Brutal: Sphere Loses $104 Million in Three Months, $480 Million Over Past Year

By Scott Roeben, on August 19 2024
4 min read 17 comments
Las Vegas Las Vegas Shows

Sphere at Venetian released its financial results for the fiscal quarter ending June 30, 2024, and it’s ugly.

During the three month period (April to June, 2024), Sphere lost $104.5 million. For the fiscal year ending June 30, 2024, Sphere lost a jarring $480 million.

Apparently, you can’t make money by building a $2.4 billion IMAX movie theater. Let’s dive in, shan’t we?

As losses mount, can Sphere stay afloat?

Sphere Entertainment Co. is a public company, so we get to go all up inside their business at the end of each quarter.

Public companies have lots of ways of spinning their results, but ultimately, the numbers don’t lie.

Here’s a news release with Sphere’s financial results for “fiscal 2024 fourth quarter,” as the kids say.

For the fiscal 2024 fourth quarter, the Sphere reported revenues of $151.2 million, which sounds awesome without any context. The context comes a few paragraphs later in the Sphere’s news release: “Fiscal 2024 fourth quarter selling, general and administrative expenses of $102.1 million increased $11.8 million, or 13%, as compared to the prior year quarter, primarily due to higher employee compensation and related benefits and, to a lesser extent, higher professional fees.”

A giant red flag, “selling, general and administrative expenses of $102.1.” This reeks of poor management, and you don’t even have to read between the lines. It’s right out there in plain sight.

Math is the world’s most boring thing besides sports, but it’s part of the Las Vegas conversation, so.

Caution: The follow-up may cause nausea, dizziness or disorientation. From the news release, “Fiscal 2024 fourth quarter operating loss of $104.5 million increased by $9.3 million, as compared to the prior year quarter.”

In other news, Sphere generated about $15 million from advertising fees in fiscal 2024 fourth quarter. Again, that doesn’t sound too bad if you’re cherry-picking fun facts. Ultimately, though, Sphere aspired to making $100 million-plus a year from its “Exosphere.”

We are not a math expert, but the $15 million in ad revenue is 40% off of projections.

There’s no denying Sphere has made a splash in Las Vegas. It’s a must-see for visitors, and the showings of “Postcard from Earth” are packed multiple times a day. Sphere says “Postcard” generates more than a million dollars a day on average.

Movies, though, even at more than $100 a ticket, aren’t a viable business plan for a venue that cost $2.3 billion to build. Sphere has a really, really big nut.

There are more movie in the works, including an $80 million version of “Wizard of Oz,” but that’s not going to address the elephant in the room.

We really need to find another metaphor because that whole “elephant in the room” thing is sort of body shaming, up with which we will not put. “Eight hundred pound gorilla in the room” is also not very kind. We’re trying to get across is there’s something pretty obvious in the room but everyone’s avoiding it and nobody’s talking about it. The “Criss Angel in the room,” let’s say.

What, you thought just because we know Criss Angel now we can’t poke fun? Do you know this blog at all?

See, Sphere needs to refinance their primary tranche of debt by Oct. 11, 2024. The amount is a whopping $850 million.

“Tranche” comes from the word “slice.” A “tranche of debt” refers to a portion of a debt obligation that is divided and sold separately, often with varying levels of risk and return.

It’s likely Sphere will get its refinancing deal done, but it’s rare for a company to wait so long to do so. We’re told most companies don’t like to get within a year of when the debt is due in case the credit markets seize up.

Lots of red-flaggery going on here.

Is there hope for the Sphere? While several of the financial trends are slowly moving in the right direction (less losing is the new winning), it’s a little like saying they’re moving the deck chairs on the Titanic twice as fast.

Sphere really needs to up its concert game to have even a remote chance of success. The A-list residencies just haven’t materialized, so the venue is relying on niche acts and movies and that one UFC event in September 2024.

When and if it does get big acts, Sphere can’t keep giving all the revenue to the performers. U2 got 90% of the box office during its residency.

The Sphere experience itself is great, and we highly recommend it.

Everyone’s rooting for this new Vegas landmark to succeed, but there’s a reason we dubbed it the “Bankruptcy Bulb.” There’s a reason the venue’s owner, James Dolan (technically, his family, but he’s the Executive Chairman and Chief Executive Officer), and his Madison Square Garden Entertainment Corp., peeled Sphere off as its own financial entity.

If you saw “Furiosa: A Mad Max Saga,” and we hope you didn’t because it’s terrible, remember what happened with Furiosa’s arm? It was sacrificed in order for her to escape. More earnings calls should include this reference.

Feel free to substitute a Merle reference if you’re a “Walking Dead” fan.

If you’re more of a real life drama person, Google Aron Ralston and “127 Hours.” He’s the one who relinquished his right arm after being trapped by a boulder hiking in Utah’s Bluejohn Canyon in 2003. Fun fact: In brothels, customers whose courtesans cancel their appointments are referred to as “Bluejohns.”

Anyway, we love you, Sphere. As they say in financial analysis circles, get your shit together.