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What changed in Sphere Entertainment Co.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Sphere Entertainment Co.'s 2023 and 2024 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 2024 report.

+673 added−586 removedSource: 10-K (2024-08-14) vs 10-K (2023-06-30)

Top changes in Sphere Entertainment Co.'s 2024 10-K

673 paragraphs added · 586 removed · 440 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

110 edited+35 added−38 removed52 unchanged
Biggest changeTogether with MSG Entertainment and MSG Sports, we have furthered these objectives under our expanded Talent Management, Diversity and Inclusion function, including: Workforce: Embedding Diversity and Inclusion through Talent Actions • Created a common definition of “potential” and an objective potential assessment to de-bias talent review conversations so employees have an opportunity to learn, grow and thrive.
Biggest changeTogether with MSG Entertainment and MSG Sports, we have furthered these objectives under our expanded People Development, Diversity and Inclusion function, including: Workforce: Embedding Diversity and Inclusion through Talent Actions • Created a common definition of “potential” and an objective potential assessment to de-bias talent review conversations so employees have an opportunity to learn, grow and thrive; • Through our performance management process, we encourage regular conversations between managers and employees regarding goals, career growth and productivity; • Integrated D&I best practices into our performance management and learning and development strategies with the goal of driving more equitable outcomes; • Developed an emerging talent list to expand our talent pool to better identify and provide specific development opportunities for high performing employees, including diverse talent; and 11 • Required all employees to participate in our “Uncover the Elements of an Effective Interview” training prior to participation in any interview process to educate employees on various forms of bias in the interview process.
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”).
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 the Buffalo Bills (the “Bills”) of the National Football League (the “NFL”).
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.
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 Network 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.
Furthermore, the Company would have the opportunity to leverage its in-house expertise – including across venue management, design and construction, operations and technology – to drive new revenue streams. An increasing number of Sphere venues would also create additional monetization opportunities for the Company’s original content, including Postcard From Earth.
Furthermore, the Company would have the opportunity to leverage its in-house expertise – including across venue management, design and construction, operations and technology – to drive new revenue streams. An increasing number of Sphere venues would also create additional monetization opportunities for the Company’s original content library, including Postcard from Earth.
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.
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.
We use the following, as well as other social media channels, to disclose public information to investors, the media and others: • Our website (www.sphereentertainmentco.com); 12 • Our LinkedIn account (www.linkedin.com/company/sphere-entertainment-co/); • Our X (formerly Twitter) account (x.com/SphereVegas); and • Our Instagram account (instagram.com/spherevegas). Our officers may use similar social media channels to disclose public information.
We use the following, as well as other social media channels, to disclose public information to investors, the media and others: • Our website (www.sphereentertainmentco.com); • Our LinkedIn account (www.linkedin.com/company/sphere-entertainment-co/); • Our X (formerly Twitter) account (x.com/SphereVegas); and • Our Instagram account (instagram.com/spherevegas). Our officers may use similar social media channels to disclose public information.
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. Competition in Our MSG Networks Business Distribution of Programming Networks The business of distributing programming networks is highly competitive.
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.” Competition in Our MSG Networks Business Distribution of Programming Networks The business of distributing programming networks is highly competitive.
Our programming networks face competition from other programming networks, including other regional sports and entertainment networks, for the right to be carried by a particular Distributor, and for the right to be carried on the service tier(s) that will attract the most subscribers.
Our programming networks face competition from other programming networks, including national networks and other regional sports and entertainment networks, for the right to be carried by a particular Distributor, and for the right to be carried on the service tier(s) that will attract the most subscribers.
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.
Our 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.
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.
Our registrations and applications relate to trademarks and inventions associated with, among other of our brands, Sphere, The Sphere Experience, Exosphere, Sphere Studios, Sphere Immersive Sound and MSG Networks.
New or existing programming networks that are owned by or affiliated with broadcast networks such as NBC, ABC, CBS or Fox, or broadcast station owners, such as Sinclair, may have a competitive advantage over our networks in obtaining distribution through the “bundling” of agreements to carry those programming networks with the agreement giving the Distributor the right to carry a broadcast station owned by or affiliated with the network.
New or existing programming networks that are owned by or affiliated with broadcast networks such as NBC, ABC, CBS or Fox, or broadcast station owners such as Sinclair, may have a competitive advantage over our networks in obtaining distribution through the “bundling” of agreements to carry those programming networks with the agreement giving the Distributor the right to carry a broadcast station, or group of other programming networks, owned by or affiliated with the network.
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.
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.
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.
For example, California passed a comprehensive data privacy law, the California Consumer Privacy Act of 2018 (the “CCPA”), and other states including New Jersey, Virginia, Colorado, Utah and Connecticut have also passed similar laws, and various additional states may do so in the near future.
Competition Competition in Our Sphere Business Our Sphere business competes, in certain respects and to varying degrees, for guests, advertisers and marketing partners with other leisure-time activities such as television, radio, motion pictures, sporting events and other live performances, entertainment and nightlife venues, the Internet, social media and social networking platforms, online and mobile services, and the large number of other entertainment and public attraction options available to members of the public, advertisers and marketing partners.
Competition Competition in Our Sphere Business Our Sphere business competes, in certain respects and to varying degrees, for guests, advertisers and marketing partners with other leisure-time activities and entertainment options such as other live performances, sporting events, music festivals, television, radio, motion pictures, restaurants and nightlife venues, the Internet, social media and social networking platforms, online and mobile services, and the large number of other entertainment and public attraction options available to members of the public, advertisers and marketing partners.
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.
Most notably, 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.
Each puck contains 48 individual LED diodes, with each diode capable of displaying 256 million different colors. • The main venue bowl featuring a 16K x 16K LED screen – a 160,000-square foot high-resolution interior display plane that surrounds the audience, creating a fully immersive visual environment. • Sphere Immersive Sound, powered by HOLOPLOT – an advanced audio system that delivers crystal-clear, concert-grade sound to every seat in Sphere through beamforming and wave field synthesis technology. • 4D multi-sensory technologies – which enable guests to feel experiences such as vibrations, wind, scent and changing temperatures to enhance storytelling.
Each puck contains 48 individual LED diodes, with each diode capable of displaying more than 1 billion different colors. • The main venue bowl featuring a 16K x 16K LED screen – a 160,000-square foot high-resolution interior display plane that surrounds the audience, creating a fully immersive visual environment. • Sphere Immersive Sound, powered by HOLOPLOT – an advanced audio system that delivers crystal-clear, concert-grade sound to every seat in Sphere through beamforming and wave field synthesis technology. • 4D multi-sensory technologies – which enable guests to feel experiences such as vibrations, wind, scent and changing temperatures to enhance storytelling.
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.
See “ Item 1A. 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 Advertising, Sponsorship, and Premium Hospitality Partner Offerings Sphere’s unique platform and technological capabilities offer powerful and premium opportunities for advertisers and marketing partners to engage with audiences.
Our Advertising, Sponsorship, and Premium Hospitality Partner Offerings We believe Sphere’s unique platform and technological capabilities offer powerful and premium opportunities for advertisers and marketing partners to engage with audiences.
Investor Relations can be contacted at Sphere Entertainment Co., Two Penn Plaza, New York, New York 10121, Attn: Investor Relations, telephone: 212-465-6618, e-mail: investor@sphereentertainmentco.com.
Investor Relations can be contacted at Sphere Entertainment Co., Two Penn Plaza, New York, New York 10121, Attn: Investor Relations, telephone: 212-465-6618, e-mail: investor@thesphere.com.
We cannot predict, however, whether steps taken by us to protect our proprietary rights will be adequate to prevent misappropriation of these rights or protect against vulnerability to oppositions or cancellation actions due to non-use. See “— Item 1A.
We cannot predict, however, whether steps taken by us to protect our proprietary rights will be adequate to allow for registration, prevent misappropriation of these rights or protect against vulnerability to oppositions or cancellation actions due to non-use. See “— Item 1A.
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.
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. ” 7 Labor Our business is also subject to regulation regarding working conditions, overtime and minimum wage requirements.
On May 3, 2023, the Company completed the sale of its 66.9% majority interest in TAO Group Sub-Holdings LLC (“Tao Group Hospitality”) to a subsidiary of Mohari Hospitality Limited, a global investment company focused on the luxury lifestyle and hospitality sectors (the “Tao Group Hospitality Disposition”). The Company reports on a fiscal year basis ending on June 30th.
On May 3, 2023, the Company completed the sale of its 66.9% majority interest in TAO Group Sub-Holdings LLC (“Tao Group Hospitality”) to a subsidiary of Mohari Hospitality Limited, a global investment company focused on the luxury lifestyle and hospitality sectors (the “Tao Group Hospitality Disposition”). The Company has historically reported on a fiscal year basis ending on June 30th.
In June 2023, MSG Networks introduced MSG+, a direct to consumer streaming product (replacing MSG GO), which allows subscribers to access MSG Network and MSG Sportsnet as well as on demand content on smartphones, tablets, computers and other devices.
In June 2023, MSG Networks introduced MSG+, a DTC streaming product (replacing MSG GO), which allows subscribers to access MSG Network and MSG Sportsnet as well as on demand content on smartphones, tablets, computers and other devices.
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.
See “Item 1A. Risk Factors — Operational and Economic Risks — Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations. ” Ticket Sales Our business is subject to legislation governing the sale and resale of tickets and consumer protection statutes generally.
The Company expects that Sphere in Las Vegas will deliver significant exposure not only to the guests that attend events at the venue and the more than 40 million annual visitors to Las Vegas, and the over 2 million local residents, but also around the world on social media.
Sphere in Las Vegas can deliver significant exposure not only to the guests that attend events at the venue and the more than 40 million annual visitors to Las Vegas, and the over 2 million local residents, but also around the world on social media.
Sphere represents an innovative business model for entertainment venues, with new and expanded revenue opportunities that span across original immersive productions, performances, concerts and residencies, sporting and corporate events, advertising and sponsorship, and premium hospitality, as well as food, beverage and merchandise.
Sphere represents an innovative business model for entertainment venues, with new and expanded revenue opportunities that span across original immersive productions, concerts and residencies, marquee sports and corporate events, advertising and sponsorship, and premium hospitality, as well as food, beverage and merchandise.
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.
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 NFL’s Giants and Bills.
We recently introduced our own DTC product, which provides consumers an alternative to accessing our programming through our Distributors, but there can be no assurance that we will successfully execute our strategy for such offering.
We introduced our own DTC product in June 2023, which provides consumers an alternative to accessing our programming through our Distributors, but there can be no assurance that we will successfully execute our strategy for such offering.
In January 2023, the Company, through an indirect subsidiary, extended financing to Holoplot in the form of a three-year convertible loan of €18.8 million, equivalent to $20.5 million using the applicable exchange rate at the time of the transaction.
In January 2023, the Company extended financing to Holoplot in the form of a three-year convertible loan of €18.8 million, equivalent to $20.5 million using the applicable exchange rate at the time of the transaction.
The Company is collaborating with third-party creators and is also developing its own content ranging from original immersive productions, purpose-built for Sphere, to the establishment of a dynamic library of content that can be used by artists or third parties who want to bring their experiences to life – whether for concerts, residencies or corporate events.
The Company is developing its own content ranging from original immersive productions, purpose-built for Sphere, to the establishment of a dynamic library of content that can be used by artists or third parties who want to bring their experiences to life – whether for concerts, residencies or corporate events.
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.
Sphere Studios is 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, and Exosphere content creation.
In addition, the Company has entered into a multi-year agreement with Formula 1 for a full multi-day takeover of Sphere, starting with its inaugural Las Vegas Grand Prix in November 2023.
In addition, the Company entered into a multi-year agreement with Formula 1 for a full multi-day takeover of Sphere, which started with its inaugural Las Vegas Grand Prix in November 2023.
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.
MSG Networks also showcases a wide array of other sports and entertainment programming, which includes Westchester Knicks basketball, NY/NJ Gotham FC of the National Women’s Soccer League, New York team of the Professional Women’s Hockey League (PWHL), 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.
Sphere will offer bespoke advertising and sponsorship opportunities, including externally with the Exosphere and internally with immersive galleries, interactive installations, the atrium, and premium hospitality spaces.
Sphere offers bespoke advertising and sponsorship opportunities, including externally with the Exosphere and internally with immersive galleries, interactive installations, the Atrium, and premium hospitality spaces.
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.
In addition to existing DTC 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. For example, ESPN, Warner Bros.
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.
Workplace: Building an Inclusive and Accessible Community • Expanded our efforts with the MSG D&I 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.
