MSG Owners Bet On The Future of Live Entertainment and Vegas’ Revival With The Sphere

If 2023 taught us anything, it’s that millennials would rather spend $10K on concerts than live a life with regrets (or retirement). And Sphere Entertainment (NYSE:SPHR) is making a bold bet that’ll continue.

Sphere who? Earlier this year, MSG Entertainment renamed itself Sphere Entertainment and separated from its other live entertainment businesses (i.e., Madison Square Garden, Radio City Music Hall, etc.). The Sphere, the world’s largest spherical structure that operates 365 days a year with 17.6K seating capacity, 1.2M programmable LED screens and 1.6K speakers — officially opened last Friday with a U2 concert.

• Unlike other concert venues, The Sphere also monetizes through ads, which can set advertisers back $450K per day.
• The venue also offers a “tour in the future of technology,” costing $49-$199 (Barron’s).

Macquarie analyst Paul Golding thinks The Sphere “could be the ‘live’ disruptor — more intimate, impressive, premium, and purpose-built than stadiums and arenas” (YF). But it’ll take 5,111 days of running ads — or 11.5M tours just to recoup the ~$2.3B invested. And while they’re looking to build their next dome in London, Sphere is also a bet on the revival of Vegas.

Vegas reinvents itself again

Visitors to Vegas have nearly recovered, reaching 5.9% below its pre-COVID peak in the 12 months through March 2023. But the city is becoming known for more than just gambling. Since 2016, Vegas has turned itself into a sports hotspot with the acquisition of three major league teams.

• The Vegas Golden Knights won the 2023 NHL Stanley Cup, and Vegas will be hosting the 2024 Super Bowl in February.
• In November, the MLB will vote on the Oakland Athletic’s relocation to Vegas, homed in their potential new $1.5B ballpark.
• The Vegas Formula 1 Grand Prix is scheduled for Nov. 18, in the first of a 10-year contract.

Forward-looking: While $SPHR has nearly doubled this year, Golding has a $32 price target (20% downside) — saying there are too many uncertainties ”on the venue, including the timeline on reaching full potential.” And whether advertisers will pay its exorbitant ad fees or if consumers still have money to spend is another question.