indemnification rights in respect of any adverse judgment or settlement of the action.
Removed
Plaintiffs seek, among other relief, an award of damages to the Company including interest, and plaintiffs’ attorneys’ fees. The Company and other defendants filed answers to the complaint on December 30, 2021. The Company substantially completed its production of documents responsive to plaintiffs’ requests on June 24, 2022, and continues to be engaged in responding to plaintiffs’ additional discovery requests.
Added
On March 14, 2023, the parties to the MSG Entertainment Litigation reached an agreement in principle to settle the MSG Entertainment Litigation on the terms and conditions set forth in a binding term sheet, which was incorporated into a long-form settlement agreement (the “MSGE Settlement Agreement”) that was filed with the Court on April 20, 2023.
Removed
The Company substantially completed its production of documents responsive to plaintiffs’ requests on June 24, 2022, and continues to be engaged in responding to plaintiffs’ additional discovery requests.
Added
The MSGE Settlement Agreement provides for, among other things, the final dismissal of the MSG Entertainment Litigation in exchange for a settlement payment to the Company of $85 million, subject to customary reduction for attorneys’ fees and expenses, in an amount to be determined by the Court. The settlement’s amount will be fully funded by the other defendants’ insurers.
Removed
On March 3, 2022, the Court of Chancery approved a case schedule, governing the two consolidated actions, which set tentative trial dates for April 2023. We are currently unable to determine a range of potential liability, if any, with respect to these Merger-related claims.
Added
On April 6, 2023, the parties to the MSG Networks Litigation reached an agreement in principle to settle the MSG Networks Litigation, without admitting liability, on the terms and conditions set forth in a binding term sheet, which was incorporated into a long-form settlement agreement (the “MSGN Settlement Agreement”) that was filed with the Court on May 18, 2023.
Removed
Accordingly, no accrual for these matters has been made in our consolidated financial statements. 46 The Company is a defendant in various other lawsuits.
Added
The MSGN Settlement Agreement provides for, among other things, the final dismissal of the MSG Networks Litigation in exchange for a settlement payment to the plaintiffs and the class of $48.5 million, which has been recorded in Accounts payable, accrued and other current liabilities as of June 30, 2023.
Added
MSG Networks has a dispute with its insurers over whether and to what extent there is insurance coverage for the settlement. Unless MSG Networks Inc. and the insurers settle that insurance dispute, it is expected to be resolved in a pending Delaware insurance coverage action.
Added
In the interim, and subject to final resolution of the parties’ insurance coverage dispute, certain of MSG Networks’ insurers have agreed to advance $20.5 million to fund the settlement and related class notice costs. The MSGN Settlement Agreement was approved by the Court on August 14, 2023. The Company is a defendant in various other lawsuits.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeBase Period 4/20/20 6/30/20 6/30/21 6/30/22 Madison Square Garden Entertainment Corp. $ 100.00 $ 114.80 $ 128.53 $ 80.54 Russell 3000 Index 100.00 111.76 161.11 138.77 Bloomberg Americas Entertainment Index 100.00 123.07 283.23 149.70 This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing. 48 As of June 30, 2022, there were 701 holders of record of our Class A Common Stock.
Biggest changeThey do not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of the stock involved and they are not intended to forecast or be indicative of possible future performance of our common stock. 37 Base Period 4/20/20 6/30/20 6/30/21 6/30/22 6/30/23 Sphere Entertainment Co. $ 100.00 $ 114.80 $ 128.53 $ 80.54 $ 90.81 Russell 2000 Index 100.00 119.13 193.03 144.39 162.16 Russell 3000 Index 100.00 111.76 161.11 138.77 165.07 Bloomberg Americas Entertainment Index 100.00 123.07 283.23 149.70 177.25 This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Class A common stock, par value $0.01 per share (“Class A Common Stock”), is listed on the New York Stock Exchange (“NYSE”) under the symbol “MSGE.” The Company’s Class A Common Stock began “regular way” trading on the NYSE on April 20, 2020.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Class A common stock, par value $0.01 per share (“Class A Common Stock”), is listed on the New York Stock Exchange (the “NYSE”) under the symbol “SPHR.” The Company’s Class A Common Stock began “regular way” trading on the NYSE on April 20, 2020.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this Item is incorporated by reference to the definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, which is expected to be filed with the SEC within 120 days of our fiscal year end.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this Item is incorporated by reference to the definitive Proxy Statement for our 2023 Annual Meeting of Stockholders, which is expected to be filed with the SEC within 120 days of our fiscal year end. Item 6. [RESERVED] 38
There is no public trading market for our Class B common stock, par value $.01 per share (“Class B Common Stock”). As of June 30, 2022, there were 15 holders of record of our Class B Common Stock.
As of June 30, 2023, there were 687 holders of record of our Class A Common Stock. There is no public trading market for our Class B common stock, par value $.01 per share (“Class B Common Stock”). As of June 30, 2023, there were 15 holders of record of our Class B Common Stock.
We did not pay any dividend on our common stock during Fiscal Year 2022 and do not have any current plans to pay a cash dividend on our common stock for the foreseeable future.
We did not pay any dividends on our common stock during Fiscal Year 2023 and do not have any current plans to pay a cash dividends on our common stock for the foreseeable future.
Issuer Purchases of Equity Securities On March 31, 2020, the Company’s Board of Directors authorized, effective following the Entertainment Distribution, a share repurchase program to repurchase up to $350 million of the Company’s Class A Common Stock.
Issuer Purchases of Equity Securities On March 31, 2020, the Company’s Board of Directors authorized a share repurchase program to repurchase up to $350 million of the Company’s Class A Common Stock. The program was re-authorized by the Company’s Board of Directors on March 29, 2023.
The stock price performance included in this graph is not necessarily indicative of future stock performance. The Russell 3000 Index and the Bloomberg Americas Entertainment Index are included for comparative purposes only.
The comparison assumes an investment of $100 on April 20, 2020 and reinvestment of dividends. The stock price performance included in this graph is not necessarily indicative of future stock performance. The Russell 2000 Index, Russell 3000 Index and the Bloomberg Americas Entertainment Index are included for comparative purposes only.
Performance Graph The following graph compares the relative performance of our Class A Common Stock, the Russell 3000 Index and the Bloomberg Americas Entertainment Index. This graph covers the period from April 20, 2020 through June 30, 2022. The comparison assumes an investment of $100 on April 20, 2020 and reinvestment of dividends.
Performance Graph The following graph compares the relative performance of our Class A Common Stock, the Russell 2000 Index and the Bloomberg Americas Entertainment Index. This year, the graph also includes a comparison against the Russell 3000 Index, which had been used by the Company in prior years.
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They do not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of the stock involved and they are not intended to forecast or be indicative of possible future performance of our common stock.