The venue’s technologies and design will enable it to seamlessly accommodate a variety of different event types, with fast turnover between events, and accommodate multiple events per-day, year-round. This creates the opportunity for Sphere to be more efficiently utilized than traditional large-scale venues.
The venue’s technologies and design are intended to enable it to seamlessly accommodate a variety of different event types, with fast turnover between events, and accommodate multiple events per-day, year-round. We believe this allows for Sphere to be more efficiently utilized than traditional large-scale venues.
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+.
It includes two award-winning regional sports and entertainment networks, MSG Network and MSG Sportsnet, as well as its DTC authenticated streaming product, MSG+.
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.
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: A Next-Generation Entertainment Medium: Sphere combines cutting-edge technologies with multi-sensory storytelling to deliver immersive experiences at an unparalleled scale.
Regulation The rules, regulations, policies and procedures affecting our business are subject to change. The following paragraphs describe the existing legal and regulatory requirements that are most significant to our business today; they do not purport to describe all present and proposed laws and regulations affecting our business.
The following paragraphs describe the existing legal and regulatory requirements that are most significant to our business today; they do not purport to describe all present and proposed laws and regulations affecting our business.
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.
These technologies come together to create a powerful platform, which we believe makes Sphere the venue of choice for a wide variety of content – including original immersive productions; concerts and residencies from the world’s biggest artists; and marquee sports and corporate events.
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.
Developing Original Content: Sphere Studios 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.
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 — Risks Related to Cybersecurity and Intellectual Property — We Have in the Past and May in the Future Become Subject to Infringement or Other Claims Relating to Our Content or Technology. ” and “— 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. 6 In Fiscal Year 2019, the Company acquired a 30% interest in SACO Technologies Inc.
Program Carriage The FCC has made changes to the program carriage rules, which prohibit Distributors from favoring their affiliated programming networks over unaffiliated similarly situated programming networks in the rates, terms and conditions of carriage agreements between programming networks and cable operators or other MVPDs.
Program Carriage The FCC’s program carriage rules prohibit Distributors from favoring their affiliated programming networks over unaffiliated similarly situated programming networks in the rates, terms and conditions of carriage agreements between programming networks and cable operators or other MVPDs.
The Company expects that Sphere in Las Vegas will deliver significant exposure to the guests that attend events at the venue, including the more than 40 million annual visitors and over 2 million local residents to Las Vegas, but also around the world on social media.
Sphere in Las Vegas can deliver significant exposure to not only the guests that attend events at the venue, but also to the more than 40 million annual visitors to and over 2 million local residents of Las Vegas, and around the world on social media.
Our DTC offering represents a new consumer offering for which we have limited prior experience and we may not be able to successfully predict the demand for such product or the impact such product may have on our traditional distribution business, including with respect to renewals of our affiliation agreements with Distributors.
Our DTC offering represents a new consumer offering for which we have limited prior experience and we may not be able to successfully predict the demand for such product or the impact such product may have on our traditional distribution business.
Our Strengths • Strong position in live entertainment and media through: ◦ A next-generation entertainment medium powered by cutting-edge technologies; and ◦ Two award-winning regional sports and entertainment networks • Presence in both Las Vegas, a market which attracts more than 40 million visitors each year and has over 2 million local residents, and the New York Designated Market Area – the nation’s largest media market • Deep industry relationships across music, entertainment, corporate, and sports that can be leveraged to drive events to Sphere • Focus on world-class guest experience, backed by decades of experience in venue management • In-house studio and production expertise for original content creation for Sphere • Established history of successfully planning and executing comprehensive venue design and construction projects • Portfolio of patents and other intellectual property spanning across Sphere design and construction, audio delivery, cinematic video display systems, and in-venue technologies • Exclusive local media rights to live games of five professional New York-area NBA and NHL teams, including long-term agreements with the Knicks and Rangers; and • A strong and seasoned management team.
Our Strengths • Strong position in live entertainment and media through: ◦ A next-generation entertainment medium powered by cutting-edge technologies; and ◦ Two award-winning regional sports and entertainment networks as well as a DTC and authenticated streaming service. • Presence in both Las Vegas, a market which attracts more than 40 million visitors each year and has over 2 million local residents, and the New York Designated Market Area – the nation’s largest media market; • Deep industry relationships across music, entertainment, corporate, and sports that drive events to Sphere; • Focus on world-class guest experience, backed by decades of experience in venue management; • In-house interdisciplinary team of creative, production, technology and software experts who provide full creative and production services, including strategy and concept, capture, post-production and show production; • Established history of successfully planning and executing comprehensive venue design and construction projects; • Portfolio of patents and other intellectual property spanning across Sphere design and construction, audio delivery, cinematic video display systems, and in-venue technologies; • Exclusive local media rights to live games of five professional New York-area NBA and NHL teams, including long-term agreements with the Knicks and Rangers; and • A strong and seasoned management team.
Sphere will offer bespoke advertising and sponsorship opportunities, including externally with the Exosphere and internally with immersive galleries, interactive installations, the atrium, and suites. Sphere in Las Vegas will offer advertising and marketing partners unique and valuable inventory that is not available in traditional large-scale entertainment venues. Sphere will also offer premium hospitality products.
Sphere offers bespoke advertising and sponsorship opportunities, including externally with the Exosphere and internally with immersive galleries, interactive installations, the Atrium, and suites. We believe Sphere in Las Vegas offers advertising and marketing partners unique and valuable inventory that is not available in traditional large-scale entertainment venues.
The Company’s first Sphere is expected to open in Las Vegas in September 2023. The venue can accommodate up to 20,000 guests and is expected to host a wide variety of events year-round, including The Sphere Experience TM , which will feature original immersive productions, as well as concerts and residencies from renowned artists, and marquee sporting and corporate events.
The Company’s first Sphere opened in Las Vegas on September 29, 2023. The venue can accommodate up to 20,000 guests and can host a wide variety of events year-round, including The Sphere Experience TM , which features original immersive productions, as well as concerts and residencies from renowned artists, and marquee sports and corporate events.
Sphere is a next-generation entertainment medium, and MSG Networks operates two regional sports and entertainment networks, as well as a direct-to-consumer and authenticated streaming product. Sphere : This segment reflects Sphere, a next-generation entertainment medium powered by cutting-edge technologies that we believe will enable multi-sensory storytelling at an unparalleled scale.
Sphere is a next-generation entertainment medium, and MSG Networks operates two regional sports and entertainment networks, as well as a direct-to-consumer (“DTC”) and authenticated streaming product. Sphere : This segment reflects Sphere TM , a next-generation entertainment medium powered by cutting-edge technologies to create multi-sensory experiences at an unparalleled scale.
The original shows and segments featured a mix of sports gaming experts and former New York athletes covering betting-related topics across the sports world, from NBA and NHL to NFL, MLB, tennis, golf, and mixed martial arts.
MSG Networks produces original sports betting shows and segments featuring a mix of sports gaming experts and former New York athletes covering betting-related topics across the sports world, from NBA and NHL to NFL, Major League Baseball, tennis, golf, and mixed martial arts.
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”).
Sphere in Las Vegas is a 17,600-seat venue with capacity to hold up to 20,000 guests located on land adjacent to The Venetian Resort leased from Venetian Venue Propco, LLC (“The Venetian”).
Sphere in Las Vegas has already become a landmark – as the world’s largest spherical structure standing at 366 feet tall and 516 feet wide, with a fully-programmable LED exterior that offers a powerful global platform for potential advertisers and marketing partners, as well as creative content.
Sphere in Las Vegas is the world’s largest spherical structure standing at 366 feet tall and 516 feet wide, with a fully-programmable LED exterior – the Exosphere – that we believe offers a powerful global platform for advertisers and marketing partners, as well as artistic content.
We compete for bookings with a large number of other venues, both in Las Vegas where Sphere is located and in alternative locations capable of booking traditional productions and events, which venues may be more familiar to performers who may not be willing to take advantage of the immersive experiences and next generation technologies that Sphere offers (which cannot be re-used in other venues).
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. 9 We compete for bookings with a large number of other venues, both in Las Vegas where Sphere is located and in alternative locations capable of booking traditional productions and events, which venues may be more familiar to performers who may not be willing to take advantage of the immersive experiences and next generation technologies that Sphere offers (which cannot be re-used in other venues).
Advertising Restrictions on Children’s Programming Any programming intended primarily for children 12 years of age and under and associated Internet websites that we may offer must comply with certain limits on commercial matter 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. 8 Advertising Restrictions on Children’s Programming Any programming intended primarily for children 12 years of age and under and associated Internet websites that we may offer must comply with certain limits on commercial matter and certain of our affiliation agreements require us to certify compliance with such standards.
Some of our competitors may own or control, or are owned or controlled by, or otherwise affiliated with, sports teams, leagues or sports promoters, which gives them an advantage in obtaining telecast rights for such teams or sports. For example, two professional sports teams located in New York have ownership interests in programming networks featuring the games of their teams.
Some of our competitors may own or control, or are owned or controlled by, or otherwise affiliated with, sports teams, leagues or sports promoters, which gives them an advantage in obtaining telecast rights for such teams or sports. For example,the New York Yankees have an ownership interest in YES.
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.
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.
In Fiscal Year 2023, the Company and MSG Sports hosted a multi-city holiday market event featuring twenty underrepresented businesses in New York City and Burbank. • Invested in an external facing supplier diversity portal on our website, which launched in Fiscal Year 2023.
In Fiscal Year 2024, the Company expanded its multi-city holiday market event featuring thirty underrepresented businesses in New York City and Burbank, and hosted a virtual market for our Las Vegas employees; and • Invested in an external facing supplier diversity portal on our website, which launched in Fiscal Year 2023.
Competition for Advertising Revenue The level of our advertising revenue depends in part upon unpredictable and volatile factors beyond our control, such as viewer preferences, the performance of the sports teams whose media rights we control, the quality and appeal of the competing programming and the availability of other entertainment activities. See “ Item 1A.
Competition for Advertising Revenue The level of our advertising revenue depends in part upon unpredictable and volatile factors beyond our control, such as viewer preferences, traditional linear viewing verse digital streaming trends, ad-supported streaming services, the performance of the sports teams whose media rights we control, the quality and appeal of the competing programming and the availability of other entertainment activities.
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.
As of June 30, 2024, approximately 18% of our employees were subject to collective bargaining agreements (“CBAs”). Approximately 5% of those union employees are subject to CBAs that expired as of June 30, 2024 and approximately 39% are subject to CBAs that will expire by June 30, 2025 if they are not extended prior thereto.
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 .
Financial Statements and Supplementary Data — Consolidated Financial Statements — Notes to Consolidated Financial Statements — Note 19. 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 Company’s first Sphere is expected to open in September 2023, and is conveniently located in Las Vegas, one block from the Las Vegas Strip and connected to The Venetian Expo.
The Company’s first Sphere opened in September 2023, and is conveniently located one block from the Las Vegas Strip.
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.
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.
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.
We aim to attract top talent through our prestigious brands and venues, as well as through the many benefits we offer. 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.
Sphere in Las Vegas will offer advertising and marketing partners unique and valuable inventory that is not available in traditional large-scale entertainment venues. ▪ The Exosphere – The exterior of Sphere in Las Vegas, which we call the Exosphere, is the world’s largest LED screen covered in 580,000 square feet of fully programmable LED paneling, consisting of approximately 1.2 million LED pucks, spaced eight inches apart.
Sphere has already run numerous unique advertising and marketing campaigns for a variety of companies, demonstrating the appeal of Sphere’s unique and valuable inventory that is not available in traditional large-scale entertainment venues. 3 • The Exosphere – The exterior of Sphere in Las Vegas, the Exosphere – the world’s largest LED screen – is covered in 580,000 square feet of fully programmable LED paneling, consisting of approximately 1.2 million LED pucks, spaced eight inches apart.
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.
Community: Bridging the Divide through Expansion to Diverse Stakeholders • Focused on increasing opportunities to connect with diverse vendors and suppliers by leveraging ERGs and our community. This effort creates revenue generating opportunities for diverse suppliers to promote their businesses and products.
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.
The design of Sphere can accommodate a wide range of sizes and capacities based on the needs of the individual market. Leveraging the Sphere brand and operating a network of Sphere venues would allow the Company to pursue a number of avenues for potential growth, including driving increased bookings and greater advertising and sponsorship opportunities.
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.
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. Accessibility Under FCC rules, our programming networks, websites and mobile applications must meet certain requirements for access by persons with disabilities.
