Sphere's Las Vegas gains have a television problem
The Sphere business added $15.3 million to quarterly adjusted operating income. Falling earnings at MSG Networks absorbed most of the improvement.
More shows, higher advertising revenue and extra concerts lifted Sphere Entertainment's venue and content business in the third quarter. Yet the group's adjusted operating income rose just 8%, as its regional sports networks lost subscribers.
The company behind the giant Las Vegas venue also owns MSG Networks, which broadcasts local professional sports and sells streaming access. Those businesses are pulling in different directions.
The TV drag on a stronger venue
The Sphere business increased adjusted operating income by 90%, while MSG Networks' contribution fell 65%. Management's adjusted measure leaves out depreciation, amortization, stock-based pay, write-downs and certain other costs.
| Business | 2025 | 2026 |
|---|---|---|
| Sphere | $17.1 | $32.4 |
| MSG Networks | $19.3 | $6.8 |
| Total | $36.4 | $39.2 |
Sphere's revenue rose 14% to $198.9 million. It staged 241 performances of The Wizard of Oz at Sphere, compared with 220 performances across three productions a year earlier. More performances and slightly higher revenue per show helped, alongside advertising on the venue's exterior and three additional concert residency shows.
MSG Networks' revenue fell 15% to $75.4 million. Its subscriber count dropped about 15.5%, while programming and production costs increased. Fewer subscribers are leaving the company with less revenue to cover those expenses.
Under U.S. accounting rules, the group's operating loss widened to $240.6 million from $163.1 million. A $177.6 million noncash write-down of MSG Networks goodwill was the largest charge. The year-earlier comparison incorporates corrections to previous goodwill calculations.
The cash comparison is less flattering
Research by Ticker Byline shows that group operations generated $56.9 million of cash in the third quarter, about half the year-earlier amount. We reconstructed the quarter by comparing the nine-month and six-month reports.
The cash-flow benefit from deferred revenue, money collected before a show or service is delivered, shrank to $33.0 million from $79.5 million. Across the first nine months, operating cash flow still improved to $159.5 million from $63.1 million.
Management continues to expect substantial growth from the Sphere business in calendar 2026, repeating its July outlook. Metallica began a residency in October, while the next original production, The Rocky Horror Picture Show at Sphere, is expected by the end of March 2027.
Our Sphere Entertainment company profile tracks the two businesses, cash commitments and plans for additional venues.