Madison Square Garden Sports (US:MSGS)2024-08-13 20:10Media Rights and Agreements - The Knicks and Rangers have media rights agreements with MSG Networks, each with approximately 11 years remaining[18] - Media rights revenues for the Knicks and Rangers totaled $175.3 million in fiscal year 2024, with stated rights fees for fiscal year 2025 totaling up to approximately $186.7 million[42] - The Knicks and Rangers entered into 20-year local media rights agreements with MSG Networks in October 2015[41] - Diamond Sports Group filed for Chapter 11 bankruptcy in March 2023, leading to the rejection or expiration of certain media rights agreements[41] Community and Youth Programs - Over 480,000 tri-state area youth participated in the Jr. Knicks and Jr. Rangers programs in fiscal year 2024[19] - The Garden of Dreams Foundation has donated nearly $81 million in grants and donations since 2006, impacting over 440,000 young people[20] Diversity and Inclusion - Employee Resource Group (ERG) involvement increased from approximately 1,100 members in fiscal year 2023 to 1,700 members in fiscal year 2024, a 54.8% increase[26] - Approximately 500 employees completed Diversity and Inclusion (D&I) trainings from January 2024 to June 2024[26] - The company awarded a $60,000 scholarship to a New York City high school student during the 3rd Annual Historically Black Colleges and Universities Night[27] Employee and Union Representation - As of June 30, 2024, the company had approximately 533 full-time and 450 part-time employees[28] - Approximately 11.2% of employees were represented by unions as of June 30, 2024[28] Collective Bargaining Agreements (CBA) - The current NBA CBA expires after the 2029-30 season, with a possible termination option after the 2028-29 season[28] - The current NHL CBA expires after the 2025-26 season, with a possible one-year extension[28] - The NHL CBA expires on September 15, 2026, with a possible one-year extension, while the NBA CBA expires after the 2029-30 season, with a potential termination option after the 2028-29 season[46][47] Financial Performance and Revenue - The company's financial results are heavily dependent on the popularity and competitive success of the Knicks and Rangers, which drive ticket sales, sponsorships, and media rights revenue[34] - The Knicks and Rangers qualified for the post-season during their respective 2023-24 seasons, which can boost revenue through increased games and fan engagement[34] - The company recorded approximately $76.1 million in estimated revenue sharing expenses, net of escrow, for fiscal year 2024[38] - The company incurred an operating loss of approximately $78 million in fiscal year 2021[44] - The company's revenues and expenses are seasonal, with the majority concentrated in the second and third quarters due to the NBA and NHL playing seasons[48] Player Salaries and Expenses - NBA and NHL player salaries have increased significantly and are expected to continue rising, impacting the company's expenses[36] - The Knicks are projected to be a luxury tax payer for the 2024-25 season, potentially impacting financial results[36] - The company may incur significant charges related to player injuries, trades, and contract terminations, adding volatility to financial results[36] Competition and Market Risks - The company faces intense competition in the New York City metropolitan area from other sports teams and entertainment options[33] - The company's business is sensitive to discretionary spending, which could decline due to economic downturns, recessions, or inflation[42] League Control and Media Rights - The NBA and NHL's control over media rights, league rules, and expansion decisions could materially affect the company's business and revenue[37][38] Insurance and Risk Management - The company maintains insurance policies to mitigate risks associated with player injuries and illnesses[39] Talent Acquisition and Retention - The company's ability to attract and retain talented players is crucial for maintaining team competitiveness and financial performance[36] Credit Facilities and Interest Expense - The Knicks Revolving Credit Facility has an outstanding balance of $275 million as of June 30, 2024, while the Rangers Revolving Credit Facility remains undrawn[42] - The NHL Advance Agreement has an outstanding balance of $30 million as of June 30, 2024[42] - Interest expense increased from approximately $22.9 million in fiscal year 2023 to approximately $27.6 million in fiscal year 2024[44] - The company has $275 million in borrowings under credit facilities, and a 100 basis point increase in interest rates would increase annual interest expense by approximately $2.8 million[131] Real Estate and Zoning - The Knicks and Rangers play their home games at The Garden