Once inside Sphere’s main venue bowl, guests will experience the full range of the venue’s cutting-edge technologies, including: • A 16K x 16K LED screen – a 160,000-square foot high-resolution interior display plane that surrounds the audience, creating a fully immersive visual environment. • Sphere Immersive Sound, powered by HOLOPLOT – an advanced audio system that delivers crystal-clear, concert-grade sound to every seat in Sphere through beamforming and wave field synthesis technology. • 4D multi-sensory technologies – which enable guests to feel experiences such as vibrations, wind, scent and changing temperatures to enhance storytelling. 2 Leveraging Sphere’s Unique Capabilities to Drive Venue Utilization: Sphere in Las Vegas was designed and engineered from the ground up to be one of the most highly utilized venues of its size.
Inside, the venue’s public-facing interior spaces include the Atrium, food and beverage locations, expo spaces, 23 premium hospitality suites, and more. 2 Once inside Sphere’s main venue bowl, guests can experience the full range of the venue’s cutting-edge technologies, including: • A 16K x 16K LED screen – a 160,000-square foot high-resolution interior display plane that surrounds the audience, creating a fully immersive visual environment. • Sphere Immersive Sound TM , powered by HOLOPLOT – an advanced audio system that delivers crystal-clear, concert-grade sound to every seat in Sphere through beamforming and wave field synthesis technology. • 4D multi-sensory technologies – which enable guests to feel experiences such as vibrations, wind, scent and changing temperatures to enhance storytelling.
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.
NBC, Peacock and Amazon beginning in 2025-26), and NHL on ABC, ESPN, Hulu, ESPN+, TNT and Max), 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/ESPN+), 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.
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.
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.
In addition, the Company plans to expand its network of Sphere venues around the world over time, which would create additional monetization opportunities for the Company’s original content. • Debut of The Sphere Experience.
In addition, the Company plans to expand its network of Sphere venues around the world over time, which would create additional monetization opportunities for the Company’s original content. • The Sphere Experience. A core content category at Sphere in Las Vegas is The Sphere Experience, which takes full advantage of Sphere's experiential, next-generation technologies.
Live Entertainment : Our Company has deep industry relationships that are expected to drive the world’s biggest artists to Sphere in Las Vegas. Global rock band U2 will open Sphere in Las Vegas on September 29, 2023 with the first of 25 shows from the band.
Live Entertainment : Our Company has deep industry relationships that can drive the world’s biggest artists to Sphere in Las Vegas. Global rock band U2 opened Sphere in Las Vegas on September 29, 2023 and performed 40 shows through March 2024.
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.
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.
The Company plans to leverage Sphere’s unique platform, as well as the Company’s deep relationships across music, entertainment, corporate and sports, to attract additional events to Sphere in Las Vegas. Unique Platform for Advertising and Sponsorship : Sphere’s unique platform and technological capabilities offer powerful and premium opportunities for advertisers and marketing partners to engage with audiences.
The Company plans to continue to leverage Sphere’s unique platform, as well as the Company’s deep relationships across music, entertainment, corporate and sports, to attract additional events to Sphere in Las Vegas.
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.
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.
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.
Item 1. Business Sphere Entertainment Co. is a Delaware corporation with its principal executive office at Two Pennsylvania Plaza, New York, NY, 10121. 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.
MSG+ is available on a free, authenticated basis to subscribers of participating Distributors (including all of MSG Networks’ major Distributors), as well as for purchase by viewers on a DTC basis.
MSG+ is available on a free, authenticated basis to subscribers of participating Distributors (including all of MSG Networks’ major Distributors), as well as for purchase by viewers on a DTC basis. In addition to monthly and annual DTC subscription options, MSG+ also offers single game purchases of MSG Networks’ NBA and NHL teams.
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.
The design of future Sphere venues 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.
Other programming networks, or distribution outlets, that are affiliated with or otherwise have larger relationships with programming sources such as sports teams or leagues, movie or television studios, or film libraries may have a competitive advantage over us in this area.
Other programming networks, or distribution outlets, that are affiliated with or otherwise have larger relationships with programming sources such as sports teams or leagues, movie or television studios, or film libraries may have a competitive advantage over us in this area. 10 Competition for Sports Programming Sources Because the loyalty of the sports viewing audience to a sports programming network is primarily driven by loyalty to a particular team or teams, access to adequate sources of sports programming is particularly critical to our networks.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThere can be no assurance that Sphere will be successful. • We depend on licenses from third parties for the performance of musical works at our venue. • Our properties are subject to, and benefit from, certain easements, the availability of which may not continue on terms favorable to us or at all.
Biggest changeRisks Related to Our Sphere Business • The success of our Sphere business depends on the popularity of The Sphere Experience, as well as our ability to continue to attract advertisers and marketing partners, and audiences and artists to concerts, residencies and other events at Sphere in Las Vegas. • The difficulty with estimating the costs of our initial Sphere in Las Vegas and the complexities of the planning process create risks with respect to our Sphere initiative, which may not be successful unless we can develop additional venues. • 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. • Our properties are subject to, and benefit from, certain easements, the availability of which may not continue on terms favorable to us or at all.
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.
We undertook certain remediation efforts by implementing additional controls which were operating effectively as of June 30, 2022, and as a result, our management has concluded that the material weakness has been remediated and our internal control over financial reporting was effective as of June 30, 2022.
We undertook certain remediation efforts by implementing additional controls which were operating effectively as of June 30, 2022, and as a result, our management concluded that the material weakness has been remediated and our internal control over financial reporting was effective as of June 30, 2022.
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.
See “ — 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 .” 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.
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.
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, which took effect 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 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.
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 of the Company, MSG Sports and MSG Entertainment rely on the others to perform their respective obligations under these agreements.
If we are required to indemnify MSG Entertainment under the circumstances set forth in the Tax Disaffiliation Agreement, we may be subject to substantial liabilities, which could materially adversely affect our financial position. The 2020 Entertainment Distribution Could Result in Significant Tax Liability.
If we are required to indemnify MSG Entertainment under the circumstances set forth in the Entertainment Tax Disaffiliation Agreement, we may be subject to substantial liabilities, which could materially adversely affect our financial position. The 2020 Entertainment Distribution Could Result in Significant Tax Liability.
If we are required to indemnify MSG Sports under the circumstances set forth in the Tax Disaffiliation Agreement, we may be subject to substantial liabilities, which could materially adversely affect our financial position. Certain Adverse U.S. Federal Income Tax Consequences Might Apply to Non-U.S.
If we are required to indemnify MSG Sports under the circumstances set forth in the Sports Tax Disaffiliation Agreement, we may be subject to substantial liabilities, which could materially adversely affect our financial position. Certain Adverse U.S. Federal Income Tax Consequences Might Apply to Non-U.S.
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.
Dolan, also serves as the Executive Chairman and Chief Executive Officer of MSG Entertainment and MSG Sports and as Non-Executive Chairman of AMC Networks. Furthermore, nine members of our Board of Directors (including James L. Dolan) also serve as directors of MSG Entertainment, ten members of our Board of Directors (including James L.
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.
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.
Advertising revenues depend on a number of factors, many of which are beyond our control, such as: (i) team performance; (ii) whether live sports games are being played; (iii) the popularity of our programming; (iv) the activities of our competitors, including increased competition from other forms of advertising-based media (such as Internet, mobile media, other programming networks, radio and print media) and an increasing shift of advertising expenditures to digital and mobile offerings; (v) shifts in consumer viewing patterns, including consumers watching more ad-free content, non-traditional and shorter-form video content online, and the increased use of ad skipping functionality; (vi) increasing audience fragmentation caused by increased availability of alternative forms of leisure and entertainment activities, such as social networking platforms and video games; (vii) consumer budgeting and buying patterns; (viii) the extent of the distribution of our networks; (ix) changes in the audience demographic for our programming; (x) the ability of third parties to successfully and accurately measure audiences due to changes in emerging technologies and otherwise; (xi) the health of the economy in the markets our businesses serve and in the nation as a whole; and (xii) general economic trends in the advertising industry.
Advertising revenues depend on a number of factors, many of which are beyond our control, such as: (i) team performance; (ii) whether live sports games are being played and the number of live games available for telecast on our programming networks; (iii) the popularity of our programming; (iv) the activities of our competitors, including increased competition from other forms of advertising-based media (such as Internet, mobile media, other programming networks, radio and print media) and an increasing shift of advertising expenditures to digital and mobile offerings; (v) shifts in consumer viewing patterns, including consumers watching more ad-free content, non-traditional and shorter-form video content online, and the increased use of ad skipping functionality; (vi) increasing audience fragmentation caused by increased availability of alternative forms of leisure and entertainment activities, such as social networking platforms and video games; (vii) consumer budgeting and buying patterns; (viii) the extent of the distribution of our networks; (ix) changes in the audience demographic for our programming; (x) the ability of third parties to successfully and accurately measure audiences due to changes in emerging technologies and otherwise; (xi) the health of the economy in the markets our businesses serve and in the nation as a whole; and (xii) general economic trends in the advertising industry.
System interruption and the lack of integration and redundancy in the information and other systems and infrastructure, both of our own websites and other computer systems and of affiliate and third-party software, computer networks, and other substructure and communications systems service providers on which we rely may adversely affect our ability to operate websites, applications, process and fulfill transactions, respond to customer inquiries, present events, and generally maintain cost-efficient operations.
System interruption and the lack of integration and redundancy in the information systems and infrastructure, both of our own websites and other computer systems and of affiliate and third-party software, computer networks, applications and other communications systems service providers on which we rely may adversely affect our ability to operate websites, applications, process and fulfill transactions, respond to customer inquiries, present events, and generally maintain cost-efficient operations.
To the extent effects of the COVID-19 pandemic or another pandemic or public health emergency adversely affect our business and financial results, they may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to our liquidity, indebtedness, and our ability to comply with the covenants contained in the agreements that govern our indebtedness.
To the extent effects of the COVID-19 pandemic or another pandemic or public health emergency adversely affect our business and financial results, they may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those 29 relating to our liquidity, indebtedness, and our ability to comply with the covenants contained in the agreements that govern our indebtedness.
As a result of the COVID-19 pandemic, both the NBA and the NHL reduced the number of regular season games for their 2020-21 seasons, resulting in MSG Networks airing 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 as the 2019-20 seasons were temporarily suspended and subsequently shortened).
For example, as a result of the COVID-19 pandemic, both the NBA and the NHL reduced the number of regular season games for their 2020-21 seasons, resulting in MSG Networks airing 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 as the 2019-20 seasons were temporarily suspended and subsequently shortened).
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.
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. 26 Our Sphere business has been characterized by significant expenditures for properties, businesses, renovations and productions.
These risks are exacerbated in our business in light of the fact that we only have one venue in Las Vegas, which is dependent on tourism travel for its success. 23 Consumer and corporate spending has in the past declined and may in the future decline at any time for reasons beyond our control.
These risks are exacerbated in our business in light of the fact that we only have one venue in Las Vegas, which is dependent on tourism travel for its success. Consumer and corporate spending has in the past declined and may in the future decline at any time for reasons beyond our control.
As a result, our or our customers’ or affiliates’ sensitive, proprietary and/or confidential information may be lost, disclosed, accessed or taken without consent. 30 We also continue to review and enhance our security measures in light of the constantly evolving techniques used to gain unauthorized access to networks, data, software and systems.
As a result, our or our customers’ or affiliates’ sensitive, proprietary and/or confidential information may be lost, disclosed, accessed or taken without consent. We also continue to review and enhance our security measures in light of the constantly evolving techniques used to gain unauthorized access to networks, data, software and systems.
In addition, the success of our DTC product will depend on a number of factors, including competition from other DTC products, such as offerings from other regional sports networks. 22 The extent to which competitive programming, including NBA and NHL games, are available on other programming networks and distribution platforms can adversely affect our competitive position.
In addition, the success of our DTC product will depend on a number of factors, including competition from other DTC products, such as offerings from other regional sports networks. The extent to which competitive programming, including NBA and NHL games, are available on other programming networks and distribution platforms can adversely affect our competitive position.
If MSG Sports or MSG Entertainment were to breach or become unable to satisfy its respective material obligations under 31 these agreements, including a failure to satisfy its indemnification or other financial obligations, or these agreements otherwise terminate or expire and we do not enter into replacement agreements, we could suffer operational difficulties and/or significant losses.
If MSG Sports or MSG Entertainment were to breach or become unable to satisfy its respective material obligations under these agreements, including a failure to satisfy its indemnification or other financial obligations, or these agreements otherwise terminate or expire and we do not enter into replacement agreements, we could suffer operational difficulties and/or significant losses.
