Sphere Entertainment Co. is projecting even more cost overruns for the MSG Sphere, set to open in Las Vegas later this year. Its latest quarterly financial results show that the company has spent $2.08 billion on the project, which is 73% more than the original budget. That initial $1.2 billion projection has been upped repeatedly. As of the previous report, the estimate had risen to $2.18 billion. The latest revision tacks on another $120 million, bringing the forecast to $2.3 billion.
On the positive side, the company expects to complete the setback-ridden arena’s construction on schedule. The venue is set to open on September 29 with a series of U2 concerts. The Irish band will become the latest entertainment act to take up residency in Las Vegas.
With the price tag ever rising, it’s fair to wonder whether the venue will ultimately be worth the investment.
Sphere Entertainment Completed Key Moves In Q3 To Offset Costs
Madison Square Garden Entertainment announced in January that it would be splitting in two. The company said it would spin off its live entertainment businesses. They include the namesake arena, Radio City Music Hall, Chicago Theater, and more. Meanwhile, the original company would rebrand to Sphere Entertainment and include the Sphere and Tao Hospitality Group, though it has since sold the latter.
Alongside its quarterly report, Sphere Entertainment announced it had completed the spin-off on Apr 20. As such, it’s the last report for the combined company. It posted $363.3 million in revenue for the quarter but a $70.3 million operating loss. Most of that revenue comes from the legacy businesses that will be splitting off, and it remains to be seen how much new revenue the Sphere will generate when it opens.
The company initially said that spinning off the legacy businesses could raise up to $600 million to offset construction costs. The report values that portion of the company at $575 million as of May 9, and Sphere Entertainment retains a 33% stake.
Additionally, the company said it completed the sale of Tao Hospitality Group on May 3, leaving the MSG Sphere itself as the sole business under the original company. Following that sale, it says it has over $230 million in unrestricted cash and cash equivalents available to complete the construction.
James L. Dolan, the CEO and Executive Chairman, expressed confidence in the company’s future. According to him, the opening of Sphere Las Vegas is a significant milestone in the company’s strategy to create long-term shareholder value.
How Much Revenue Might the MSG Sphere Generate?
It is reported that U2 will earn 90% of the tickets’ face value. Assuming an average of $250 per ticket, the remaining 10% leaves just $437,500 in revenue for Sphere Entertainment if the 17,500-people venue sells out, which is already close to being the case for many dates. Multiplying by 25 events, the Sphere could earn nearly $11 million from this opening run. However, it will take a lot more concerts to put a dent in the final price tag for the venue, and that doesn’t factor in operating costs.
The real winners may end up being ticket vendors. Tickets originally started at $140 face value. However, sellers like Ticketmaster are charging market prices. At the moment, the cheapest tickets start around $450. Meanwhile, premium seats cost $4000, and a front-row VIP package will set you back around $5000.
In other words, if the final ticket cost to concert-goers ends up being around $1000 on average, there could be $440 million spent on the show. But Sphere Entertainment would only reap 2.5% of that.
So far, the Sphere has not announced any other artists. According to rumors, owner Dolan is in talks with Phish. The band has a cult following, so selling out won’t be an issue. Aside from that, the Sphere has only announced one show. The Postcard from Earth is a “Sphere Experience,” with tickets starting at $49.
Aside from these events, the Sphere will benefit from November’s highly anticipated F1 race. The venue is a focal part of the race as the circuit goes around it, with grandstands to be built next to it. Additionally, Formula 1 will hold a multi-day takeover of the Sphere.