Madison Square Garden’s live entertainment business is bouncing back from the pandemic, but its sports network is still lagging after experiencing a double-digit drop in revenue in the first quarter.
Madison Square Garden Entertainment Corp. (NYSE: MSGE) reported MSG Networks booked $122.5 million during the first quarter of the 2023 fiscal year, which ended Sept. 30. That’s a 13% decrease from the same period last year, when the networks generated $141.5 million. MSG Networks’ revenue represents 30% of the parent company’s $401.2 million in total revenue, which is up 36% year over year.
MSG Networks—which airs exclusive coverage of five NBA and NHL teams, including the New York Knicks and New York Rangers—felt the revenue hit after a 9% drop in subscriber base. The parent company also attributed the decline to Comcast Corp. not renewing its carriage deal with the network last year. After failing to reach an agreement, Comcast accused MSG Entertainment of having the nation’s “most expensive sports content” with “extremely low viewership” in their markets.
MSG Entertainment shares declined 8.3% on the day to close at $41.40.
MSG Networks merged with MSG Entertainment last July, and has been slow to match the revenues it achieved during Q1 in previous fiscal years. It posted revenues of $164.5 million in 2018’s first quarter, but that started dipping the following year ($161 million). Revenue fell to $157 million in the Q1 of 2020, and the pandemic led to another drop in 2021 ($141.5 million).
The slow recovery is noteworthy as the parent company prepares to spin off its live entertainment businesses, including MSG Networks, which owns MSG Sportsnet and a streaming service (MSG GO).
MSG Entertainment submitted its Form 10 registration to the Securities and Exchanges Commission (SEC) last month. The two-year-old company is looking to place its MSG Sphere arena in Las Vegas and the Tao Group hospitality businesses into MSG Sphere Corp, while keeping MSG's live entertainment arm, including New York City's Radio City Music Hall and the Beacon Theater, under the MSG Entertainment banner.
That transaction still must be approved by multiple parties, including the sports leagues and MSG Entertainment board of directors. MSG offered no timetable on when that process would be completed.
Sister company Madison Square Garden Sports got off to a solid start to the year, as it saw revenues rise 28% to $24.1 million during the first quarter thanks in part to combined average season ticket renewal rates for both teams exceeding 90%. The holding company, which operates the Knicks and Rangers, also reported on Oct. 27 that it experienced a $35.9 million operating loss (an adjusted operating loss of $27.3 million).
A spokesperson for MSG Entertainment didn’t immediately respond to a request for comment.