Additionally, our Sphere business is also dependent on our ability to attract advertisers and marketing partners and we compete with other venues and companies for signage and digital advertising dollars. The degree and extent of competition for advertising dollars will depend on our pricing, reach and audience demographics, among others.
Additionally, our Sphere business is also dependent on our ability to continue to attract advertisers and marketing partners and we compete with other venues and companies for signage and digital advertising dollars. The degree and extent of competition for advertising dollars will depend on our pricing, reach and audience demographics, among others.
To the extent that such parties do not perform as expected, including with respect to repayment of such loans, it could impair such assets or create losses related to such loans, and, as a result, have a negative effect on our business and results of operations.
To the extent that such parties do not perform as expected, 23 including with respect to repayment of such loans, it could impair such assets or create losses related to such loans, and, as a result, have a negative effect on our business and results of operations.
It is expected that the amount of any such taxes to us and our stockholders would be substantial. See “— We May Have a Significant Indemnity Obligation to MSG Entertainment if the MSGE Distribution Is Treated as a Taxable Transaction.” We May Have a Significant Indemnity Obligation to MSG Entertainment if the MSGE Distribution Is Treated as a Taxable Transaction.
It is expected that the amount of any such taxes to us and our stockholders would be substantial. See 36 “—We May Have a Significant Indemnity Obligation to MSG Entertainment if the MSGE Distribution Is Treated as a Taxable Transaction.” We May Have a Significant Indemnity Obligation to MSG Entertainment if the MSGE Distribution Is Treated as a Taxable Transaction.
In those circumstances, the acquisition of a Distributor that is a party to one or more affiliation agreements with us on terms that are more favorable to us than that of the acquirer could have a material negative impact on our business and results of operations.
In those 18 circumstances, the acquisition of a Distributor that is a party to one or more affiliation agreements with us on terms that are more favorable to us than that of the acquirer could have a material negative impact on our business and results of operations.
In addition, if we fail to maintain the adequacy of our internal control over financial reporting, we will not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002.
If we fail to maintain the adequacy of our internal control over financial reporting, we will not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002.
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.
Pursuant to the Sports 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.
While the Company believes that these next-generation venues will enable new experiences and innovative opportunities to engage with audiences, there can be no assurance that guests, artists, promoters, advertisers and marketing partners will embrace this new platform.
While the Company believes that these next-generation venues will enable new experiences and innovative opportunities to engage with audiences, there can be no assurance that guests, artists, promoters, advertisers and marketing partners will continue to embrace this new platform.
In exchange for public performance licenses, PROs are paid a per-event royalty, traditionally calculated either as a percentage of ticket revenue or a per-ticket amount. The PRO royalty obligation of any individual event is generally paid by, or charged to, the promoter of the event.
In exchange for public performance licenses, most PROs are paid a per-event royalty, traditionally calculated either as a percentage of ticket revenue or a per-ticket amount. The PRO royalty obligation of any individual event is generally paid by, or charged to, the promoter of the event.
At times, we have had significant investments in businesses that we account for under the equity method of accounting, and we may again in the future. Certain of these investments have generated operating losses in the past and certain have required additional investments from us in the form of equity or loans.
At times, we have had and may in the future have, significant investments in businesses that we account for under the equity method of accounting. Certain of these investments have generated operating losses in the past and certain have required additional investments from us in the form of equity or loans.
We are subject to various data privacy and protection laws, regulations, policies and contractual obligations that apply to the collection, transmission, storage, processing and use of personal information or personal data, which among other things, impose certain requirements relating to the privacy and security of personal information.
We are subject to data privacy and protection laws, regulations, policies and contractual obligations that apply to the collection, transmission, storage, processing and use of personal information or personal data, which among other things, impose certain requirements relating to the privacy and security of personal information.
Our Board of Directors has elected for the Company to be treated as a “controlled company” under NYSE corporate governance rules and not to comply with the NYSE requirement for a majority-independent board of directors and for an independent corporate governance and nominating committee because of our status as a controlled company.
Our Board of Directors has elected for the Company to be treated as a “controlled company” under NYSE corporate governance rules and not to comply with the NYSE requirement for a majority-independent board of directors 38 and for an independent corporate governance and nominating committee because of our status as a controlled company.
Risks Related to Our Sphere Business The Success of Our Sphere Business Depends on the Popularity of The Sphere Experience, as Well as Our Ability to Attract Advertisers and Marketing Partners, and Audiences and Artists to Concerts, Residencies and Other Events at Sphere in Las Vegas.
Risks Related to Our Sphere Business The Success of Our Sphere Business Depends on the Popularity of The Sphere Experience, as Well as Our Ability to Continue to Attract Advertisers and Marketing Partners, and Audiences and Artists to Concerts, Residencies and Other Events at Sphere in Las Vegas.
If The Sphere Experience Does Not Appeal to Customers or We Are Unable to Attract Advertisers and Marketing Partners, There Will be a Material Negative Effect on Our Business and Results of Operations.
If The Sphere Experience Does Not Continue to Appeal to Customers or We Are Unable to Attract Advertisers and Marketing Partners, There Will be 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. 25 • 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. • Data Privacy .
For example, the NBA has experienced labor difficulties, including a lockout during the 2011-12 NBA season, 26 which resulted in a regular season that was shortened from 82 games to 66 games.
For example, the NBA has experienced labor difficulties, including a lockout during the 2011-12 NBA season, which resulted in a regular season that was shortened from 82 games to 66 games.
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.
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; 33 • 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.
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.
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.
There may be a limited number of popular artists, groups or events that are willing to take advantage of the immersive experiences and next generation technologies (which cannot be re-used in other venues) or that can attract audiences to Sphere, and our business would suffer to the extent that we are unable to attract such artists, groups and events willing to perform at our venue .
There may be a limited number of popular artists, groups or events that are willing to invest in and to take advantage of the immersive experiences and next generation technologies (which cannot be re-used in venues other than Sphere) or that can attract audiences to Sphere, and our business would suffer to the extent that we are unable to attract such artists, groups and events willing to perform at our venue.
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.
We have entered into a Tax Disaffiliation Agreement with MSG Sports (the “Sports 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.
In addition, the success of our DTC product may depend on a number of factors, including our ability to: (i) acquire and maintain direct-to-consumer rights from the professional sports teams and/or leagues we currently air on our networks; (ii) appropriately price our offering; (iii) offer competitive content and programming and (iv) ensure our direct-to-consumer technology operates efficiently.
In addition, the success of our DTC product may depend on a number of factors, including our ability to: (i) acquire and maintain DTC rights from the professional sports teams and/or leagues we currently air on our networks; (ii) appropriately price our offering; (iii) offer competitive content and programming; and (iv) ensure our DTC technology operates efficiently.
A pandemic, such as COVID-19, or the fear of a new pandemic or public health emergency, has in the past and could in the future impede economic activity in impacted regions and globally over the long term, leading to a decline in discretionary spending on entertainment and sports events and other leisure activities, which could result in long-term effects on our business.
A pandemic, such as COVID-19, or the fear of a new pandemic or public health emergency, has in the past impeded and could in the future impede economic activity in impacted regions and globally over the long term, leading to a decline in discretionary spending on entertainment and sports events and other leisure activities, which has in the past resulted and could in the future result in long-term effects on our business.
The Sphere business initially operates only in Las Vegas with one venue and, as a result, is subject to significantly greater degrees of risk than competitors with more operating properties or that operate in more markets. MSG Networks’ programming networks are widely distributed throughout New York State and certain nearby areas.
The Sphere business currently operates only in Las Vegas with one venue and, as a result, is subject to significantly greater degrees of risk than competitors with more operating properties or that operate in more markets. MSG Networks’ programming networks are widely distributed throughout New York State and certain nearby areas.
Our commercial general liability and/or the pollution legal liability insurance coverage may not be adequate or available to cover any or all such potential liability. • Broadcasting.
Our commercial general liability and/or the pollution legal liability insurance coverage may not be adequate or available to cover any or all such potential liability. 31 • Broadcasting .
We have entered into a Tax Disaffiliation Agreement with MSG Entertainment (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 MSGE 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 Entertainment (the “Entertainment 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 MSGE Distribution and related matters such as the filing of tax returns and the conduct of IRS and other audits.
See “— Risks Related to Cybersecurity and Intellectual Property — We Face Continually Evolving Cybersecurity and Similar Risks, Which Could Result in Loss, Disclosure, Theft, Destruction or Misappropriation of, or Access to, Our Confidential Information and Cause Disruption of Our Business, Damage to Our Brands and Reputation, Legal Exposure and Financial Losses. ” The failure or unavailability of distribution facilities or these internal and third-party services, systems or software, depending upon its severity and duration, could have a material negative effect on our business and results of operations.
See “—Risks Related to Cybersecurity and Intellectual Property— We Face Continually Evolving Cybersecurity and Other Technology-Related Risks, Which Could Result in Loss, Disclosure, Theft, Destruction or Misappropriation of, or Access to, Our Confidential Information and Cause Disruption of Our Business, Damage to Our Brands and Reputation, Legal Exposure and Financial Losses. ” The failure or unavailability of distribution facilities or these internal and third-party services, systems or software, depending upon its severity and duration, could have a material negative effect on our business and results of operations.
This variability may adversely affect our business, results of operations and financial condition. Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations.
This variability may adversely affect our business, results of operations and financial condition. 32 Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations.
Our DTC offering represents a new consumer offering for which we have limited prior experience and we may not be able to successfully predict the demand for such DTC product or the impact such DTC product may have on our traditional distribution business, including with respect to renewals of our affiliation agreements with Distributors.
Our DTC offering represents a new consumer offering for which we have limited prior experience and we may not be able to successfully predict the demand for such DTC product or the impact such DTC product may have on our traditional distribution business, if any, including with respect to renewals of our affiliation agreements with Distributors.
The failure to satisfy the covenants, including any inability to attain a covenant waiver, and other requirements under each credit agreement could trigger a default thereunder, acceleration of outstanding debt thereunder and, with respect to the LV Sphere Facility, a demand for payment under the guarantee provided by Sphere Entertainment Group.
The failure to satisfy the covenants, including any inability to attain a covenant waiver and other requirements under each credit agreement could trigger a default thereunder, acceleration of outstanding debt thereunder and, with respect to the LV Sphere Term Loan Facility, a demand for payment under the guarantee provided by Sphere Entertainment Group.
On December 22, 2022, MSG Las Vegas, LLC (“MSG LV”), entered into a credit agreement providing for a five-year, $275 million senior secured term loan facility (the “LV Sphere Facility”). All obligations under the LV Sphere Facility are guaranteed by Sphere Entertainment Group, LLC (“Sphere Entertainment Group”).
On December 22, 2022, MSG Las Vegas, LLC (“MSG LV”), entered into a credit agreement providing for a five-year, $275 million senior secured term loan facility (the “LV Sphere Term Loan Facility”). All obligations under the LV Sphere Term Loan Facility are guaranteed by Sphere Entertainment Group.
Risks Related to Our MSG Networks Business • The success of our MSG Networks business depends on affiliation fees we receive under our affiliation agreements, the loss of which or renewal of which on less favorable terms may have a material negative effect on our business and results of operations. • Given that we depend on a limited number of distributors for a significant portion of our MSG Networks revenues, further industry consolidation could adversely affect 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. • 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 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. • Our MSG Networks business depends on media rights agreements with professional sports teams that have varying durations and terms and include significant obligations, and our inability to renew those agreements on acceptable terms, or the loss of such rights for other reasons, may have a material negative effect on our MSG Networks business and results of operations. • Our MSG Networks business is substantially dependent on the popularity of the NBA and NHL teams whose media rights we control.
Risks Related to Our MSG Networks Business • The success of our MSG Networks business depends on affiliation fees we receive under our affiliation agreements, the loss of which or renewal of which on less favorable terms may have a material negative effect on our business and results of operations. • Given that we depend on a limited number of distributors for a significant portion of our MSG Networks revenues, further industry consolidation could adversely affect 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. • 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 distribution revenues. • 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. • Our MSG Networks business depends on media rights agreements with professional sports teams that have varying durations and terms and include significant obligations, and our inability to renew those agreements on acceptable terms, or the loss of such rights for other reasons, may have a material negative effect on our MSG Networks business and results of operations. • The actions of the NBA and NHL may have a material negative effect on our MSG Networks business and results of operations. • Our MSG Networks business is substantially dependent on the popularity of the NBA and NHL teams whose media rights we control. • Our MSG Networks business depends on the appeal of its programming, which may be unpredictable, and increased programming costs may have a material negative effect on our business and results of operations.