under Arena License Agreements expiring in 2055[44] - The Garden's zoning special permit was renewed in September 2023 for five years[44] - The Garden's real estate tax exemption for fiscal year 2024 is $42.2 million, which is subject to potential repeal or amendment[45] Strategic Transactions and Acquisitions - The company may pursue acquisitions or strategic transactions, which could involve significant capital, indebtedness, and integration risks[49] Data Privacy and Cybersecurity - The company is subject to data privacy and protection laws, including the CCPA and CPRA, which went into effect on January 1, 2023, and may require additional compliance investment[50] - The company faces significant cybersecurity risks, including potential breaches, theft, or misappropriation of sensitive information, which could lead to financial losses and reputational damage[51] - In November 2016, a payment card issue affected cards used at merchandise and food and beverage locations at several MSG Entertainment venues, including The Garden, which was promptly addressed with enhanced security measures[51] - The company relies on third-party software and systems for ticket sales, credit card processing, and other operations, which could be disrupted by factors such as network failures, natural disasters, or malicious actions[52] - Cloud computing services are critical to the company's operations, and any disruption or interference with these services could adversely impact the business[52] - The company has incurred and expects to continue incurring significant expenses to enhance security measures and address potential cybersecurity incidents[51] - The company may face legal or regulatory action, financial losses, and reputational harm due to unauthorized access or security breaches of its systems[51] - The company is subject to new regulations requiring timely disclosure of material cybersecurity incidents, which could lead to negative publicity and loss of customer confidence[52] - The company relies on third-party facilities and systems, and any interruption or unavailability of these services could have a material negative effect on its business[52] Governmental Regulations and Public Health - The company's business is subject to governmental regulations, including labor, immigration, and employment laws, which could change and impact operations[50] - The company's operations could be adversely affected by terrorist activity or the threat of such activity, which could reduce attendance at games[50] - The company's business was materially impacted by government actions during the COVID-19 pandemic, and could be impacted by future public health emergencies[50] Affiliated Entities and Agreements - The company relies on affiliated entities' performance under various agreements, including arena license agreements and services agreements, which could impact operations if breached[48] Financing and Market Volatility - The company may require financing for ongoing operations, but the availability of financing is highly uncertain due to market volatility and potential league approval requirements[45] Tax and Indemnity Obligations - The company has indemnity obligations to Sphere Entertainment under the Tax Disaffiliation Agreement, which could result in substantial liabilities if the Sphere Distribution is treated as a taxable transaction[56] - The company could face significant tax liability if the Sphere Distribution does not qualify for tax-free treatment, potentially resulting in substantial taxes for both the company and Sphere Entertainment stockholders[55] Corporate Governance and Control - The Dolan Family Group collectively owns approximately 70.9% of the total voting power of all outstanding common stock, including 3.0% of Class A Common Stock and all of Class B Common Stock[57] - The Dolan Family Group controls MSG Entertainment, Sphere Entertainment, and AMC Networks, and can prevent changes in control or corporate transactions without their consent[58] - The Dolan Family Group holds registration rights for approximately 5.1 million shares of Class A Common Stock, which could impact the stock price if sold[60] - The company is a "controlled company" under NYSE rules, allowing it to bypass certain governance requirements, such as having a majority independent board[58] - The company's common stock is subject to NBA and NHL transfer restrictions, and non-compliance could result in shares being redeemed at 85% of fair market value[60] - The company shares directors and executives with MSG Entertainment, Sphere Entertainment, and AMC Networks, potentially leading to conflicts of interest[60] - The company has renounced rights to certain business opportunities in favor of MSG Entertainment, Sphere Entertainment, and AMC Networks[62]