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In light of the Company’s market capitalization following the MSGE Distribution and the Tao Group Hospitality Disposition, management has determined that the Russell 2000 Index is a more comparable broad equity market index . This graph covers the period from April 20, 2020 through June 30, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFactors that may cause such differences to occur include, but are not limited to: • our ability to effectively manage any impacts of the COVID-19 pandemic (including COVID-19 variants) as well as renewed actions taken in response by governmental authorities or certain professional sports leagues, including ensuring compliance with rules and regulations imposed upon our venues, to the extent applicable; • the effect of any postponements or cancellations by third-parties or the Company as a result of the COVID-19 pandemic due to operational challenges and other health and safety concerns (such as the partial cancellation of the 2021 production of the Christmas Spectacular ); • the extent to which attendance at our venues may be impacted by government actions, continuing health concerns by potential attendees and reduced tourism; • the impact on the payments we receive under the Arena License Agreements as a result of government-mandated capacity restrictions, league restrictions and/or social-distancing or vaccination requirements, if any, at games of the Knicks of the NBA and the Rangers of the NHL; • the level of our expenses and our operational cash burn rate, including our corporate expenses; • our ability to successfully design, construct, finance and operate new entertainment venues in Las Vegas and other markets, and the investments, costs and timing associated with those efforts, including the impact of the temporary suspension of construction and inflation and any other construction delays and/or cost overruns; • the level of our revenues, which depends in part on the popularity of the Christmas Spectacular, the sports teams whose games are played at The Garden and broadcast on our networks, the appeal of our Tao Group Hospitality branded locations, and other events which are presented in our venues or broadcast on our networks; • the demand for MSG Networks programming among Distributors and the subscribers thereto, and our ability to enter into and renew affiliation agreements with Distributors, or to do so on favorable terms, as well as the impact of consolidation among Distributors; • our ability to develop and successfully execute MSG Networks’ strategy for a direct-to-consumer offering; • the ability of our Distributors to maintain, or minimize declines in, subscriber levels; • the impact of subscribers selecting Distributors’ packages that do not include our networks or Distributors that do not carry our networks at all; • the security of our MSG Networks program signal and electronic data; • the on-ice and on-court performance of the professional sports teams whose games we broadcast on our networks and host in our venues; • the level of our capital expenditures and other investments; • general economic conditions, especially in the New York City, Las Vegas, Chicago and London metropolitan areas where we have (or plan to have) significant business activities; • the demand for sponsorship arrangements and advertising and viewer ratings for our networks; 50 • competition, for example, from other venues and other sports and entertainment and nightlife options and other regional sports and entertainment networks, including the construction of new competing venues; • the relocation or insolvency of professional sports teams with which we have a media rights agreement; • our ability to maintain, obtain or produce content, together with the cost of such content; • MSG Networks’ ability to renew or replace our media rights agreements with professional sports teams; • changes in laws, guidelines, bulletins, directives, policies and agreements, and regulations under which we operate; • any economic, social or political actions, such as boycotts, protests, work stoppages or campaigns by labor organizations, including the unions representing players and officials of the NBA and NHL, or other work stoppage due to COVID-19 or otherwise; • seasonal fluctuations and other variations in our operating results and cash flow from period to period; • the successful development of new live productions or attractions, enhancements or changes to existing productions and the investments associated with such development, enhancements, or changes, as well as investment in personnel, content and technology for MSG Sphere; • business, reputational and litigation risk if there is a cyber or other security incident resulting in loss, disclosure or misappropriation of stored personal information, disruption of our MSG Networks business or disclosure of confidential information or other breaches of our information security; • activities or other developments (such as pandemics, including the COVID-19 pandemic) that discourage or may discourage congregation at prominent places of public assembly, including our venues; • the continued popularity and success of Tao Group Hospitality dining and nightlife venues, as well as its existing brands, and the ability to successfully open and operate new entertainment dining and nightlife branded locations; • the ability of BCE to profitably operate its future festivals and to attract attendees and performers to its future festivals; • the acquisition or disposition of assets or businesses and/or the impact of, and our ability to successfully pursue, acquisitions or other strategic transactions; • our ability to successfully integrate acquisitions, new venues or new businesses into our operations; • the operating and financial performance of our strategic acquisitions and investments, including those we do not control; • our internal control environment, remediation of the material weakness, and our ability to identify any future material weaknesses; • the costs associated with, and the outcome of, litigation and other proceedings to the extent uninsured, including litigation or other claims against companies we invest in or acquire, including those related to the Merger with MSG Networks Inc.; • the impact of governmental regulations or laws, changes in how those regulations and laws are interpreted, as well as the continued benefit of certain tax exemptions and the ability to maintain necessary permits or licenses; • the impact of any government plans to redesign New York City’s Pennsylvania Station; • the impact of sports league rules, regulations and/or agreements and changes thereto; • the substantial amount of debt incurred, the ability of our subsidiaries to make payments on, or repay or refinance, such debt under their respective credit facilities and our ability to obtain additional financing, to the extent required; • financial community perceptions of our business, operations, financial condition and the industries in which we operate; • the ability of our investees and others to repay loans and advances we have extended to them; • the tax-free treatment of the Entertainment Distribution (as defined below); • our ability to achieve the intended benefits of the Entertainment Distribution; • the performance by MSG Sports of its obligations under various agreements with the Company related to the Entertainment Distribution and ongoing commercial arrangements, including the Arena License Agreements; and 51 • the additional factors described under “Part I — Item 1A.
Biggest changeFactors that may cause such differences to occur include, but are not limited to: • the substantial amount of debt we have incurred, the ability of our subsidiaries to make payments on, or repay or refinance, such debt under their respective credit facilities (including refinancing the MSG Networks debt prior to its maturity in October 2024), and our ability to obtain additional financing, to the extent required, on terms favorable to us or at all; • the popularity of The Sphere Experience, as well as our ability to attract advertisers and marketing partners, and audiences and artists to residencies, concerts and other events at Sphere in Las Vegas; • our ability to successfully design, construct, finance and operate new entertainment venues in Las Vegas and/or other markets, as applicable, and the investments, costs and timing associated with those efforts, including obtaining financing, the impact of inflation and any construction delays and/or cost overruns; • the successful development of The Sphere Experience and related original immersive productions and the investments associated with such development, as well as investment in personnel, content and technology for Sphere; • our ability to successfully implement cost reductions and reduce or defer certain discretionary capital projects, if necessary; • our ability to dispose of all or a portion of the remainder of the MSGE Retained Interest (as defined below) on favorable terms due to market conditions or otherwise; • the level of our expenses and our operational cash burn rate, including our corporate expenses; • the demand for MSG Networks programming among cable, satellite, fiber-optic and other platforms that distribute its networks (“Distributors”) and the number of subscribers thereto, and our ability to enter into and renew affiliation agreements with Distributors, or to do so on favorable terms, as well as the impact of consolidation among Distributors; • our ability to successfully execute MSG Networks’ strategy for a direct-to-consumer offering and our ability to adapt to new content distribution platforms or changes in consumer behavior resulting from emerging technologies; • the ability of our Distributors to minimize declines in subscriber levels; • the impact of subscribers selecting Distributors’ packages that do not include our networks or distributors that do not carry our networks at all; • MSG Networks’ ability to renew or replace its media rights agreements with professional sports teams and its ability to perform its obligations thereunder; • the relocation or insolvency of professional sports teams with which we have a media rights agreement; 39 • general economic conditions, especially in the Las Vegas and New York City metropolitan areas where we have (or plan to have) significant business activities; • the demand for advertising and marketing partnership offerings at Sphere and advertising and viewer ratings for our networks; • competition, for example, from other venues (including the construction of new competing venues) and other regional sports and entertainment offerings; • our ability to effectively manage any impacts of the COVID-19 pandemic or future pandemics or public health emergencies, as well as renewed actions taken in response by governmental authorities or certain professional sports leagues, including ensuring compliance with rules and regulations imposed upon our venues, to the extent applicable; • the effect of any postponements or cancellations by third-parties or the Company as a result of the COVID-19 pandemic or future pandemics due to operational challenges and other health and safety concerns; • the extent to which attendance at Sphere in Las Vegas may be impacted by government actions, health concerns by potential attendees or reduced tourism; • the security of our MSG Networks program signal and electronic data; • the on-ice and on-court performance and popularity of the professional sports teams whose games we broadcast on our networks; • changes in laws, guidelines, bulletins, directives, policies and agreements, and regulations under which we operate; • any economic, social or political actions, such as boycotts, protests, work stoppages or campaigns by labor organizations, including the unions representing players and officials of the NBA and NHL, or other work stoppage that may impact us or our business partners; • seasonal fluctuations and other variations in our operating results and cash flow from period to period; • business, reputational and litigation risk if there is a cyber or other security incident resulting in loss, disclosure or misappropriation of stored personal information, disruption of our Sphere or MSG Networks businesses or disclosure of confidential information or other breaches of our information security; • activities or other developments (such as pandemics, including the COVID-19 pandemic) that discourage or may discourage congregation at prominent places of public assembly, including our venue; • the level of our capital expenditures and other investments; • the acquisition or disposition of assets or businesses and/or the impact of, and our ability to successfully pursue, acquisitions or other strategic transactions; • our ability to successfully integrate acquisitions, new venues or new businesses into our operations; • the operating and financial performance of our strategic acquisitions and investments, including those we do not control; • our internal control environment and our ability to identify and remedy any future material weaknesses; • the costs associated with, and the outcome of, litigation and other proceedings to the extent uninsured, including litigation or other claims against companies we invest in or acquire; • the impact of governmental regulations or laws, changes in these regulations or laws or how those regulations and laws are interpreted, as well as our ability to maintain necessary permits, licenses and easements; • the impact of sports league rules, regulations and/or agreements and changes thereto; • financial community perceptions of our business, operations, financial condition and the industries in which we operate; • the ability of our investees and others to repay loans and advances we have extended to them; 40 • the performance by our affiliated entities of their obligations under various agreements with us, as well as our performance of our obligations under such agreements and ongoing commercial arrangements; • the tax-free treatment of the MSGE Distribution (as defined below) and the distribution from MSG Sports in 2020; • our ability to achieve the intended benefits of the MSGE Distribution; and • the additional factors described under “Part I — Item 1A.