In addition to existing subscription direct-to-consumer streaming services such as Amazon Prime, Hulu, Netflix, Apple TV+, Disney+, ESPN+, Max and Peacock and free advertiser-supported streaming television (“FAST”) channels that are offered directly to consumers at no cost, 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 subscription DTC streaming services such as Amazon Prime, Hulu, Netflix, Apple TV+, Disney+, ESPN+, Max and Peacock and free advertiser-supported streaming television (“FAST”) channels that are offered directly to consumers at no cost, 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.
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.
For example, there is 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.
Risks Related to Cybersecurity and Intellectual Property • We face continually evolving cybersecurity and similar risks, which could result in loss, disclosure, theft, destruction or misappropriation of, or access to, our confidential information and cause disruption of our business, damage to our brands and reputation, legal exposure and financial losses. • 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.
Risks Related to Cybersecurity and Intellectual Property • We face continually evolving cybersecurity and similar risks, which could result in loss, disclosure, theft, destruction or misappropriation of, or access to, our confidential information and cause disruption of our business, damage to our brands and reputation, legal exposure and financial losses. • We have in the past and may in the future 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.
As a result, instability and weakness of the U.S. and global economies, including due to the effects caused by disruptions to financial mark ets, inflation, recession, high unemployment, geopolitical events, including any prolonged effects caused by the COVID-19 pandemic or another future pandemic, and the negative effects on consumers’ and businesses’ discretionary spending, have in the past materially negatively affected, and may in the future materially negatively affect, our business and results of operations.
As a result, instability and weakness of the U.S. and global economies, including due to the effects caused by disruptions to financial markets, inflation, recession, high unemployment, geopolitical events, including any prolonged effects caused by the COVID-19 pandemic or another future pandemic, and the negative effects on consumers’ and businesses’ discretionary spending, have in the past materially negatively affected, and may in the future materially negatively affect, our business and results of operations.
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.
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 Distribution Revenues.
For example, Sphere will compete with other entertainment options in the Las Vegas area, which is a popular entertainment destination. While the Company believes that these next-generation venues will enable new experiences and innovative opportunities to engage with audiences, there can be no assurance that guests, artists, promoters, advertisers and marketing partners will embrace this new platform.
For example, Sphere competes with other entertainment options in the Las Vegas area, which is a popular entertainment destination. While the Company believes that these next-generation venues enable new experiences and innovative opportunities to engage with audiences, there can be no assurance that guests, artists, promoters, advertisers and marketing partners will continue to embrace this new platform.
The success of our Sphere business will also depend upon our ability to offer live entertainment that is popular with guests. While the Company believes that these next-generation venues will enable new experiences and innovative opportunities to engage with audiences, there can be no assurance that guests, artists, promoters, advertisers and marketing partners will embrace this new platform.
The success of our Sphere business also depends upon our ability to offer live entertainment that is popular with guests. While the Company believes that these next-generation venues will enable new experiences and innovative opportunities to engage with audiences, there can be no assurance that guests, artists, promoters, advertisers and marketing partners will continue to embrace this new platform.
In addition, in the event of a security incident, changes in legislation may increase the risk of potential litigation.
In addition, in the event of a security incident, changes in legislation may increase the risk of potential 34 litigation.
If we are unable to obtain these licenses, or are unable to obtain them on favorable terms consistent with past practice, it may have a negative effect on our business and results of operations.
If we lose or are unable to obtain these licenses, or are unable to obtain them on terms consistent with past practice, it may have a negative effect on our business and results of operations.
Our Business Has Been Subject to Seasonal Fluctuations, and Our Operating Results and Cash Flow Have In the Past Varied, and Could In the Future Vary, Substantially from Period to Period. Our revenues and expenses have been seasonal and may continue to be seasonal.
Our Business Has Been Subject to Seasonal Fluctuations, and Our Operating Results and Cash Flows Have In the Past Varied, and Could In the Future Vary, Substantially from Period to Period. Our revenues and expenses have been seasonal and may continue to be seasonal.
We cannot provide assurance that we could affect any of these actions on a timely basis, on commercially reasonable terms or 28 at all, or that these actions would be sufficient to meet our capital requirements. In addition, the terms of our existing or future debt agreements may restrict us from effecting certain or any of these alternatives.
We cannot provide assurance that we could effect any of these actions on a timely basis, on commercially reasonable terms or at all, or that these actions would be sufficient to meet our capital requirements. In addition, the terms of our existing or future debt agreements may restrict us from effecting certain or any of these alternatives.
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.
However, because 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.
The Sphere Experience will employ novel and transformative technologies for which there is no established basis of comparison, and there is an inherent risk that we may be unable to achieve the level of success we are expecting, which could have a material negative impact on our business and results of operations.
The Sphere Experience employs novel and transformative technologies for which there is no established basis of comparison, and there is an inherent risk that we may be unable to achieve the level of success we are expecting, which could have a material negative impact on our business and results of operations.
Even if our future operating performance is strong, l imitations on our ability to access the capital or credit markets, including as a result of general economic conditions, unfavorable terms or general reductions in liquidity may adversely and materially impact our business, financial condition, and results of operations.
Even if our future operating performance is strong, limitations on our ability to access the capital or credit markets, including as a result of general economic conditions, unfavorable terms or general reductions in liquidity may adversely and materially impact our business, financial condition, and results of operations.
The MSGE Distribution Could Result in Significant Tax Liability. We received an opinion from Sullivan & Cromwell LLP substantially to the effect that, among other things, the MSGE Distribution should qualify as a tax-free distribution under the Internal Revenue Code (the “Code”). The opinion is not binding on the IRS or the courts.
The MSGE Distribution Could Result in Significant Tax Liability. We received an opinion from Sullivan & Cromwell LLP substantially to the effect that, among other things, the MSGE Distribution should qualify as a tax-free distribution under the Internal Revenue Code (the “Code”). The opinion is not binding on the Internal Revenue Service (the “IRS”) or the courts.
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.
If our programming does not gain or maintain the level of audience 28 acceptance we, our advertisers or Distributors expect, it could negatively affect advertising or distribution fee revenues. An increase in our costs associated with programming, including original programming, may materially negatively affect our business and results of operations.
The success of our Sphere business is largely dependent on the success of The Sphere Experience, which will feature first-of-its-kind immersive productions that can run multiple times per day, year-round and are designed to utilize the full breadth of the venue’s next-generation technologies.
Sphere business . The success of our Sphere business is largely dependent on the success of The Sphere Experience, which features first-of-its-kind immersive productions that can run multiple times per day, year-round and are designed to utilize the full breadth of the venue’s next-generation technologies.
The financial results of our Sphere business are largely dependent on the popularity of The Sphere Experience, which will feature original immersive productions that can run multiple times per day, year-round and are designed to utilize the full breadth of the venue’s next-generation technologies.
The financial results of our Sphere business are largely dependent on the popularity of The Sphere Experience, which features original immersive productions that can run multiple times per day, year-round and are designed to utilize the full breadth of the venue’s next-generation technologies.
Risks Related to Cybersecurity and Intellectual Property We Face Continually Evolving Cybersecurity and Similar Risks, Which Could Result in Loss, Disclosure, Theft, Destruction or Misappropriation of, or Access to, Our Confidential Information and Cause Disruption of Our Business, Damage to Our Brands and Reputation, Legal Exposure and Financial Losses.
Risks Related to Cybersecurity and Intellectual Property We Face Continually Evolving Cybersecurity and Other Technology-Related Risks, Which Could Result in Loss, Disclosure, Theft, Destruction or Misappropriation of, or Access to, Our Confidential Information and Cause Disruption of Our Business, Damage to Our Brands and Reputation, Legal Exposure and Financial Losses.
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.
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 response to concerns about inflation may have the effect of further increasing economic uncertainty and heightening these risks.
It is unclear to what extent pandemic concerns, including with respect to COVID-19 or other future pandemics, could 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 our MSG Networks segment, or could 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 our sponsorship and advertising assets, deter our employees and vendors from working at Sphere in Las Vegas (which may lead to difficulties in staffing), deter artists from touring or otherwise materially impact our operations.
It is unclear to what extent concerns with respect to pandemics, such as a resurgence of COVID-19 or other future pandemics, could 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 our sponsorship and advertising assets, deter our employees and vendors from working at Sphere in Las Vegas (which may lead to difficulties in staffing), deter artists from touring, or result in professional sports leagues suspending, cancelling or otherwise reducing the number of games scheduled in the regular reason or playoffs, which has in the past and could in the future have a material impact on the distribution and/or advertising revenues of our MSG Networks segment, or otherwise materially impact our operations.
Risks Related to Our Indebtedness, Financial Condition, and Internal Control We Have Substantial Indebtedness and Are Highly Leveraged, Which Could Adversely Affect Our Business. We are highly leveraged with a significant amount of debt and we may continue to incur additional debt in th e future.
Risks Related to Our Indebtedness, Financial Condition, and Internal Control We Have Substantial Indebtedness and Are Highly Leveraged, Which Could Adversely Affect Our Business. We are highly leveraged with a significant amount of debt and we may continue to incur additional debt in the future.
In addition, the ability of MSGN L.P. to draw on its revolving credit facilities will depend on its ability to meet certain financial covenants and other conditions.
The ability of MSGN L.P. to draw on its revolving credit facilities will depend on its ability to meet certain financial covenants and other conditions.
We Have Elected to Be a “Controlled Company” for NYSE Purposes Which Allows Us Not to Comply with Certain of the Corporate Governance Rules of NYSE. Members of the Dolan Family Group have entered into the Stockholders Agreement relating, among other things, to the voting of their shares of our Class B Common Stock.
We Have Elected to Be a “Controlled Company” for New York Stock Exchange (“NYSE”) Purposes Which Allows Us Not to Comply with Certain of the Corporate Governance Rules of NYSE. Members of the Dolan Family Group have entered into the Stockholders Agreement relating, among other things, to the voting of their shares of our Class B Common Stock.
We Have Incurred Substantial Operating Losses, Adjusted Operating Losses and Negative Cash Flow and There is No Assurance We Will Have Operating Income, Adjusted Operating Income or Positive Cash Flow in the Future. We incurred operating losses of $273 million and $166 million for Fiscal Years 2023 and 2022, respectively.
We Have Incurred Substantial Operating Losses, Adjusted Operating Losses and Negative Cash Flow and There is No Assurance We Will Have Operating Income, Adjusted Operating Income or Positive Cash Flow in the Future. We incurred operating losses of approximately $341 million, $273 million and $166 million for Fiscal Years 2024, 2023 and 2022, respectively.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibil ity that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
There can be no assurance that some or all of these restrictions will not be imposed again in the future due to future outbreaks of COVID-19 (including variants) or another pandemic or public health emergency. We are unable to predict what the long-term effects of these events, including renewed government regulations or requirements, will be.
There can be no assurance that some or all of these restrictions will not be imposed again in the future due to another pandemic or public health emergency. We are unable to predict what the long-term effects of these events, including renewed government regulations or requirements, will be.
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.
Such mandatory disclosures are costly, could provide information to threat actors, 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.
Consequently, MSG Networks experienced a decrease in revenues, including a material decrease in advertising revenue. The absence of live sports games also resulted in a decrease in certain MSG Networks expenses, including rights fees, variable production expenses, and advertising sales commissions.
Consequently, MSG Networks experienced a decrease in revenues in Fiscal Year 2021, including a material decrease in advertising revenue. The absence of live sports games also resulted in a decrease in certain MSG Networks expenses in Fiscal Year 2021, including rights fees, variable production expenses, and advertising sales commissions.
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.
There Is a Risk of Injuries and Accidents in Connection with Sphere, Which Has in the Past and Could in the Future Subject Us to Personal Injury or Other Claims; We Are Subject to the Risk of Adverse Outcomes in Other Types of Litigation.
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.
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 and the overlap may give rise to conflicts.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeBusiness — 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.
Biggest changeBusiness — Our Business — Sphere.” In addition, we lease approximately 14,000 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. Sphere in Las Vegas has the benefit of easements with respect to the pedestrian bridge to The Venetian.
Moreover, certain adjoining property owners have easements over our property, which we are required to maintain so long as those property owners meet certain conditions.
Our ability to continue to utilize these and other easements requires us to comply with certain conditions. Moreover, certain adjoining property owners have easements over our property, which we are required to maintain so long as those property owners meet certain conditions.
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.
