MSG Entertainment
For the fiscal 2020 second quarter, MSG Entertainment revenues of $312.7 million decreased 1%, as compared to the prior year period. This primarily reflects lower event-related revenues from concerts, as well as the impact of the wind-down of Obscura Digital’s third-party production business and the expiration of the booking agreement with the Wang Theatre. These decreases were mostly offset by higher event-related revenues from other events, higher revenues at Tao Group Hospitality and an increase in revenues for theChristmas Spectacular Starring the Radio City Rockettes production.
Fiscal 2020 second quarter operating income increased by $2.3 million to $95.5 million and adjusted operating income increased by $2.5 million to $103.6 million, both as compared to the prior year period. This primarily reflects lower direct operating expenses and selling, general and administrative expenses, partially offset by the decrease in revenues and, for operating income, by an increase in depreciation and amortization. The decrease in direct operating expenses was primarily due to lower concert-related expenses and lower Obscura Digital costs, partially offset by higher event-related expenses from other live events and higher Tao Group Hospitality costs. The decrease in selling, general and administrative expenses was primarily due to the absence ofpre-opening venue expenses that were recorded in the prior year quarter and lower costs related to Obscura Digital, partially offset by higher employee compensation and related benefits.
MSG Sports
For the fiscal 2020 second quarter, MSG Sports revenues of $316.5 million increased less than 1% as compared to the prior year period. This reflects higher league distributions and local media rights fees from MSG Networks Inc., along with other net revenue increases, mostly offset by lower revenues from other live sporting events and a decrease in sponsorship and signage revenue.
Fiscal 2020 second quarter operating income increased by $7.3 million to $49.2 million and adjusted operating income increased by $6.7 million to $55.3 million, both as compared to the prior year period. This primarily reflects lower direct operating expenses, partially offset by higher selling, general and administrative expenses. The decrease in direct operating expenses was primarily due to a $23.1 million decrease in net provisions for certain team personnel transactions, partially offset by higher team compensation, revenue sharing and luxury tax expense, and other team operating expenses. The increase in selling, general and administrative expenses was primarily due to higher employee compensation and related benefits.
Corporate and Other
For the fiscal 2020 second quarter, Corporate and Other’s operating loss of $59.6 million and adjusted operating loss of $31.9 million increased by $9.9 million and $12.7 million, respectively, both as compared with the prior year period. The increased loss reflects higher expenses related to the MSG Sphere initiative, which include increases in personnel, content development and technology costs, as well as expenses related to the proposedspin-off the Company’s Entertainment business, partially offset by a decrease in employee compensation and related benefits in Corporate.
MSG Sphere at The Venetian
The Company has made significant progress on MSG Sphere at The Venetian, itsstate-of-the-art entertainment venue currently under construction in Las Vegas.
The Company expects the venue to have a number of significant revenue streams, including a wide variety of content such as attractions, concert residencies, corporate and select sporting events, as well as sponsorship and premium hospitality opportunities. As a result, the Company anticipates that, after opening, MSG Sphere at The Venetian will generate substantial revenue and adjusted operating income on an annual basis.
For the past six months, the Company has conducted an extensive amount of work on examining the underlying assumptions for both the venue’s construction and design. During that process, the Company identified significant savings relative to its general contractor’s initial benchmark estimate for hard construction costs, while further developing the venue’s design and making important enhancements, including to the immersive technologies. While these design changes expanded the overall scope of work and required the Company to reinvest a portion of the identified cost savings, the Company believes the changes will greatly improve the venue, along with the overall guest experience. This substantial progress has also significantly advanced the project — which has moved from the schematic design phase to detailed construction drawings — providing a better foundation for estimating costs.
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