The long-awaited Madison Square Garden (MSG) Sphere entertainment venue first broke ground behind the Venetian in September 2018—the development costs at that time were estimated at $1.8 billion.
Since then, that figure has ballooned to over $2.1 billion and counting, surpassing the $1.9 billion price tag that the Raiders’ Allegiant Stadium fetched. This is despite the fact that its capacity is only around 20,000, compared to the 65,000 that Allegiant can hold.
The venue was first projected to open last year, but is now expected to be completed sometime in 2023.
MSG representatives have attributed the rising expenses and delays to supply chain hiccups, economic inflation and challenges related to the technological complexity of the project, but investors and industry analysts are starting to question whether or not the facility will be the home run that the company is promising.
Last month, during MSG’s third-quarter earnings call, Chief Financial Officer David Brynes assured investors that there was still an abundance of sponsorship interest for the venue, saying that “companies and brands are going to want to be associated” with the project.
He added that the majority of these opportunities “are with existing major sponsors” at other venues owned by the company, which makes future prospects “even more encouraging.”
MSG has said previously that it plans to supplement the added costs with cash flow from its other assets, which include the famed Madison Square Garden and Radio City Music Hall venues in New York City as well as the New York Rangers and New York Knicks professional sports franchises.
That said, JP Morgan analyst David Karnovsky said afterward in a research note November 10 that the financial prospects for the venue are “unclear, given a lack of details from the company.”
Others, including Paul Golding from Macquarie Securities, have posited that the cost hikes may not be over just yet—Golding said in a research note from December 13 that consolidating some of MSG’s live entertainment ventures into another publicly traded company could serve to help bolster the venue’s financial troubles, should they continue.
In an email to the Nevada Independent, Jeffries analyst David Katz said that part of the problem could be that MSG vastly underestimated the venue’s potential costs “from the outset.”
Despite the increased concern, however, there is little doubt that if MSG can deliver the one-of-a-kind experience that the Sphere projects to offer, it will eventually attain success given the healthy event schedule.
Katz told the Independent that after touring the venue recently, he believes that it “could become a must-see asset in Las Vegas.”
Upon completion, the Sphere is slated to host the largest LED screens in the world, one on the exterior that totals 580,000 square feet and one on the interior that spans 160,000 square feet. The visuals will be complemented by an arsenal of over 160,000 speakers. The company is expected to utilize these offerings for advertising purposes during non-event times.
In a previous statement, Andrew Shulkind, senior vice president of MSG Sphere Studios, said that the ”vision with MSG Sphere is to create immersive experiences that transport audiences to new places, and there are few landscapes more awe-inspiring than space.”
In addition to musical performances, the company has also said that the Sphere could be used for sporting events that don’t require a large playing surface, such as boxing and mixed martial arts, both of which are staples in the Las Vegas sports scene.
When it does get up and running, competition will be steep, given that Allegiant Stadium and MGM’s T-Mobile Arena have produced extremely high revenues since their openings. The two venues also play host to sports franchises—Allegiant with the Raiders and T-Mobile with the Golden Knights—but the Sphere will have to rely solely on one-off events. But the first announced event at the Sphere could be a blockbuster. The Irish band U2 has confirmed it will set up for a month-long residency once the facility opens performing a show that takes full advantage of all the Sphere’s interactivity.