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 located, and own approximately 230,000 square feet of property in Stratford, London. See “Item 1.
Removed
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn 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.
Biggest changeThe MSGN Settlement Agreement was approved by the Court on August 14, 2023, which constituted the final judgment in the action. MSG Networks Inc. has a dispute with its insurers over whether and to what extent there is insurance coverage for the settlement (and has settled with one of the insurers).
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
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. 42 PART II
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.
On March 14, 2023, the parties to the MSG Entertainment Litigation reached an agreement in principle to settle the MSG Entertainment 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 “MSGE Settlement Agreement”) that was filed with the Court on April 20, 2023.
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.
Six complaints involved allegations of fiduciary breaches in connection with the negotiation and approval of the Networks Merger and were 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.
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.
Plaintiffs sought, 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 advanced the costs incurred by defendants in this action, and defendants asserted indemnification rights in respect of any adverse judgment or settlement of the action.
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.
The MSGE Settlement Agreement provided for, among other things, the final dismissal of the MSG Entertainment Litigation in exchange for a settlement payment to the Company of approximately $85 million, subject to customary reduction for attorneys’ fees and expenses, in an amount to be determined by the Court. The settlement’s amount was fully funded by the other defendants’ insurers.
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.
The complaint, which named the Company as only a nominal defendant, retained all of the derivative claims and alleged 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.
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.
No. 2021-0575-KSJM (the “MSG Networks Litigation”). The consolidated plaintiffs filed their Verified Consolidated Stockholder Class Action Complaint on October 29, 2021. The complaint asserted 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.
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 MSGE Settlement Agreement was approved by the Court on August 14, 2023, which constituted the final judgment in the action. On September 27, 2021, the Court entered an order consolidating four complaints filed by purported former stockholders of MSG Networks Inc. The consolidated action is captioned: In re MSG Networks Inc. Stockholder Class Action Litigation , C.A.
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.
Pursuant to the indemnity rights in its bylaws and Delaware law, the Company advanced 41 the costs incurred by defendants in this action, and defendants asserted indemnification rights in respect of any adverse judgment or settlement of the action.
Plaintiffs 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.
Plaintiffs alleged that the MSG Networks Inc. board of directors and controlling stockholders breached their fiduciary duties in negotiating and approving the Networks Merger. The Company was not named as a defendant but was subpoenaed to produce documents and testimony related to the Networks Merger. Plaintiffs sought, among other relief, monetary damages for the putative class and plaintiffs’ attorneys’ fees.
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.
Unless MSG Networks Inc. and the remaining insurers settle that insurance dispute, it is expected to be finally resolved in a pending Delaware insurance coverage action. The Company is a defendant in various other lawsuits.
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.
The MSGN Settlement Agreement provided 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 approximately $48.5 million, of which approximately $28 million has been paid by the Company and $20.5 million has been paid to the plaintiffs by insurers (who agreed to advance these costs subject to final resolution of the parties’ insurance coverage dispute).
Added
A s of June 30, 2024, approximately $18 million has been accrued for by the Company in Accounts payable, accrued and other current liabilities (reduced from $20.5 million accrued as of March 31, 2024 in connection with the aforementioned settlement) .

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+1 added−2 removed0 unchanged
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.
Biggest changeBase Period 4/20/20 6/30/20 6/30/21 6/30/22 6/30/23 6/30/24 Sphere Entertainment Co. $ 100.00 $ 114.80 $ 128.53 $ 80.54 $ 90.81 $ 116.24 Russell 2000 Index 100.00 119.13 193.03 144.39 162.16 178.47 Bloomberg Americas Entertainment Index 100.00 123.07 283.23 149.70 177.25 178.79 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.
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
No shares have been repurchased to date. 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 2024 Annual Meeting of Stockholders, which is expected to be filed with the SEC within 120 days of our fiscal year end.
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.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Class A Common Stock, is listed on the NYSE under the symbol “SPHR.” The Company’s Class A Common Stock began “regular way” trading on the NYSE on April 20, 2020.
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.
The program was re-authorized by the Company’s Board of Directors on March 29, 2023. 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.
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.
The stock price performance included in this graph is not necessarily indicative of future stock performance. The Russell 2000 Index and the Bloomberg Americas Entertainment Index are included for comparative purposes only.
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.
As of June 28, 2024, there were 649 holders of record of our Class A Common Stock. There is no public trading market for our Class B common stock. As of June 28, 2024, there were 14 holders of record of our Class B Common Stock.
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.
We did not pay any dividends on our common stock during Fiscal Year 2024 and do not have any current plans to pay a cash dividends on our common stock for the foreseeable future. 43 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.
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.
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 graph covers the period from April 20, 2020 through June 30, 2024. The comparison assumes an investment of $100 on April 20, 2020 and reinvestment of dividends.
Removed
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.
Added
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.
Removed
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.

Item 7. Management's Discussion & Analysis

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

110 edited+96 added−83 removed52 unchanged
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.
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 MSG Networks’ ability to successfully pursue a work-out with the lenders of its existing debt, and if successful, the terms of such work-out), the implications of a default under those credit facilities, our ability to make payments on our 3.50% Convertible Senior Notes (as defined below) 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 continue to attract advertisers and marketing partners, and audiences to attend, and artists to perform at, residencies, concerts and other events at Sphere in Las Vegas; • 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 design, construct, finance and operate new Sphere venues, 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; • our ability to successfully implement cost reductions and reduce or defer certain discretionary capital projects, if necessary; • the level of our expenses and our operational cash burn rate, including our corporate expenses; • the demand for MSG Networks programming among 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 its DTC and authenticated streaming product, MSG+, the success of such 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; • general economic conditions, especially in the Las Vegas and New York City metropolitan areas where we have significant business activities; • the demand for advertising and marketing partnership offerings at Sphere and advertising and viewer ratings for our networks; 45 • 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 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 of events by third-parties or the Company as a result of 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 of 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 the NHL, artists or employees involved in our productions or other work stoppages 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 (and any impairment charges related thereto); • 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; • 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 and the distribution from MSG Sports in 2020; and • the additional factors described under “Part I — Item 1A.
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.
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. Covenants.
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.
The performance obligations included in each sponsorship agreement vary and may include advertising and 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.
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.
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. 67 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.
Income taxes Inco me tax expense from continuing operations for Fiscal Year 2023 of $103,403 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 $35,656 related to state and local taxes, (ii) tax expense of $4,814 related to nondeductible officers’ compensation, and (iii) tax expense related to excess share based compensation of $4,678, partially offset by a decrease in the valuation allowance of $2,053.
Income tax expense from continuing operations for Fiscal Year 2023 of $103,403 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 $35,656 related to state and local taxes, (ii) tax expense of $4,814 related to nondeductible officers’ compensation, and (iii) tax expense related to excess share based compensation of 4,678, partially offset by a decrease in the valuation allowance of $2,053.
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, 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 54 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).
Segment Information to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. On March 31, 2020, the Company’s Board of Directors authorized a share repurchase program to repurchase up to $350,000 of the Company’s Class A Common Stock. The program was re-authorized by the Company’s Board of Directors on March 29, 2023.
Segment Information to the consolidated financial statements included in Item 8 of this Form 10-K. On March 31, 2020, the Company’s Board of Directors authorized a share repurchase program to repurchase up to $350,000 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 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 .
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, 2024. Seasonality of Our Business. This section discusses the seasonal performance of our business . Recently Issued Accounting Pronouncements and Critical Accounting Policies .
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 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 2024 annual impairment test.
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
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. 68
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.
This section provides an analysis of our results of operations for Fiscal Years 2024, 2023 and 2022 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 2024, 2023 and 2022.
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.
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 multi-year media rights agreements with the Islanders, Devils and Sabres.
We may also use cash to repurchase our common stock. Our decisions as to the use of our available liquidity will be based upon the ongoing review of the funding needs of the business, the optimal allocation of cash resources, and the timing of cash flow generation.
We may also use cash to repurchase our common stock. Our decisions as to the use of our available liquidity will be based upon the ongoing review of the funding needs of our businesses, the optimal allocation of cash resources, and the timing of cash flow generation.
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.
During the first quarter of Fiscal Year 2024, 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.
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.
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, both domestically and internationally.
Letters of Credit The Company uses letters of credit to support its business operations. As of June 30, 2023, there were no borrowings or letters of credit issued and outstanding under the MSGN Revolving Credit Facility.
Letters of Credit The Company uses letters of credit to support its business operations. As of June 30, 2024, there were no borrowings or letters of credit issued and outstanding under the MSGN Revolving Credit Facility.
(collectively with MSGN Eden, LLC, the “MSGN Holdings Entities”), and certain subsidiaries of MSGN L.P. have senior secured credit facilities pursuant to a credit agreement (as amended and restated on October 11, 2019, the “MSGN Credit Agreement”) consisting of: (i) an initia l $1,100,000 term l oan facility (the “MSGN Term Loan Facility”) and ( ii) a $250,000 revolving credit facility (the “MSGN Revolving Credit Facility”), each with a term of five years.
(collectively with MSGN Eden, LLC, the “MSGN Holdings Entities”), and certain subsidiaries of MSGN L.P. have senior secured credit facilities pursuant to a credit agreement (as amended and restated on October 11, 2019, the “MSGN Credit Agreement”) consisting of: (i) an initia l $1,100,000 term l oan facility (the “MSGN Term Loan Facility”) and ( ii) a $250,000 revolving credit facility (the “MSGN Revolving Credit Facility” and, together with the MSGN Term Loan Facility, the “MSG Networks Credit Facilities”), each with a term of five years.
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.
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, net of insurance recoveries, (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.
Risk Factors” included in this Annual Report on Form 10-K. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time.
Risk Factors” included in this Form 10-K. 46 These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time.
(a) As a result of the MSGE Distribution on April 20, 2023 (which is presented as discontinued operations under GAAP), prior period results of the MSG Networks segment have been recast to exclude expenses of approximately $8,800 and $20,900 for Fiscal Years 2023 and 2022, respectively, related to the MSG Networks’ Advertising Sales Representation Agreement with MSG Entertainment, which was terminated effective as of December 31, 2022.
(a) As a result of the MSGE Distribution on April 20, 2023 (which is presented as discontinued operations under GAAP), prior period results of the MSG Networks segment have been recast to exclude expenses of approximately $8,800 for Fiscal Year 2023 , related to the MSG Networks’ Advertising Sales Representation Agreement with MSG Entertainment, which was terminated effective as of December 31, 2022.
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.
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 Form 10-K for discussion of recently issued accounting pronouncements.
To the extent we do not realize expected cash flow from operations from Sphere in Las Vegas, we would have to take several actions to improve our financial flexibility and preserve liquidity, including significant reductions in both labor and non-labor expenses as well as reductions and/or deferrals in capital spending.
To the extent we do not realize expected cash flows from operations from Sphere, we would have to take several actions to improve our financial flexibility and preserve liquidity, including significant reductions in both labor and non-labor expenses as well as reductions and/or deferrals in capital spending.
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.
See Note 17. Income Taxes to the consolidated financial statements included in Item 8 of this 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.
To the extent that our efforts 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 generate the cash flows from operations necessary to fund our operations.
To the extent that our efforts do not result in viable shows, or to the extent that any such productions do not achieve expected levels of popularity among audiences, we may not generate the cash flows from operations necessary to fund our operations.
Both the historical and prospective debt service coverage ratios are set at 1.35:1. In addition, among other conditions, MSG LV is not permitted to make distributions to Sphere Entertainment Group unless the historical and prospective debt service coverage ratios are at least 1.50:1.
In addition, among other conditions, MSG LV is not permitted to make distributions to Sphere Entertainment Group unless the historical and prospective debt service coverage ratios are at least 1.50:1.00.
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 19. Segment Information to the consolidated financial statements included in Item 8 of this Form 10-K for further discussion on the definition of AOI.
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 further details regarding our accounting policies on direct operating expenses. MSG Networks Revenue Sources — MSG Networks The MSG Networks segment generates revenues principally from affiliation fees, as well as from the sale of advertising.
Summary of Significant Accounting Policies to the consolidated financial statements included in Item 8 of this Form 10-K for further details regarding our accounting policies on direct operating expenses. MSG Networks Revenue Sources — MSG Networks The MSG Networks segment generates revenues principally from distribution fees, as well as from the sale of advertising.
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”).
On December 22, 2022, 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 (as amended, the “LV Sphere Term Loan Facility”). Interest Rates .
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.
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.
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 .