MSG Networks Senior Secured Credit Facility MSGN L.P., MSGN Eden, LLC, an indirect subsidiary of the Company (through the Merger) and the general partner of MSGN L.P., Regional MSGN Holdings LLC, an indirect subsidiary of the Company and the limited partner of MSGN L.P.
MSG Networks Senior Secured Credit Facility MSGN L.P., MSGN Eden, LLC, an indirect subsidiary of the Company (through the Networks Merger) and the general partner of MSGN L.P., Regional MSGN Holdings LLC, an indirect subsidiary of the Company and the limited partner of MSGN L.P.
Direct operating expenses For Fiscal Year 2022, direct operating expenses increased $57,419, or 22%, to $320,278 as compared to the prior year. The increases were primarily due to higher rights fees expenses of $45,024 and, to a lesser extent, an increase in other programming and production-related costs of $12,395.
Direct operating expenses For Fiscal Year 2022, direct operating expenses increased $57,419, or 22%, to $320,278 as compared to the prior year. The increases were primarily due to higher rights fees expenses of $45,024 and, to a lesser extent, an increase in other programming 54 and production-related costs of $12,395.
Introduction This MD&A is provided as a supplement to, and should be read in conjunction with, the audited consolidated and combined financial statements and footnotes thereto included in Item 8 of this Annual Report on Form 10-K to help provide an understanding of our financial condition, changes in financial condition and results of operations .
Introduction This MD&A is provided as a supplement to, and should be read in conjunction with, the audited consolidated financial statements and footnotes thereto included in Item 8 of this Annual Report on Form 10-K to help provide an understanding of our financial condition, changes in financial condition and results of operations .
These assessments considered factors such as: • macroeconomic conditions; • industry and market considerations; 83 • cost factors; • overall financial performance of the reporting unit; • other relevant company-specific factors such as changes in management, strategy or customers; and • relevant reporting unit specific events such as changes in the carrying amount of net assets.
These assessments considered factors such as: • macroeconomic conditions; • industry and market considerations; • cost factors; • overall financial performance of the reporting unit; • other relevant company-specific factors such as changes in management, strategy or customers; and • relevant reporting unit specific events such as changes in the carrying amount of net assets.
The Company believes AOI is an appropriate measure for evaluating the operating performance of its business segments and the Company on a consolidated and combined basis. AOI and similar measures with similar titles are common performance measures used by investors and analysts to analyze the Company’s performance.
The Company believes AOI is an appropriate measure for evaluating the operating performance of its business segments and the Company on a consolidated basis. AOI and similar measures with similar titles are common performance measures used by investors and analysts to analyze the Company’s performance.
This section cross-references a discussion of accounting policies considered to be important to our financial condition and results of operations and which require significant judgment and estimates on the part of management in their application .
This section cross-references a discussion of critical accounting policies considered to be important to our financial condition and results of operations and which require significant judgment and estimates on the part of management in their application.
As of June 30, 2022, there were no borrowings or letters of credit issued and outstanding under the MSGN Revolving Credit Facility. The MSGN Term Loan Facility amortizes quarterly in accordance with its terms beginning March 31, 2020 through September 30, 2024 with a final maturity date of October 11, 2024.
As of June 30, 2023, there were no borrowings or letters of credit issued and outstanding under the MSGN Revolving Credit Facility. The MSGN Term Loan Facility amortizes quarterly in accordance with its terms beginning March 31, 2020 through September 30, 2024 with a final maturity date of October 11, 2024.
The amount of an impairment loss is measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The Company elected to perform the qualitative assessment of impairment for all of the Company’s reporting units for the Fiscal Year 2022 annual impairment test.
The amount of an impairment loss is measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The Company elected to perform the qualitative assessment of impairment for all of the Company’s reporting units for the Fiscal Year 2023 annual impairment test.
The Company eliminates merger and acquisition- related costs because the Company does not consider such costs to be indicative of the ongoing operating performance of the Company as they result from an event that is of a non-recurring nature, thereby enhancing comparability.
The Company eliminates merger and acquisition-related costs, when applicable, because the Company does not consider such costs to be indicative of the ongoing operating performance of the Company as they result from an event that is of a non-recurring nature, thereby enhancing comparability.
This section provides an analysis of our results of operations for Fiscal Years 2022 and 2021 on both a (i) consolidated and combined basis and (ii) segment basis . Liquidity and Capital Resources. This section provides a discussion of our financial condition and liquidity, as well as an analysis of our cash flows for Fiscal Years 2022 and 2021.
This section provides an analysis of our results of operations for Fiscal Years 2023, 2022, and 2021 on both a (i) consolidated basis and (ii) segment basis . Liquidity and Capital Resources. This section provides a discussion of our financial condition and liquidity, as well as an analysis of our cash flows for Fiscal Years 2023, 2022, and 2021.
Certain of these factors in turn depend on the popularity and/or performance of the professional sports teams whose games we broadcast on our networks and host in our venues. Our Company’s future performance is dependent in part on general economic conditions and the effect of these conditions on our customers.
Certain of these factors in turn depend on the popularity and/or performance of the professional sports teams whose games we broadcast on our networks. Our Company’s future performance is dependent in part on general economic conditions and the effect of these conditions on our customers.
Under the authorization, shares of Class A Common Stock may be purchased from time to time in open market transactions, in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other factors. No shares have been repurchased to date.
Under the authorization, shares of Class A Common Stock may be purchased from time to time in open market transactions, in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other factors. No shares have been repurchased under the share repurchase program to date.
The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following: Revenue Recognition - Arrangements with Multiple Performance Obligations The Company enters into arrangements with multiple performance obligations, such as multi-year sponsorship agreements which may derive revenues for both the Company as well as MSG Sports within a single arrangement.
The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following: Revenue Recognition - Arrangements with Multiple Performance Obligations The Company may enter into arrangements with multiple performance obligations, such as multi-year sponsorship agreements which may derive revenues for the Company as well as MSG Entertainment and MSG Sports within a single arrangement.
The Company believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the various operating units of the Company’s business without regard to the settlement of an obligation that is not expected to be made in cash.
The Company believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the Company’s business without regard to the settlement of an obligation that is not expected to be made in cash.
To the extent costs are capitalized, the Company estimates the useful life of the related contract asset which may be the underlying contract term or the estimated customer life depending on the facts and circumstances surrounding the contract.
To the extent costs are capitalized, the Company estimates the useful life of the related contract asset which may be the underlying contract term or the estimated customer life depending on the facts and circumstances surrounding the contract. The contract asset is amortized over the estimated useful life.
MSG Networks resumed airing full regular season telecast schedules in Fiscal Year 2022 for its five professional teams across both the NBA and NHL, and as a result, its advertising revenue and certain operating expenses, including rights fees expense, reflect the same.
MSG Networks aired full regular season telecast schedules in Fiscal Year 2022 and Fiscal Year 2023 for its five professional teams across both the NBA and NHL, and, as a result, its advertising revenue and certain operating expenses, including rights fees expense, reflect the same.
In estimating the useful lives, the Company considers factors such as, but not limited to, risk of obsolescence, anticipated use, plans of the Company, and applicable laws and permit requirements. In light of these facts and circumstances, the Company has determined that its estimated useful lives are appropriate. 85
In estimating the useful lives, the Company considers factors such as, but not limited to, risk of obsolescence, anticipated use, plans of the Company, and applicable laws. In light of these facts and circumstances, the Company has determined that its estimated useful lives are appropriate. 62
See Note 20 to the consolidated and combined financial statements included in Item 8 of this Annual Report on Form 10-K for further details on the components of income tax and a reconciliation of the statutory federal rate to the effective tax rate.
See Note 16. Income Taxes to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details on the components of income tax and a reconciliation of the statutory federal rate to the effective tax rate.
