Las Vegas Sphere Reports $98.4M Loss … But That Mostly Covers Period Before Doors Opened

November 9, 2023 by Dave Haynes

That giant LED orb in Las Vegas has generated a huge amount of intention since it was lit up and the doors opened for paid admissions, and its backers are undoubtedly hoping it will generate the kind of money needed to make it viable – given that the most recent financials for the Sphere show a $98.4 million operating loss.

That doesn’t look good, but the qualifier as big as the Sphere itself is that the latest quarterlies only encompass a few days of revenue from the opening dates in late September.

The company’s financial reporting period covers July through September. From its investor PR:

For the fiscal 2024 first quarter, the Sphere segment reported revenues of $7.8 million, an increase of $7.1 million, as compared to the prior year quarter. This was primarily driven by event-related revenues of $4.1 million, reflecting the opening of Sphere in Las Vegas on September 29, 2023.  In addition, revenues from sponsorship, signage, Exosphere advertising and suite license fees were $2.6 million, primarily reflecting advertising campaigns on the venue’s Exosphere, which began in September 2023.

For the fiscal 2024 first quarter, the Sphere segment had direct operating expenses of $7.8 million, as compared to no direct operating expenses in the prior year quarter. This primarily included $2.8 million of venue operating costs and $2.2 million of event-related expenses, both reflecting the opening of Sphere in Las Vegas on September 29, 2023. In addition, direct operating expenses included $2.1 million in costs associated with The Sphere Experience, reflecting advertising expenses ahead of the October 6, 2023 debut of The Sphere Experience featuring Darren Aronofsky’s Postcard from Earth.

Fiscal 2024 first quarter selling, general and administrative expenses of $84.2 million increased $7.0 million, or 9%, as compared to the prior year quarter, primarily due to the impact of the Company’s transition services agreement with MSG Entertainment, higher employee compensation and related benefits, and other cost increases. The overall increase was partially offset by the absence of certain corporate expenses that were included in the results of the prior year quarter but were not included in the results for the current year quarter. While the Company did not incur these costs after the spin-off from MSG Entertainment, which occurred in April 2023, and does not expect to incur these costs in future periods, they did not meet the criteria for inclusion in discontinued operations in the prior year quarter.

Fiscal 2024 first quarter operating loss of $98.4 million increased by $19.4 million, as compared to the prior year quarter, primarily reflecting higher depreciation and amortization, direct operating expenses, and selling, general and administrative expenses (including share-based compensation expense and merger and acquisition related costs, net of insurance recoveries), partially offset by the increase in revenues. Adjusted operating loss of $83.1 million increased by $19.0 million, as compared to the prior year quarter, primarily reflecting higher selling, general and administrative expenses (excluding share-based compensation expense and merger and acquisition related costs, net of insurance recoveries) and direct operating expenses, partially offset by the increase in revenues.

The venue has been selling out its U2 concerts and those have been extended into next year, bringing the band’s planned number of performances at Sphere to 36 in total. Social media also suggests the outside LED ball has been booked by numerous brands. The outside-facing display has been block-booked for creative related to the Formula One race that has already eaten the Strip and goes off next week.

The venue cost more than $2B to build, so it might take a considerable amount of time to make this a profitable development.

The Las Vegas Sun has a piece looking at the financials, and noting the CFO resigned after just 11 months on the job.