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 Form 10-K to help provide an understanding of our financial condition, changes in financial condition and results of operations . Our MD&A is organized as follows: Business Overview.
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.
Credit Facilities and Convertible Notes to the consolidated financial statements included in Item 8 of this 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 14.
In the MSGE Distribution, stockholders of the Company received (a) one share of MSG Entertainment’s Class A common stock, par value $0.01 per share, for every share of the Company’s Class A common stock, par value $0.01 per share (“Class A common stock”), held of record as of the close of business, New York City time, on April 14, 2023 (the “Record Date”), and (b) one share of MSG Entertainment’s Class B common stock, par value $0.01 per share, for every share of the Company’s Class B common stock, par value $0.01 per share (“Class B common stock”), held of record as of the close of business, New York City time, on the Record Date.
In the MSGE Distribution, stockholders of the Company received (a) one share of MSG Entertainment’s Class A common stock, par value $0.01 per share, for every share of the Company’s Class Common Stock held of record as of the close of business, New York City time on the Record Date, and (b) one share of MSG Entertainment’s Class B common stock, par value $0.01 per share, for every share of the Company’s Class B Common Stock, held of record as of the close of business, New York City time, on the Record Date.
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 commitments are presented exclusive of the imputed interest used to reflect the payment’s present value. See Note 10. Leases to the consolidated financial statements included in Item 8 of this Form 10-K for more information. (b) See Note 13.
The operating results of our MSG Networks segment are largely dependent on the affiliation agreements MSG Networks negotiates with Distributors, the number of subscribers of certain Distributors, the success of our DTC product, and the advertising rates we charge advertisers.
The operating results of our MSG Networks segment are largely dependent on (i) the affiliation agreements MSG Networks negotiates with Distributors, (ii) the number of subscribers of certain Distributors, (iii) the success of MSG+, MSG Networks’ DTC and authenticated streaming product, and (iv) the advertising rates we charge advertisers.
While the Company did not incur these corporate costs after the MSGE Distribution Date and does not expect to incur these corporate costs in Fiscal Year 2024, they did not meet the criteria for inclusion in discontinued operations for all periods prior to the MSGE Distribution Date.
While the Company did not incur these corporate costs after the MSGE Distribution Date (April 20, 2023) and does not expect to incur these corporate costs in future periods, they did not meet the criteria for inclusion in discontinued operations for all periods prior to the MSGE Distribution Date.
Original immersive productions, such as Postcard From Earth , have not been previously pursued on the scale that we are planning for, which increases the uncertainty of our operating expectations.
Original immersive productions, such as Postcard From Earth , have not been previously pursued on the scale of Sphere, which increases the uncertainty of our operating expectations.
(a) For periods through the MSGE Distribution, share-based compensation includes expenses related to corporate employees that the Company does not expect to incur in future periods, but which do not meet the criteria for inclusion in discontinued operations . Adjusted operating loss for Fiscal Year 2023 increased $98,052 to $122,520 as compared to Fiscal Year 2022.
(a) For periods through the MSGE Distribution, share-based compensation includes expenses related to corporate employees that the Company does not expect to incur in future periods, but which do not meet the criteria for inclusion in discontinued operations . Adjusted operating income (loss) for Fiscal Year 2024 increased $203,251 to $80,731 as compared to Fiscal Year 2023.
The Company has letters of credit relating to operating leases which are supported by cash and cash equivalents that are classified as restricted. 58 Cash Flow Discussion As of June 30, 2023, cash, cash equivalents and restricted cash totaled $429,114, as compared to $760,312 as of June 30, 2022 and $1,190,105 as of June 30, 2021.
The Company has letters of credit relating to operating leases which are supported by cash and cash equivalents that are classified as restricted. 64 Cash Flow Discussion As of June 30, 2024, cash, cash equivalents and restricted cash totaled $573,233, as compared to $429,114 as of June 30, 2023 and $760,312 as of June 30, 2022.
A portion of these expenses were absorbed directly by MSG Networks following the termination of the advertising sales representation agreement and are reflected in MSG Networks’ results beginning January 1, 2023. Revenues Revenues for Fiscal Year 2023 decreased $36,934, or 6%, to $571,221 as compared to the prior year.
A portion of these expenses were absorbed directly by MSG Networks following the termination of the advertising sales representation agreement and are reflected in MSG Networks’ results beginning January 1, 2023. Revenues Revenues for Fiscal Year 2024 decreased $41,491, or 7%, to $529,730 as compared to the prior year.
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.
Credit Facilities and Convertible Notes to the consolidated financial statements included in Item 8 of this Form 10-K for a discussion of the MSG Networks Credit Facilities, the LV Sphere Term Loan Facility and the 3.50% Convertible Senior Notes. For additional information regarding the Company’s capital expenditures, including those related to Sphere in Las Vegas, see Note 19.
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.
The goodwill balance reported on the Company’s consolidated balance sheets as of June 30, 2024 by reportable segment was as follows: As of June 30, 2024 Sphere 45,644 MSG Networks 424,508 $ 470,152 The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred.
Therefore, we do not have a definitive timeline at this time. We will continue to explore additional domestic and international markets where we believe next-generation venues such as Sphere can be successful. The Company’s intention for any future venues is to utilize several options, such as joint ventures, equity partners, a managed venue model and non-recourse debt financing.
We will continue to explore additional domestic and international markets where we believe Sphere venues can be successful. The Company’s intention for any future venues is to utilize several options, such as joint ventures, equity partners, a managed venue model and non-recourse debt financing. Financing Agreements See Note 13.
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.
In certain advertising arrangements, the Company guarantees specific viewer ratings for its programming. 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.
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.
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. Our critical accounting policies and recently issued accounting pronouncements, are discussed in Items 7 and 8, respectively, of this Form 10-K.
Although we anticipate that Sphere in Las Vegas will generate substantial revenue and adjusted operating income on an annual basis, there can be no assurances that guests, artists, promoters, advertisers and marketing partners will embrace this new platform.
Although Sphere has been embraced by guests, artists, promoters, advertisers and marketing partners, and we anticipate that Sphere will generate substantial revenue and adjusted operating income on an annual basis over time, there can be no assurance that guests, artists, promoters, advertisers and marketing partners will continue to embrace this new platform.
Sphere also incurs corporate and supporting department operating costs that are attributable to Sphere development, including charges under the transition services agreement with MSG Entertainment (the “MSGE TSA”), costs associated with the promotion of events through various advertising campaigns, and non-event related operating expenses such as insurance, utilities, repairs and maintenance, labor related to the overall management of the Sphere segment and depreciation and amortization expense related to certain corporate property, equipment and leasehold improvements.
Additionally, it incurs corporate and supporting department operating costs, including charges under the transition services agreement with MSG Entertainment (the “MSGE TSA”), and other operating expenses such as insurance, utilities, repairs and maintenance, labor related to the overall management of the Sphere segment, non-capitalizable content development and technology costs associated with the Company’s Sphere initiative, and depreciation and amortization expense related to certain corporate property, equipment and leasehold improvements.
The Company’s first Sphere is expected to open in Las Vegas in September 2023. The venue can accommodate up to 20,000 guests and is expected to host a wide variety of events year-round, including The Sphere Experience TM , which will feature original immersive productions, as well as concerts and residencies from renowned artists, and marquee sporting and corporate events.
The venue can accommodate up to 20,000 guests and can host a wide variety of events year-round, including The Sphere Experience TM , which features original immersive productions, as well as concerts and residencies from renowned artists, and marquee sports and corporate events.
Other direct programming and production-related costs include, but are not limited to, the salaries of on-air personalities, producers, directors, technicians, writers and other creative staff, as well as expenses associated with location costs, remote facilities and maintaining studios, origination, and transmission services and facilities.
Other direct programming and production-related costs include, but are not limited to, the salaries of on-air personalities, producers, directors, technicians, writers and other creative staff, as well as expenses associated with location costs, remote facilities and maintaining studios, origination, and transmission services and facilities. 50 Other Expenses The Company’s selling, general and administrative expenses primarily consist of administrative costs, including compensation, professional fees, advertising sales commissions, as well as sales and marketing costs, including non-event related advertising expenses.
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.
Impairment of Long-Lived and Indefinite-Lived Assets The Company’s long-lived and indefinite-lived assets accounted for approximately 79% of the Company’s consolidated total assets as of June 30, 2024 and consisted of the following: As of June 30, 2024 Goodwill $ 470,152 Intangible assets, net 31,940 Property and equipment, net 3,158,420 Right-of-use lease assets 106,468 $ 3,766,980 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 has recognized intangible assets for affiliate relationships as a result of purchase accounting, and has determined that these intangible assets have finite lives.
The Company has recognized intangible assets for affiliate relationships as a result of purchase accounting, and has determined that these intangible assets have finite lives. The Company also recognized intangible assets subject to amortization during Fiscal Year 2024 as a result of the acquisition of Holoplot.
MSGE Distribution On April 20, 2023 (the “MSGE Distribution Date”), the Company distributed approximately 67% of the outstanding common stock of MSG Entertainment (the “MSGE Distribution”), with the Company retaining approximately 33% of the outstanding common stock of MSG Entertainment (in the form of MSG Entertainment Class A common stock) immediately following the MSGE Distribution (the “MSGE Retained Interest”).
Factors Affecting Comparability MSGE Distribution On April 20, 2023, the MSGE Distribution Date, the Company distributed approximately 67% of the outstanding common stock of MSG Entertainment to its stockholders, with the Company retaining approximately 33% of the outstanding common stock of MSG Entertainment (in the form of MSG Entertainment Class A common stock) immediately following the MSGE Distribution.
If performance obligations are concluded to meet the definition of a series, the contractual fees for all years during the contract term are aggregated and the related revenue is recognized proportionately as the underlying performance obligations are satisfied.
If performance obligations are concluded to meet the definition of a series, the contractual fees for all years during the contract term are aggregated and the related revenue is recognized proportionately as the underlying performance obligations are satisfied. 66 The timing of revenue recognition for each performance obligation is dependent upon the facts and circumstances surrounding the Company’s satisfaction of its respective performance obligation.
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.
MSGN L.P., MSGN Eden, LLC, an indirect subsidiary of the Company 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.
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.
The fees we receive depend largely on the demand from subscribers for our programming. Advertising Revenue 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 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.
As of June 30, 2024, the total leverage ratio was 5.10:1.00. 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, 2024, the interest coverage ratio was 2.25:1.00.
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 the 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 Knicks of the NBA and the Rangers, the Islanders, the Devils and the Sabres of the NHL, as well as significant coverage of the Giants and the Bills of the NFL.
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.
Credit Facilities and Convertible Notes to the consolidated financial statements included in Item 8 of this Form 10-K for discussions of the Company’s debt obligations and various financing arrangements. 61 MSG Networks Credit Facilities General.
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.
The net increase was attributable to the following: Year Ended June 30, 2024 Decrease in adjusted operating loss of the Sphere segment $ 230,866 Decrease in adjusted operating income of the MSG Networks segment (27,615) $ 203,251 55 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.
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 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 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.
The decreased adjusted operating loss was primarily due to an increase in revenues, partially offset by an increase in direct operating expenses and selling, general and administrative expenses (excluding share-based compensation expense and merger and acquisition related costs, net of insurance recoveries). 57 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.
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.
Since March 31, 2023, the Tao Group Hospitality segment 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 Form 10-K for further details regarding the Tao Group Hospitality Disposition.
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.
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. Our ability to have sufficient liquidity to fund our operations and refinance our indebtedness is dependent on the ability of Sphere to generate significant positive cash flow.
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.
As of June 30, 2024, the Company had 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 Sphere segment’s goodwill carrying amount increased during Fiscal Year 2024 due to the acquisition of Holoplot.
The minimum liquidity level was tested on the closing date and is tested as of the last day of each fiscal quarter thereafter based on Sphere Entertainment Group’s unencumbered liquidity, consisting of cash and cash equivalents and available lines of credit, as of such date.
The minimum liquidity level for Sphere Entertainment Group is set at $50,000, with $25,000 required to be held in cash or cash equivalents, and is tested as of the last day of each fiscal quarter based on Sphere Entertainment Group’s unencumbered liquidity, consisting of cash and cash equivalents and available lines of credit, as of such date.
The overall increase was partially offset by the absence of certain corporate expenses that were included in the segment results for the entire prior year but were only included in the results for the pre-MSGE Distribution period (July 1, 2022 through April 20, 2023) in Fiscal Year 2023.