In addition, management believes that the exclusion of gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan, which are included for the first time this period, provides investors with a clearer picture of the Company’s operating performance given that, in accordance with GAAP, gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan are recognized in Operating (income) loss whereas gains and losses related to the remeasurement of the assets under the Company’s Executive Deferred Compensation Plan, which are equal to and therefore fully offset the gains and losses related to the remeasurement of liabilities, are recognized in Other income (expense), net, which is not reflected in Operating income (loss).
In addition, management believes that the exclusion of gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan provides investors with a clearer picture of the Company’s operating performance given that, in accordance with GAAP, gains and losses related to the 46 remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan are recognized in Operating income (loss) whereas gains and losses related to the remeasurement of the assets under the Company’s Executive Deferred Compensation Plan, which are equal to and therefore fully offset the gains and losses related to the remeasurement of liabilities, are recognized in Other income (expense), net, which is not reflected in Operating income (loss).
In addition, the MSGN Credit Agreement requires a minimum interest coverage ratio of 2.00:1.00 for the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis. As of June 30, 2022, the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis were in compliance with the covenants.
In addition, the MSGN Credit Agreement requires a minimum interest coverage ratio of 2.00:1.00 for the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis. As of June 30, 2023, the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis were in compliance with the covenants. See Note 12.
The performance obligations included in each sponsorship agreement vary and may include advertising and other benefits such as, but not limited to, signage at The Garden and the Company’s other venues, digital advertising, and event or property specific advertising, as well as non-advertising benefits such as suite licenses and event tickets.
The performance obligations included in each sponsorship agreement vary and may include advertising and 60 other benefits such as, but not limited to, signage at Sphere, digital advertising, event or property specific advertising, as well as non-advertising benefits such as suite licenses and event tickets.
See Note 22, Segment Information to the consolidated and combined financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion on the definition of AOI.
See Note 18. Segment Information to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion on the definition of AOI.
See Note 16, Pension Plans and Other Postretirement Benefit Plans to the consolidated and combined financial statements included in 80 Item 8 of this Annual Report on Form 10-K for more information on the future funding requirements under our pension obligations.
Pension Plans and Other Postretirement Benefit Plans to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for more information on the future funding requirements under our pension obligations.
The Company also derives revenue from similar types of arrangements which are entered into by MSG Sports. Payment terms for such arrangements can vary by contract, but payments are generally due in installments throughout the contractual term.
The Company may also derive revenue from similar types of arrangements which are entered into by MSG Entertainment or MSG Sports. Payment terms for such arrangements can vary by contract, but payments are generally due in installments throughout the contractual term.
The discussion of our financial condition and liquidity includes summaries of our primary sources of liquidity, our contractual obligations and off balance sheet arrangements that existed at June 30, 2022. Seasonality of Our Business. This section discusses the seasonal performance of our Entertainment and MSG Networks segments . Recently Issued Accounting Pronouncements and Critical Accounting Policies.
The discussion of our financial condition and liquidity includes summaries of our primary sources of liquidity, our contractual obligations and off balance sheet arrangements that existed at June 30, 2023. Seasonality of Our Business. This section discusses the seasonal performance of our business . Recently Issued Accounting Pronouncements and Critical Accounting Policies .
This section provides a general description of our business, as well as other matters that we believe are important in understanding our results of operations and financial condition and in anticipating future trends. Results of Operations.
Our MD&A is organized as follows: Business Overview. This section provides a general description of our business, as well as other matters that we believe are important in understanding our results of operations and financial condition and in anticipating future trends. Results of Operations.
To the extent that we desire to access alternative sources of funding through the capital and credit markets, challenging U.S. and global economic and market conditions could adversely impact our ability to do so at that time.
To the extent that we desire to access alternative sources of funding through the capital and credit markets, market conditions could adversely impact our ability to do so at that time.
These commitments are presented exclusive of the imputed interest used to reflect the payment’s present value. See Note 11, Leases to the consolidated and combined financial statements included in Item 8 of this Annual Report on Form 10-K for more information.
These commitments are presented exclusive of the imputed interest used to reflect the payment’s present value. See Note 9. Leases to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for more information. 59 (b) See Note 12.
These decreases were partially offset by the impact of higher affiliation rates and a decrease in net unfavorable affiliate adjustments of approximately $9,400. 68 Effective October 1, 2021, Comcast’s license to carry MSG Networks expired and MSG Networks has not been carried by Comcast since that date.
These decreases were partially offset by net favorable affiliate adjustments of approximately $10,400 and the impact of higher affiliation rates. Effective October 1, 2021, Comcast’s license to carry MSG Networks expired and MSG Networks has not been carried by Comcast since that date.
As a result of the COVID-19 pandemic and league and government actions relating thereto, MSG Networks aired substantially fewer NBA and NHL telecasts during Fiscal Year 2021, as compared with Fiscal Year 2019 (the last full fiscal year not impacted by COVID-19), and consequently experienced a decrease in revenues, including a material decrease in advertising revenue.
As a result of the shortened 2020-21 NBA and NHL seasons, MSG Networks aired substantially fewer NBA and NHL telecasts during Fiscal Year 2021, as compared with Fiscal Year 2019 (the last full fiscal year not impacted by COVID-19), and consequently experienced a decrease in revenues, including a material decrease in advertising revenue.
During the first quarter of Fiscal Year 2022, the Company performed its most recent annual impairment test of goodwill and determined that there were no impairments of goodwill identified for any of its reporting units as of the impairment test date.
During the first quarter of Fiscal Year 2023, the Company performed its most recent annual impairment test of goodwill for the MSG Networks reporting unit and determined that there were no impairments of goodwill as of the impairment test date.
The Company entered into long-term media rights agreements with the Knicks and the Rangers, which provide the Company with the exclusive live media rights to the teams’ games in their local markets. In addition, the Company has multi-year media rights agreements with the Islanders, Devils and Sabres.
MSG Networks is a party to long-term media rights agreements with the Knicks and the Rangers, which provide the Company with the exclusive live media rights to the teams’ games in their local markets. In addition, MSG Networks has media rights agreements with the Islanders, Devils and Sabres.
Through June 30, 2022, The Venetian paid us $65,000 of this amount for construction costs. The ground lease has no fixed rent, however, if certain return objectives are achieve d, The Venetian w ill receive 25% of the after-tax cash flow in excess of such objectives. See “Part I — Item 1.
The ground lease has no fixed rent, however, if certain return objectives are achieve d, The Venetian w ill receive 25% of the after-tax cash flow in excess of such objectives. See “Part I — Item 1.
The Company continues to explore additional opportunities to expand our presence in the entertainment industry. Any new investment may not initially contribute to operating income, but is intended to become operationally profitable over time. Our results will also be affected by investments in, and the success of, new productions.
Any new investment may not initially contribute to operating income, but is intended to contribute to the success of the Company over time. Our results will also be affected by investments in, and the success of, new immersive productions.
The goodwill balance reported on the Company’s consolidated balance sheet as of June 30, 2022 by reportable segment was as follows: Entertainment $ 74,309 MSG Networks 424,508 Tao Group Hospitality 1,364 $ 500,181 The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred.
The goodwill balance reported on the Company’s consolidated balance sheet as of June 30, 2023 by reportable segment was as follows: Sphere $ 32,299 MSG Networks 424,508 $ 456,807 The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred.
Based on these impairment tests, the Company’s reporting units had sufficient safety margins, representing the excess of the estimated fair value of each reporting unit, derived from the most recent quantitative assessments, less its respective carrying value (including goodwill allocated to each respective reporting unit).
Based on the impairment test, the Company’s MSG Networks reporting unit had a sufficient safety margin, representing the excess of the estimated fair value of the reporting unit, derived from the most recent quantitative assessment, less its carrying value (including goodwill allocated to the reporting unit).
The fees we receive depend largely on the demand from subscribers for our programming. 57 Advertising Revenue The MSG Networks’ advertising revenue is largely derived from the sale of inventory in its live professional sports programming. As such, a disproportionate share of this revenue is earned in the second and third fiscal quarters.
Advertising Revenue The MSG Networks’ advertising revenue is largely derived from the sale of inventory in its live professional sports programming. As such, a disproportionate share of this revenue is earned in the second and third fiscal quarters. In certain advertising arrangements, the Company guarantees specific viewer ratings for its programming.
