Sphere Entertainment (NYSE:SPHR) reported second-quarter revenue of $313.6 million and adjusted operating income of $50.9 million, while executives highlighted progress on venue expansion, original content development and advertising partnerships.
Executive Chairman and Chief Executive Officer Jim Dolan said the company is pursuing its long-term strategy of building a global network of Sphere venues, with projects advancing in Abu Dhabi and National Harbor, Maryland. He also pointed to the continued performance of The Wizard of Oz at Sphere and plans for additional immersive productions.
Venue expansion plans advance
In the U.S., the company is moving forward with plans for a Sphere at National Harbor. Sphere expects to complete an agreement for third-party financing “in the near term,” Dolan said. The planned financing would supplement $200 million in state, local and private incentives.
Digger Granville-Smith, executive vice president at Sphere Entertainment, said the company is evaluating a build-to-suit and leaseback arrangement for National Harbor. Under that structure, a third-party partner would fund construction and own the venue, while Sphere would hold a long-term lease and maintain day-to-day operational control.
The company said this approach would allow it to consolidate National Harbor financial results, retain more adjusted operating income and preserve potential upside. Sphere has also filed a detailed site plan with Prince George’s County as it seeks required permits, and Dolan said the venue could open in less than four years.
Management emphasized that financing structures could vary by project. Granville-Smith said Abu Dhabi uses a franchise model, while domestic projects could be owned, structured through sale-leasebacks or supported by other financing arrangements. Dolan said the company’s objective is to build venues quickly and that it aims to have five or more venues operating within five to six years, with another five potentially under construction.
Dolan said Sphere remains in discussions with a “significant number” of markets regarding both large and smaller Sphere venues. He said the company could announce another expansion project before the end of 2026 and would be disappointed if it did not have another venue announcement by the first quarter.
Content slate broadens beyond Wizard of Oz
Sphere announced last month that The Rocky Horror Picture Show at Sphere is expected to debut in 2027. Dolan said the production would broaden the company’s content slate into a new genre and enable the venue to schedule Sphere Experiences later in the evening, complementing family-oriented daytime programming.
Meanwhile, The Wizard of Oz at Sphere has sold nearly 3.6 million tickets and generated approximately $450 million in ticket sales, according to Dolan. He said attendance is subject to Las Vegas seasonality, with summer representing a lower-demand period, but described the show’s performance as strong.
The company is developing The Wizard of Oz 2.0, an enhanced version of the experience that Dolan said it hopes to launch in September. The updated production is expected to include new elements involving the witch and flying monkeys.
Dolan said the company believes The Wizard of Oz could have a lengthy run and could eventually play at other Sphere venues. Sphere is also developing an experience called From The Edge and remains in discussions with intellectual-property holders regarding other potential productions.
Management said it is becoming more efficient in creating immersive content. Dolan said the original Wizard of Oz production took about two years to make, while Rocky Horror Picture Show is expected to take less than 12 months. He cited production techniques developed for Wizard of Oz and the use of artificial intelligence as factors that could support faster and less-expensive content creation. By the end of 2027, Dolan estimated that Sphere could have three to four Sphere Experiences playing at the venue.
Sphere segment revenue rises nearly 30%
Sphere segment revenue totaled $226.4 million in the second quarter, up nearly 30% from the prior-year period. Chief Financial Officer Robert Langer said the increase was driven primarily by higher per-show revenue from The Wizard of Oz at Sphere.
Revenue also increased from Exosphere advertising, sponsorship, suite license fees and concert residencies. Those gains were partly offset by fewer brand events held at Sphere compared with the prior year.
Sphere segment adjusted operating income increased to $39.9 million from $24.9 million a year earlier. Langer said revenue growth was partly offset by higher selling, general and administrative costs and higher direct operating expenses, including higher per-show expenses associated with The Wizard of Oz.
Company-wide SG&A expense was $125.6 million, up $29.2 million. Langer attributed part of the increase to mark-to-market adjustments on certain share-based compensation awards following appreciation in Sphere’s stock price. He said the company cash-settled more than half of those awards during the quarter, which should lessen the mark-to-market effect in future periods, all else being equal.
Advertising momentum and MSG Networks results
Chief Operating Officer Jen Koester said the Exosphere advertising and sponsorship business posted significant growth during the quarter and remains a potential growth driver over the next several quarters and into 2027. She cited brand activity from Verizon related to the World Cup and Adobe’s multiday Las Vegas summit, along with a pipeline of potential multiyear official partnerships.
MSG Networks generated second-quarter revenue of $87.3 million and adjusted operating income of $11 million, compared with $107.1 million and $36.5 million, respectively, in the prior-year quarter. Langer said the year-over-year decline reflected an approximately 16.5% decrease in subscribers, lower advertising revenue and the absence of certain retroactive media-rights adjustments recorded in the prior-year period.
Sphere’s business held approximately $534 million of unrestricted cash and cash equivalents as of June 30, alongside $259 million of convertible debt and a $275 million term loan related to Sphere in Las Vegas. MSG Networks had approximately $98 million in net debt, including $116 million outstanding on its term loan. Dolan said MSG Networks’ debt is non-recourse to Sphere.
About Sphere Entertainment (NYSE:SPHR)
Sphere Entertainment Co (NYSE: SPHR) is a publicly traded company focused on the development and operation of large-scale immersive entertainment venues. Established as a standalone entity in early 2023 following its separation from Madison Square Garden Entertainment, Sphere leverages cutting-edge audiovisual technologies to create next-generation concert, film and cultural experiences. The company’s flagship venue in Las Vegas showcases its core capabilities, while additional projects are in various stages of development around the world.
At the Las Vegas Sphere, Sphere Entertainment has installed one of the largest LED display surfaces on the planet, wrapping audiences in 16K resolution imagery and spatial audio powered by proprietary sound systems.