The increase was primarily due to the impact of the MSGE TSA, higher employee compensation and related benefits, and other cost increases. The overall increase was partially offset by the absence of certain corporate expenses that were included in the results for the pre-MSGE Distribution period (July 1, 2022 through April 20, 2023) in Fiscal Year 2023.
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.
Operating income For Fiscal Year 2024, operating income increased $42,635, or 44%, to $139,143 as compared to the prior year. The increase in operating income was primarily due to the decrease in selling, general and administrative expenses, partially offset by the decrease in revenues and to a lesser extent, the increase in direct operating expenses.
The timing of revenue recognition for each performance obligation is dependent upon the facts and circumstances surrounding the Company’s satisfaction of its respective performance obligation. The Company allocates the transaction price for such arrangements to each performance obligation within the arrangement based on the estimated relative standalone selling price of the performance obligation.
The Company allocates the transaction price for such arrangements to each performance obligation within the arrangement based on the estimated relative standalone selling price of the performance obligation.
Summary of Significant Accounting Policies to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details regarding our accounting policies on revenue recognition. 42 Expenses — Sphere The Sphere segment incurs non-capitalizable content development and technology costs associated with the Company’s Sphere initiative.
Summary of Significant Accounting Policies to the consolidated financial statements included in Item 8 of this Form 10-K for further details regarding our accounting policies on revenue recognition.
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.
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.
Other Expenses The Company’s selling, general and administrative expenses primarily consist of administrative costs, including compensation, professional fees, advertising sales commissions, as well as sales and marketing costs, including non-event related advertising expenses.
Production costs are generally deferred when incurred and are subsequently expensed when the advertisement runs on the Exosphere, in line with the corresponding proportional revenue. Other Expenses The Company’s selling, general and administrative expenses primarily consist of administrative costs, including compensation, professional fees, advertising sales commissions, as well as sales and marketing costs, including non-event related advertising expenses.
All obligations under the LV Sphere Term Loan Facility are guaranteed by Sphere Entertainment Group, LLC (“Sphere Entertainment Group”). The LV Sphere Term Loan Facility will mature on December 22, 2027. The principal obligations under the LV Sphere Term Loan Facility are due at the maturity of the facility, with no amortization payments prior to maturity.
The interest rate on the LV Sphere Term Loan Facility as of June 30, 2024 wa s 9.80%. Principal Repayments . The LV Sphere Term Loan Facility will mature on December 22, 2027. The principal obligations under the LV Sphere Term Loan Facility are due at the maturity of the facility, with no amortization payments prior to maturity.
Contractual Obligations As of June 30, 2023, the approximate future payments under our contractual obligations are as follows: Payments Due by Period (c) Total Year 1 Years 2-3 Years 4-5 More Than 5 Years Leases (a) $ 184,711 $ 10,489 $ 31,831 $ 22,952 $ 119,439 Debt repayments (b) 1,207,250 82,500 849,750 275,000 — Total future payments under contractual obligations $ 1,391,961 $ 92,989 $ 881,581 $ 297,952 $ 119,439 _________________ (a) Includes contractually obligated minimum lease payments for operating leases having an initial noncancellable term in excess of one year for various office space and equipment.
Contractual Obligations As of June 30, 2024, the approximate future payments under our contractual obligations are as follows: Payments Due by Period (c) Total Year 1 Years 2-3 Years 4-5 More Than 5 Years Leases (a) $ 206,066 $ 19,555 $ 35,304 $ 32,594 $ 118,613 Debt repayments (b) 1,383,500 849,750 — 533,750 — Total future payments under contractual obligations $ 1,589,566 $ 869,305 $ 35,304 $ 566,344 $ 118,613 _________________ (a) Includes contractually obligated minimum lease payments for operating leases having an initial noncancellable term in excess of one year for various office space and equipment.
Years Ended June 30, Change 2023 2022 Amount Percentage Revenues $ 571,221 $ 608,155 $ (36,934) (6) % Direct operating expenses (336,666) (320,278) (16,388) 5 % Selling, general and administrative expenses (a) (126,482) (126,129) (353) — % Depreciation and amortization (6,668) (9,394) 2,726 (29) % Impairment and other losses, net (109) — (109) NM Restructuring charges (4,788) (452) (4,336) NM Operating income $ 96,508 $ 151,902 $ (55,394) (36) % Reconciliation to adjusted operating income: Share-based compensation expense 6,419 17,092 (10,673) Depreciation and amortization 6,668 9,394 (2,726) Restructuring charges 4,788 452 4,336 Impairment and other losses, net 109 — 109 Merger and acquisition related costs 55,236 27,683 27,553 Amortization for capitalized cloud computing costs 161 176 (15) Adjusted operating income $ 169,889 $ 206,699 $ (36,810) (18) % _________________ 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 2024 2023 Amount Percentage Revenues $ 529,730 $ 571,221 $ (41,491) (7) % Direct operating expenses (342,517) (336,666) (5,851) (2) % Selling, general and administrative expenses (a) (39,814) (126,482) 86,668 69 % Depreciation and amortization (8,246) (6,668) (1,578) (24) % Impairment and other losses, net — (109) 109 NM Restructuring charges (10) (4,788) 4,778 100 % Operating income $ 139,143 $ 96,508 $ 42,635 44 % Reconciliation to adjusted operating income: Share-based compensation expense 6,330 6,419 (89) Depreciation and amortization 8,246 6,668 1,578 Restructuring charges 10 4,788 (4,778) Impairment and other losses, net — 109 (109) Merger and acquisition related costs (11,542) 55,236 (66,778) Amortization for capitalized cloud computing costs 87 161 (74) Adjusted operating income $ 142,274 $ 169,889 $ (27,615) (16) % _________________ NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Investing Activities Net cash used in investing activities for Fiscal Year 2023 decreased by $150,241 to $653,923 as compared to Fiscal Year 2022 primarily due to (i) proceeds received from the dispositions of Tao Group Hospitality, Boston Calling Events, LLC, and the corporate aircraft in the current year period and (ii) proceeds received from the sale of investments (primarily from the sale of the MSGE Retained Interest) in the current year period, partially offset by an increase in capital expenditures in the current year related to Sphere in Las Vegas.
Investing Activities Net cash used in investing activities for Fiscal Year 2024 decreased by $608,740 to $45,183 as compared to Fiscal Year 2023 primarily due to a decrease in capital expenditures and capitalized interest for Sphere in Las Vegas after the assets were placed in service during the first quarter of Fiscal Year 2024, as well as the proceeds from the sale of MSGE Retained Interest, offset by the absence of proceeds received from sales of investments and dispositions of Tao Group Hospitality, Boston Calling Events, LLC, and the corporate aircraft as compared to the corresponding prior year.
Tao Group Hospitality Disposition On May 3, 2023, the Company completed the sale of its 66.9% majority interest in TAO Group Sub-Holdings LLC (“Tao Group Hospitality”) to a subsidiary of Mohari Hospitality Limited, a global investment company focused on the luxury lifestyle and hospitality sectors (the “Tao Group Hospitality Disposition”).
Discontinued Operations to the consolidated financial statements included in Item 8 of this Form 10-K for further details regarding the MSGE Distribution. 51 Tao Group Hospitality Disposition On May 3, 2023, the Company completed the sale of its 66.9% majority interest in Tao Group Hospitality to a subsidiary of Mohari Hospitality Limited, a global investment company focused on the luxury lifestyle and hospitality sectors.
The reported financial results of the Company for the periods after the MSGE Distribution reflect the Company’s results on a standalone basis, including the Company’s actual corporate overhead.
The reported financial results of the Company for the periods after the MSGE Distribution reflect the Company’s results on a standalone basis, including the Company’s actual corporate overhead. Change in Fiscal Year On June 26, 2024, the Board of Directors approved a change in the Company’s fiscal year-end from June 30 to December 31, effective December 31, 2024.
Since March 31, 2023, the Tao Group Hospitality segment met the criteria for discontinued operations and was classified as a discontinued operation. See Note 3.
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.
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 Company’s uses of cash over the next 12 months beyond the issuance date of the accompanying consolidated financial statements included in Item 8 of this Form 10-K (the “issuance date”) and thereafter are expected to be substantial and include working capital-related items (including funding our operations), capital spending (including the creation of additional original content for Sphere), required debt service payments, payments we expect MSG Networks to make in connection with the work-out of its indebtedness, and investments and related loans and advances that we may fund from time to time.
Sphere The Company is completing construction of its first state-of-the-art entertainment venue in Las Vegas. See “Part I — Item 1. Business—Our Business —Sphere ” in this Form 10-K.
Sphere The Company opened Sphere in Las Vegas in September 2023. See “Part I — Item 1. Our Business — Sphere” in this Form 10-K.
The following is a reconciliation of operating loss to adjusted operating loss: Years Ended June 30, Change 2023 2022 Amount Percentage Operating loss $ (273,042) $ (165,737) $ (107,305) 65 % Share-based compensation (a) 42,607 56,760 (14,153) Depreciation and amortization 30,716 22,562 8,154 Restructuring charges 27,924 13,404 14,520 Impairment and other gains, net (6,120) (245) (5,875) Merger and acquisition related costs 55,047 48,517 6,530 Amortization for capitalized cloud computing costs 161 271 (110) Remeasurement of deferred compensation plan liabilities 187 — 187 Adjusted operating loss $ (122,520) $ (24,468) $ (98,052) NM ________________ NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
The following is a reconciliation of operating loss to adjusted operating income (loss): Years Ended June 30, Change 2024 2023 Amount Percentage Operating loss $ (341,241) $ (273,042) $ (68,199) (25) % Share-based compensation (a) 46,844 42,607 4,237 Depreciation and amortization 256,494 30,716 225,778 Restructuring charges 9,486 27,924 (18,438) Impairment and other losses (gains), net 121,473 (6,120) 127,593 Merger and acquisition related costs, net of insurance recoveries (12,718) 55,047 (67,765) Amortization for capitalized cloud computing costs 87 161 (74) Remeasurement of deferred compensation plan liabilities 306 187 119 Adjusted operating income (loss) $ 80,731 $ (122,520) $ 203,251 NM _________________ NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful .

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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 changeForeign 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.
Biggest changeForeign 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.
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.
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.
A 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.
A 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 69 Plan for Fiscal Year 2024.
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 weighted average expected long-term rate of return on plan assets for the Company’s funded pension plans was 5.65% for Fiscal Year 2024. 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.
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.
A 25 basis point decrease in the long-term return on pension plan assets assumption would increase net periodic pension benefit cost by $40 for Fiscal Year 2024. Item 8. Financial Statements and Supplementary Data The Financial Statements required by this Item 8 appear beginning on page F-1 of this Form 10-K, and are incorporated by reference herein. Item 9.
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.
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, 2024 by $850 and $20, respectively.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
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.
The effect of a hypothetical 200 basis point increase in floating interest rate prevailing as of June 30, 2024 and continuing for a full year would increase the Company’s interest expense on the outstanding amounts under the credit facilities by $22,495.
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.
The weighted-average discount rates used to determine benefit obligations as of June 30, 2024 for the Company’s Pension Plans and Postretirement Plan were 5.51% and 5.40%, respectively.
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%.
We do not plan to enter into derivative financial instrument transactions for foreign currency speculative purposes. During Fiscal Year 2024, the GBP/USD exchange rate ranged from 1.2078 to 1.3137 as compared to GBP/USD exchange rate of 1.2651 as of June 30, 2024, a fluctuation of ranging from 5% to 6%.
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.
As of June 30, 2024, a uniform hypothetical 10% fluctuation in the EUR/USD exchange rate would have resulted in a change of $383 in the Company’s net asset value.
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.
The weighted-average discount rates used to determine service cost, interest cost and the projected benefit obligation components of net periodic benefit cost were 5.52%, 5.40% and 5.33%, respectively, for Fiscal Year 2024 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 4.89%, 4.38% and 4.66%, respectively, for Fiscal Year 2023 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 5.39%, 5.47% and 5.41%, respectively, for Fiscal Year 2024 for the Company’s Postretirement Plan.
Added
As of June 30, 2024, a uniform hypothetical 10% fluctuation in the GBP/USD exchange rate would have resulted in a change of $3,081 in the Company’s net asset value. Following the acquisition of Holoplot on April 25, 2024, which is based in Berlin, Germany, we are also exposed to market risk resulting from foreign currency fluctuations related to the Euro.
Added
During Fiscal Year 2024, the EUR/USD exchange rate ranged from 1.0467 to 1.1239 as compared to EUR/USD exchange rate of 1.0717 on June 30, 2024, a fluctuation ranging from 2% to 5%.

Other SPHR 10-K year-over-year comparisons