Since AOI is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies.
Since AOI is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. The Company has presented the components that reconcile operating income (loss), the most directly comparable GAAP financial measure, to AOI.
As this is an intercompany transaction, the commissions are eliminated in consolidation in the Company’s consolidated and combined statements of operations. Expenses — MSG Networks Direct operating expenses primarily include the cost of professional team rights acquired under media rights agreements to telecast various sporting events on our networks, and other direct programming and production-related costs of our networks.
Expenses — MSG Networks Direct operating expenses primarily include the cost of professional team rights acquired under media rights agreements to telecast various sporting events on our networks, and other direct programming and production-related costs of our networks.
As of June 30, 2022, the Company has three operating and reportable segments, Entertainment, MSG Networks and Tao Group Hospitality, consistent with the way management makes decisions and allocates resources to the business.
As of June 30, 2023, the Company has two reportable segments and two reporting units, Sphere and MSG Networks, consistent with the way management makes decisions and allocates resources to the business.
The Company’s operating results were materially impacted during Fiscal Year 2021 by the COVID-19 pandemic and government actions taken in response.
Factors Affecting Comparability The Company’s operations and operating results were materially impacted by the COVID-19 pandemic and actions taken in response by governmental authorities and certain professional sports leagues during Fiscal Year 2021.
Years Ended June 30, Change 2022 2021 Amount Percentage Revenues $ 608,155 $ 647,510 $ (39,355) (6) % Direct operating expenses 320,278 262,859 57,419 22 % Selling, general and administrative expenses 147,007 115,339 31,668 27 % Depreciation and amortization 9,394 7,335 2,059 28 % Restructuring charges 452 — 452 NM Operating income $ 131,024 $ 261,977 $ (130,953) (50) % Reconciliation to adjusted operating income: Share-based compensation 17,092 17,667 Depreciation and amortization 9,394 7,335 Restructuring charges 452 — Merger and acquisition related costs 27,683 4,502 Amortization for capitalized cloud computing arrangement costs 176 — Adjusted operating income $ 185,821 $ 291,481 $ (105,660) (36) % _________________ NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Years Ended June 30, Change 2022 2021 Amount Percentage Revenues $ 608,155 $ 647,510 $ (39,355) (6) % Direct operating expenses (320,278) (262,859) (57,419) 22 % Selling, general and administrative expenses (a) (126,129) (101,641) (24,488) 24 % Depreciation and amortization (9,394) (7,335) (2,059) 28 % Restructuring charges (452) — (452) NM Operating income $ 151,902 $ 275,675 $ (123,773) (45) % Reconciliation to adjusted operating income: Share-based compensation expense 17,092 17,667 (575) Depreciation and amortization 9,394 7,335 2,059 Restructuring charges 452 — 452 Merger and acquisition related costs 27,683 4,502 23,181 Amortization for capitalized cloud computing costs 176 — 176 Adjusted operating income $ 206,699 $ 305,179 $ (98,480) (32) % _________________ NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Judgments and uncertainties may result in materially different amounts being reported under different conditions or using different assumptions. See Note 2, Summary of Significant Accounting Policies to the consolidated and combined financial statements included in Item 8 of this Annual Report on Form 10-K for discussion of recently issued accounting pronouncements.
Recently Issued Accounting Pronouncements and Critical Accounting Estimates Recently Issued Accounting Pronouncements See Note 2. Summary of Significant Accounting Policies to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for discussion of recently issued accounting pronouncements.
If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, the first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill.
If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, the first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. 61 The estimates of the fair values of the Company’s reporting units are primarily determined using discounted cash flows, comparable market transactions or other acceptable valuation techniques, including the cost approach.
These conditions may also affect the number of concerts, family shows and other events that take place in the future. An economic downturn could adversely affect our business and results of operations.
These conditions may also affect the number of immersive productions, concerts, residencies and other events that take place in the future. An economic downturn could adversely affect our business and results of operations. The Company continues to explore additional opportunities to expand our presence in the entertainment industry.
Operating income For Fiscal Year 2022, operating income decreased $130,953, or 50%, to $131,024 as compared to the prior year. The decrease in operating income was primarily due to the increase in direct operating expenses, the decrease in revenues, and to a lesser extent, the increase in SG&A expenses.
The decrease in operating income was primarily due to the increase in direct operating expenses, the decrease in revenues, and to a lesser extent, the increase in selling, general and administrative expenses. Adjusted operating income For Fiscal Year 2022, adjusted operating income decreased $98,480, or 32%, to $206,699 as compared to the prior year.
For Fiscal Year 2022 , this segment represented approximately 35% of our consolidated revenues. Affiliation Fee Revenue Affiliation fee revenue is earned from Distributors for the right to carry the Company’s networks.
For Fiscal Year 2023 , this segment represented approximately 99.5% of our consolidated revenues. Affiliation Fee Revenue Affiliation fee revenue is earned from Distributors for the right to carry the Company’s networks. The fees we receive depend largely on the demand from subscribers for our programming.
See Note 15, Credit Facilities to the consolidated and combined financial statements included in Item 8 of this Annual Report on Form 10-K for additional information such as repayments of $740,000 made in Fiscal Year 2022 and scheduled repayment requirement of $78,512 in Fiscal Year 2023 on the MSGN Term Loan Facility, National Properties Term Loan Facility and Tao Senior Secured Credit Facilities.
Credit Facilities to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information such as repayments of $66,000 made in Fiscal Year 2023 and scheduled repayment requirement of $82,500 in Fiscal Year 2024 on the MSG Networks Term Loan.
Adjusted operating income (loss) (“AOI”) The Company evaluates segment performance based on several factors, of which the key financial measure is operating income (loss) before the following adjustments, which is referred to as adjusted operating income (loss) (“AOI”), a non-GAAP financial measure: (i) adjustments to remove the impact of non-cash straight-line leasing revenue associated with the Arena License Agreements with MSG Sports, (ii) depreciation, amortization and impairments of property and equipment, goodwill and intangible assets, (iii) amortization for capitalized cloud computing arrangement costs, (iv) share-based compensation expense, (v) restructuring charges or credits, (vi) merger and acquisition-related costs, including litigation expenses, (vii) gains or losses on sales or dispositions of businesses and associated settlements, (viii) the impact of purchase accounting adjustments related to business acquisitions, and (ix) gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan (which was established in November 2021).
We define adjusted operating income (loss) as operating income (loss) excluding: (i) depreciation, amortization and impairments of property and equipment, goodwill and intangible assets, (ii) amortization for capitalized cloud computing arrangement costs, (iii) share-based compensation expense, (iv) restructuring charges or credits, (v) merger and acquisition-related costs, including litigation expenses, (vi) gains or losses on sales or dispositions of businesses and associated settlements, (vii) the impact of purchase accounting adjustments related to business acquisitions, and (viii) gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan.
Weak economic conditions may lead to lower demand for our entertainment and nightlife offerings and programming content, suite licenses and tickets to our live productions, concerts, family shows and other events, which would also negatively affect concession and merchandise sales, lower levels of sponsorship and venue signage and decrease advertising revenues.
Weak economic conditions may lead to lower demand for our entertainment offerings (including The Sphere Experience) and programming content, which would also negatively affect concession and merchandise sales, and could lead to lower levels of advertising, sponsorship and venue signage.
In addition, during any period of non-carriage, MSG Networks’ segment operating income and AOI have been, and are expected to be, reduced by an amount that is approximately equal to the dollar amount of the reduced revenue.
Comcast’s non-carriage reduced MSG Networks’ subscribers by approximately 10% and reduced MSG Networks’ revenue by a comparable percentage. In addition, MSG Networks’ segment operating income and AOI were reduced by an amount that is approximately equal to the dollar amount of the reduced revenue.
Investing Activities Net cash used in investing activities for Fiscal Year 2022 increased by $680,981 to $804,164 as compared to the prior year primarily due to an increase in capital expenditures in the current year and the absence of proceeds from the maturity of short-term investments in the prior year.
Net cash used in investing activities for Fiscal Year 2022 increased by $680,981 to $804,164 as compared to Fiscal Year 2021 primarily due to an increase in capital expenditures in Fiscal Year 2022 related to Sphere in Las Vegas, partially offset by higher proceeds received from the sale of equity security investments in Fiscal Year 2021.
The increase in SG&A expenses reflected an increase of approximately $24,900 of merger and acquisition costs that occurred primarily during the first quarter of Fiscal Year 2022, inclusive of the impact of executive separation agreements and share based compensation expense.
The increase in selling, general and administrative expenses reflected an increase of approximately $24,900 of merger and acquisition costs that occurred in Fiscal Year 2022, inclusive of the impact of executive separation agreements and share based compensation expense. In addition, the increase in selling, general and administrative expenses was due to higher advertising, and marketing expenses of approximately $3,100.
Income taxes Income tax expense for Fiscal Year 2021 of $5,725 differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax expense of $25,704 related to an increase in valuation allowance, (ii) tax expense of $9,646 related to nondeductible officers’ compensation, (iii) tax expense of $3,857 relating to noncontrolling interests and (iv) tax expense of $3,117 related to change in state apportionment, partially offset by state income tax benefit of $4,705.
Income tax expense for continuing operations for Fiscal Year 2021 of $38,907 differs from income tax expense derived from applying the statutory federal rate of 21% to the pretax income primarily due to (i) tax expense of $9,646 related to nondeductible officers’ compensation, (ii) state income tax expense of $9,222, (iii) tax expense of $5,332 related to a change in the applicable state tax rate used to measure deferred taxes and (iv) an increase in the valuation allowance of $4,863.
Selling, general and administrative expenses For Fiscal Year 2022, SG&A expenses increased $31,668, or 27%, to $147,007 as compared to the prior year.
Selling, general and administrative expenses For Fiscal Year 2022, selling, general and administrative expenses increased $24,488, or 24%, to $126,129 as compared to the prior year.
(b) See Note 15, Credit Facilities to the consolidated and combined financial statements included in Item 8 of this Annual Report on Form 10-K for more information surrounding the principal repayments required under the credit agreements.
Credit Facilities to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for more information surrounding the principal repayments required under the credit agreements. (c) Pension obligations have been excluded from the table above as the timing of the future cash payments is uncertain. See Note 13.
MSGN L.P. is required to make mandatory prepayments in certain circumstances, including without limitation from the net cash proceeds of certain sales of assets (including MSGN Collateral) or casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights) and the incurrence of certain indebtedness, subject to certain exceptions.
Under certain circumstances, MSG LV is required to make mandatory prepayments on the loan, including prepayments in an amount equal to the net cash proceeds of casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights), subject to certain exceptions.
Adjusted operating income For Fiscal Year 2022, adjusted operating income decreased $105,660, or 36%, to $185,821 as compared to the prior year.
Adjusted operating income For Fiscal Year 2023, adjusted operating income decreased $36,810, or 18%, to $169,889 as compared to the prior year.
The MSGN Credit Agreement generally requires the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a c onsolidated basis to comply with a maximum total leverage ratio of 5.50:1.00, subject, at the option of MSGN L.P. to an upward adjustment to 6.00:1.00 during the continuance of certain events.
MSGN L.P. is required to make mandatory prepayments in certain circumstances, including without limitation from the net cash proceeds of certain sales of assets (including MSGN Collateral) or casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights) and the incurrence of certain indebtedness, subject to certain exceptions. 57 The MSGN Credit Agreement generally requires the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a c onsolidated basis to comply with a maximum total leverage ratio of 5.50:1.00, subject, at the option of MSGN L.P. to an upward adjustment to 6.00:1.00 during the continuance of certain events.
Critical Accounting Estimates The preparation of the Company’s consolidated and combined financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses.
These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Management believes its use of estimates in the consolidated financial statements to be reasonable.
Our principal uses of cash include working capital-related items (including funding our operations), capital spending (including our construction of MSG Sphere at The Venetian in Las Vegas, as described below), debt service, investments and related loans and advances that we may fund from time to time, and mandatory purchases from prior acquisitions.
Our uses of cash over the next 18 months are expected to be substantial and include working capital-related items (including funding our operations), capital spending (including completing construction of Sphere in Las Vegas and related original content, as described below), debt service and payments we expect to make in connection with the refinancing of our indebtedness, and investments and related loans and advances that we may fund from time to time.
The contract asset is amortized over the estimated useful life. 82 Impairment of Long-Lived and Indefinite-Lived Assets The Company’s long-lived and indefinite-lived assets accounted for approximately 74% of the Company’s consolidated total assets as of June 30, 2022 and consisted of the following: Goodwill $ 500,181 Indefinite-lived intangible assets 63,801 Amortizable intangible assets, net of accumulated amortization 164,084 Property and equipment, net 2,939,052 Right-of-use lease assets 446,499 $ 4,113,617 In assessing the recoverability of the Company’s long-lived and indefinite-lived assets when there is an indicator of potential impairment, the Company must make estimates and assumptions regarding future cash flows and other factors to determine the fair value of the respective assets.
Impairment of Long-Lived and Indefinite-Lived Assets The Company’s long-lived and indefinite-lived assets accounted for approximately 78% of the Company’s consolidated total assets as of June 30, 2023 and consisted of the following: Goodwill $ 456,807 Intangible assets, net 17,910 Property and equipment, net 3,307,161 Right-of-use lease assets 84,912 $ 3,866,790 In assessing the recoverability of the Company’s long-lived and indefinite-lived assets when there is an indicator of potential impairment, the Company must make estimates and assumptions regarding future cash flows and other factors to determine the fair value of the respective assets.
The Company believes that if the fair value of an indefinite-lived intangible asset exceeds its carrying value by greater than 10%, a sufficient safety margin has been realized. Other Long-Lived Assets For other long-lived assets, including right-of-use lease assets and intangible assets that are amortized, the Company evaluates assets for recoverability when there is an indication of potential impairment.
Other Long-Lived Assets For other long-lived assets, including right-of-use lease assets and intangible assets that are amortized, the Company evaluates assets for recoverability when there is an indication of potential impairment.
We will continue to explore additional domestic and international markets where we believe next-generation venues such as MSG Sphere can be successful. 77 Financing Agreements See Note 15, Credit Facilities to the consolidated and combined financial statements included in Item 8 of this Annual Report on Form 10-K for discussions of the Company’s debt obligations and various financing arrangements.
Financing Agreements See Note 12. Credit Facilities to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for discussions of the Company’s debt obligations and various financing arrangements.
The Company submitted planning applications to the local planning authority in March 2019 and that process, which requires various stages of review to be completed and approvals to be granted, is ongoing. Therefore, we do not have a definitive timeline at this time.
In February 2018, we announced the purchase of land in Stratford, London, which we expect will become home to a future Sphere. The Company submitted planning applications to the local planning authority in March 2019 and that process, which requires various stages of review to be completed and approvals to be granted, is ongoing.
We regularly monitor and assess our ability to meet our net funding and investing requirements, including the construction of MSG Sphere at The Venetian.
We regularly monitor and assess our ability to meet our net funding and investing requirements, including completing the construction of Sphere in Las Vegas and the refinancing of the MSG Networks Credit Facilities prior to their maturity in October 2024.
The following table summarizes the Company’s cash flow activities for Fiscal Years 2022, 2021 and 2020: Years Ended June 30, 2022 2021 2020 Net income (loss) $ (190,147) $ (166,519) $ 149,813 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities 268,317 88,347 170,703 Subtotal $ 78,170 $ (78,172) $ 320,516 Changes in working capital assets and liabilities 63,170 19,478 (12,393) Net cash provided by (used in) operating activities $ 141,340 $ (58,694) $ 308,123 Net cash used in investing activities (804,164) (123,183) (394,531) Net cash provided by (used in) financing activities (30,392) 592,685 (113,866) Effect of exchange rates on cash, cash equivalents and restricted cash (750) 8,027 2,927 Net increase (decrease) in cash, cash equivalents and restricted cash $ (693,966) $ 418,835 $ (197,347) 79 Operating Activities Net cash provided by operating activities for Fiscal Year 2022 increased by $200,034 to $141,340 as compared to the prior year primarily due to a lower operating loss in the current year and changes in working capital assets and liabilities, which included an increase in customers’ advanced payments associated with deferred revenue, an increase in payables, including related party payable and net operating lease liabilities, partially offset by higher prepaid revenue share for suite licenses and an increase in accounts receivable associated with increased revenues due to resuming normal operations post COVID-19.
The following table summarizes the Company’s cash flow activities for Fiscal Years 2023, 2022, and 2021: Years Ended June 30, 2023 2022 2021 Net cash provided by (used in) operating activities $ 153,591 $ 141,340 $ (58,694) Net cash used in investing activities (653,923) (804,164) (123,183) Net cash provided by (used in) financing activities 85,542 (30,392) 592,685 Effect of exchange rates on cash, cash equivalents and restricted cash (2,106) (750) 8,027 Net increase (decrease) in cash, cash equivalents and restricted cash $ (416,896) $ (693,966) $ 418,835 Operating Activities Net cash provided by operating activities for Fiscal Year 2023 increased by $12,251 to $153,591 as compared to the prior year primarily due to net income in the current year and changes in working capital assets and liabilities, which primarily included an increase in customers’ advanced payments associated with deferred revenue, an increase in payables and accruals, partially offset by a decrease in prepaid expenses and other current and non-current assets.
National Properties Facilities On June 30, 2022, MSG National Properties, an indirect, wholly-owned subsidiary of the Company, MSG Entertainment Group, LLC (“MSG Entertainment Group”) and certain subsidiaries of MSG National Properties entered into a credit agreement with JP Morgan Chase Bank, N.A., as administrative agent and the lenders and L/C issuers party thereto (the “National Properties Credit Agreement”), providing for a five- year, $650,000 sen ior secured term loan facility (the “National Properties Term Loan Facility”) and a five-year, $100,000 revolving credit facility (the “National Properties Revolving Credit Faci lity” and, together with the National Properties Term Loan Facility, the “National Properties Facilities”).
LV Sphere Term Loan Facility On December 22, 2022, MSG Las Vegas, LLC (“MSG LV”), an indirect, wholly-owned subsidiary of the Company, entered into a credit agreement with JP Morgan Chase Bank, N.A., as administrative agent and the lenders party thereto, providing for a five-year, $275,000 senior secured term loan facility (the “LV Sphere Term Loan Facility”).
It is unclear to what extent ongoing COVID-19 concerns, including with respect to new variants, could result in new government or league-mandated capacity restrictions or vaccination/mask requirements or impact the use of and/or demand for our performance, entertainment dining and nightlife venues, demand for our sponsorship and advertising assets, deter our employees and vendors from working at our venues (which may lead to difficulties in staffing) or otherwise materially impact our operations.
It is unclear to what extent pandemic concerns, including with respect to COVID-19 or other future pandemics, could (i) result in new government-mandated capacity or other restrictions or vaccination/mask requirements or impact the use of and/or demand for Sphere in Las Vegas, impact demand for the Company’s sponsorship and advertising assets, deter employees and vendors from working at Sphere in Las Vegas (which may lead to difficulties in staffing), deter artists from touring or (ii) result in professional sports leagues suspending, cancelling or otherwise reducing the number of games scheduled in the regular reason or playoffs, which could have a material impact on the distribution and/or advertising revenues of the MSG Networks segment, or otherwise materially impact our operations.
For additional information regarding the Company’s capital expenditures, including those related to MSG Sphere, see Note 22, Segment Information to the consolidated and combined financial statements included in Item 8 of this Annual Report on Form 10-K. In February 2018, we announced the purchase of land in Stratford, London, which we expect will become home to a future MSG Sphere.
Credit Facilities to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for a discussion of the MSG Networks Credit Facilities, the LV Sphere Term Loan Facility and the DDTL Facility. 56 For additional information regarding the Company’s capital expenditures, including those related to Sphere in Las Vegas, see Note 18.
The decrease in adjusted operating income was lower than the decrease in operating income of $130,953 primarily due to the increase in merger and acquisition-related costs of approximately $25,000, which are excluded in the calculation of adjusted operating income. 69 Tao Group Hospitality The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating income (loss) to adjusted operating income (loss) for the Company’s Tao Group Hospitality segment.
The increased adjusted operating loss was primarily due to the increase in selling, general and administrative expenses, partially offset by higher merger and acquisition related costs, and higher depreciation and amortization expenses, both of which are excluded in the calculation of adjusted operating loss. 53 MSG Networks The tables below set forth, for the periods presented, certain historical financial information and a reconciliation of operating income to adjusted operating income for the Company’s MSG Networks segment.
Financing Activities Net cash used in financing activities for Fiscal Year 2022 increased by $623,077 to $30,392 as compared to the prior year primarily due to lower principal payments for the National Properties Term Loan Facility in Fiscal Year 2021 of $46,750 versus $725,000 in Fiscal Year 2022.
Net cash used in financing activities for Fiscal Year 2022 increased by $623,077 to $30,392 as compared to the prior year primarily due to higher repayments of long-term debt in Fiscal Year 2022, partially offset by higher proceeds received from term loans in Fiscal Year 2022.
In this MD&A, there are statements concerning the future operating and future financial performance of Madison Square Garden Entertainment Corp. and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” “MSG Entertainment,” or the “Company”), including the impact of the COVID-19 pandemic and COVID-19 variants on our future operations, the timing and costs of new venue construction and the development of related content, our plans to pursue additional debt financing, our expansion plan for Tao Group Hospitality, and the status of the non-carriage of our networks by Comcast Corporation (“Comcast”).
In this MD&A, there are statements concerning the future operating and future financial performance of Sphere Entertainment Co. and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” “Sphere Entertainment,” or the “Company”), including (i) the timing and costs of venue construction and the development of related content, (ii) our plans to refinance MSG Networks’ existing debt, (iii) the success of Sphere and The Sphere Experience, (iv) our plans for the potential disposition of the Company’s retained interest in Madison Square Garden Entertainment Corp.
See Note 9, Investments in Nonconsolidated Affiliates to the consolidated and combined financial statements included in Item 8 of this Annual Report on Form 10-K for more information. 60 Results of Operations Comparison of the Fiscal Year Ended June 30, 2022 versus the Fiscal Year Ended June 30, 2021 Consolidated R esults of Operations The table below sets forth, for the periods presented, certain historical financial information.
See below for further discussion. 44 Results of Operations Comparison of the Fiscal Year Ended June 30, 2023 versus the Fiscal Year Ended June 30, 2022 Consolidated R esults of Operations The table below sets forth, for the periods presented, certain historical financial information.
Income taxes Income tax benefit for Fiscal Year 2022 of $25,785 differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax expense of $12,759 related to nondeductible officers’ compensation, (ii) tax expense of $10,723 related to nondeductible transaction costs relating to the Merger, and (iii) increase in valuation allowance of $11,402, partially offset by state income tax benefit of $10,003 and a tax benefit relating to change in state apportionment of $4,199. 62 Income tax expense for Fiscal Year 2021 of $5,725 differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax expense of $25,704 related to an increase in valuation allowance, (ii) tax expense of $9,646 related to nondeductible officers’ compensation, (iii) tax expense of $3,857 relating to noncontrolling interests and (iv) tax expense of $3,117 related to change in state apportionment, partially offset by state income tax benefit of $4,705.
Income tax benefit from continuing operations for Fiscal Year 2022 of $29,830 differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax expense of $12,759 related to nondeductible officers’ compensation, partially offset by state income tax benefit of $3,970 and a decrease in the valuation allowance of $2,200.
See Note 24, Accounting for Entertainment Distribution and Merger Transactions to the consolidated and combined financial statements included in Item 8 of this Annual Report on Form 10-K for more information regarding the Merger.
As of April 20, 2023, the MSG Entertainment business met the criteria for discontinued operations and was classified as a discontinued operation. See Note 3. Discontinued Operations to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details regarding the MSGE Distribution.
Relative to our cost estimate above, our actual construction costs for MSG Sphere at The Venetian incurred through June 30, 2022 were approximately $1,530,000, which is net of $65,000 received from the Venetian.
This cost estimate is net of $75,000 that The Venetian has agreed to pay to defray certain construction costs. Relative to our cost estimate above, our actual construction costs for Sphere in Las Vegas paid through August 18, 2023 were approximately $2,250,000, which is net of $65,000 received from The Venetian.
These amounts represent the share of net income (loss) from the Company’s investments in Tao Group Hospitality and BCE that are not attributable to the Company. 64 Business Segment Results Entertainment The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating loss to adjusted operating loss for the Company’s Entertainment segment.
The net increase was attributable to the following: Increase in adjusted operating loss of the Sphere segment $ (61,242) Decrease in adjusted operating income of the MSG Networks segment (36,810) $ (98,052) 47 Business Segment Results Sphere The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating loss to adjusted operating loss for the Company’s Sphere segment.
Net cash used in operating activities for Fiscal Year 2021 increased by $366,817 to $58,694 as compared to the prior year primarily due to a higher operating loss in the current year and changes in working capital assets and liabilities, which included higher cash collection associated with deferred revenue, higher accrued operating expenses due to an increase in business due to the easing of league and governmental restrictions related to the COVID-19 pandemic, partially offset by lower cash receipts from collections of accounts receivables and payments for certain prepaid insurance.
Net cash provided by operating activities for Fiscal Year 2022 increased by $200,034 to $141,340 as compared to the prior year primarily due to positive adjustments to reconcile net loss to net cash provided by operating activities in Fiscal Year 2022 and changes in working capital assets and liabilities, which primarily included an increase in payables and accruals, partially offset by lower cash receipts from collections of accounts receivables.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA 25 basis point decrease in these assumed discount rates would increase the total net periodic benefit cost for the Company’s Pension Plans by $100 and would result in no impact to the net periodic benefit cost for the Company’s Postretirement Plan for Fiscal Year 2022. 86 The expected long-term return on plan assets is based on a periodic review and modeling of the plans’ asset allocation structures over a long-term horizon.
Biggest changeA 25 basis point decrease in these assumed discount rates would increase the total net periodic benefit cost for the Company’s Pension Plans by $40 and would result in no impact to the net periodic benefit cost for the Company’s Postretirement Plan for Fiscal Year 2023.
Expectations of returns for each asset class are the most important of the assumptions used in the review and modeling, and are based on comprehensive reviews of historical data, forward-looking economic outlook, and economic/financial market theory.
Expectations of returns for each asset class are the most important of the assumptions used in the review and modeling, and are based on comprehensive reviews of historical data, forward-looking economic outlook, and economic/ 63 financial market theory.
Defined Benefit Pension Plans and Other Postretirement Benefit Plans: The Company utilizes actuarial methods to calculate pension and other postretirement benefit obligations and the related net periodic benefit cost which are based on actuarial assumptions.
Defined Benefit Pension Plans and Other Postretirement Benefit Plan: The Company utilizes actuarial methods to calculate pension and other postretirement benefit obligations and the related net periodic benefit cost which are based on actuarial assumptions.
A 25 basis point decrease in the long-term return on pension plan assets assumption would increase net periodic pension benefit cost by $290 for Fiscal Year 2022. Item 8. Financial Statements and Supplementary Data The Financial Statements required by this Item 8 appear beginning on page F-1 of this Annual Report on Form 10-K, and are incorporated by reference herein.
A 25 basis point decrease in the long-term return on pension plan assets assumption would increase net periodic pension benefit cost by $50 for Fiscal Year 2023. Item 8. Financial Statements and Supplementary Data The Financial Statements required by this Item 8 appear beginning on page F-1 of this Annual Report on Form 10-K, and are incorporated by reference herein.
The weighted average expected long-term rate of return on plan assets for the Company’s funded pension plans was 4.79% for Fiscal Year 2022. Performance of the capital markets affects the value of assets that are held in trust to satisfy future obligations under the Company’s funded plans.
The weighted average expected long-term rate of return on plan assets for the Company’s funded pension plans was 5.00% for Fiscal Year 2023. Performance of the capital markets affects the value of assets that are held in trust to satisfy future obligations under the Company’s funded plans.
The effect of a hypothetical 200 basis point increase in floating interest rate prevailing as of June 30, 2022 and continuing for a full year would increase the Company’s interest expense on the outstanding amounts under the credit facilities by $35,247.
The effect of a hypothetical 200 basis point increase in floating interest rate prevailing as of June 30, 2023 and continuing for a full year would increase the Company’s interest expense on the outstanding amounts under the credit facilities by $24,145.
A 25 basis point decrease in each of these assumed discount rates would increase the projected benefit obligations for the Company’s Pension Plans and Postretirement Plan at June 30, 2022 by $4,640 and $50, respectively.
A 25 basis point decrease in each of these assumed discount rates would increase the projected benefit obligations for the Company’s Pension Plans and Postretirement Plan at June 30, 2023 by $890 and $30, respectively.
As of June 30, 2022, a uniform hypothetical 10% fluctuation in the GBP/USD exchange rate would have resulted in a change of $18,315 in the Company’s net asset value.
As of June 30, 2023, a uniform hypothetical 10% fluctuation in the GBP/USD exchange rate would have resulted in a change of $17,686 in the Company’s net asset value.
We do not plan to enter into derivative financial instrument transactions for foreign currency speculative purposes. During Fiscal Year 2022, the GBP/USD exchange rate ranged from 1.1999 to 1.3967 as compared to GBP/USD exchange rate of 1.3836 as of June 30, 2022, a fluctuation of ranging from 1% to 18%.
We do not plan to enter into derivative financial instrument transactions for foreign currency speculative purposes. During Fiscal Year 2023, the GBP/USD exchange rate ranged from 1.0695 to 1.2835 as compared to GBP/USD exchange rate of 1.2719 as of June 30, 2023, a fluctuation of ranging from 1% to 20%.
The weighted-average discount rates used to determine benefit obligations as of June 30, 2022 for the Company’s Pension Plans and Postretirement Plan were 4.85% and 4.64%, respectively.
The weighted-average discount rates used to determine benefit obligations as of June 30, 2023 for the Company’s Pension Plans and Postretirement Plan were 5.34% and 5.41%, respectively.
Foreign Currency Exchange Rate Exposure: The Company is exposed to market risk resulting from foreign currency fluctuations, primarily to the British pound sterling through our net investment position initiated with our acquisition of land in London in the second quarter of Fiscal Year 2018 for future MSG Sphere development and through cash and invested funds which will be deployed in the construction of our London venue.
Foreign Currency Exchange Rate Exposure: The Company is exposed to market risk resulting from foreign currency fluctuations, primarily to the British pound sterling through the land we own in London for future Sphere development and through cash and invested funds which will be deployed in the construction of our London venue.
The weighted-average discount rates used to determine service cost, interest cost and the projected benefit obligation components of net periodic benefit cost were 2.64%, 1.61% and 2.20%, respectively, for Fiscal Year 2022 for the Company’s Postretirement Plan.
The weighted-average discount rates used to determine service cost, interest cost and the projected benefit obligation components of net periodic benefit cost were 4.89%, 4.38% and 4.66%, respectively, for Fiscal Year 2023 for the Company’s Postretirement Plan.
Potential Interest Rate Risk Exposure: The Company, through its subsidiaries, MSG National Properties and MSG Networks, and the consolidation of Tao Group Hospitality, is subject to potential interest rate risk exposure related to borrowings incurred under their respective credit facilities. Changes in interest rates may increase interest expense payments with respect to any borrowings incurred under these credit facilities.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Potential Interest Rate Risk Exposure: The Company, through its subsidiaries, MSG LV and MSG Networks, is subject to potential interest rate risk exposure related to borrowings incurred under their respective credit facilities. Changes in interest rates may increase interest expense payments with respect to any borrowings incurred under these credit facilities.
The weighted-average discount rates used to determine service cost, interest cost and the projected benefit obligation components of net periodic benefit cost were 3.13%, 1.98% and 2.60%, respectively, for Fiscal Year 2022 for the Company’s Pension Plans.
The weighted-average discount rates used to determine service cost, interest cost and the projected benefit obligation components of net periodic benefit cost were 5.06%, 4.55% and 4.81%, respectively, for Fiscal Year 2023 for the Company’s Pension Plans.
Removed
Item 7A. Quantitative and Qualitative Disclosures About Market Risk There were no material changes to the disclosures regarding market risks in connection with our pension and postretirement plans, interest rate risk exposure, and foreign currency exchange rate risk exposure.
Added
The expected long-term return on plan assets is based on a periodic review and modeling of the plans’ asset allocation structures over a long-term horizon.

Other SPHR 10-K year-over-year comparisons