Sphere
For the fiscal 2023 fourth quarter, the Sphere segment reported revenues of $0.7 million, an increase of $0.1 million, as compared to the prior year quarter.
For the fiscal 2023 fourth quarter, the Sphere segment had direct operating expenses of $1.1 million, which reflected advertising and marketing costs related to Sphere in Las Vegas, as compared to no direct operating expenses in the prior year quarter.
Fiscal 2023 fourth quarter selling, general and administrative expenses of $90.3 million increased $1.9 million, or 2%, 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 fourth quarter but were only included in the results for the pre-spin period (April 1, 2023 through April 20, 2023) in the fiscal 2023 fourth quarter. While the company did not incur these costs after the spin-off date and does not expect to incur these costs in future periods, they did not meet the criteria for inclusion in discontinued operations for all periods prior to the spin-off date. In addition, professional fees decreased, as compared to the prior year quarter, inclusive of litigation-related insurance recoveries associated with the MSG Networks merger.
Fiscal 2023 fourth quarter operating loss of $95.2 million increased by $2.8 million, as compared to the prior year quarter, primarily reflecting the increase in selling, general and administrative expenses (including merger and acquisition related costs and share-based compensation expense). Adjusted operating loss of $90.4 million increased by $15.7 million, as compared to the prior year quarter, primarily reflecting the increase in selling, general and administrative expenses (excluding merger and acquisition related costs and share-based compensation expense).
MSG Networks
For the fiscal 2023 fourth quarter, the MSG Networks segment reported total revenues of $128.4 million, a decrease of $10.7 million, or 8%, as compared to the prior year quarter. Affiliation fee revenue decreased $11.7 million, primarily due to a decrease in subscribers of approximately 11.5%, partially offset by the impact of higher affiliation rates in the fiscal 2023 fourth quarter. Advertising revenue increased $0.8 million, primarily due to higher advertising sales related to playoff telecasts and other net advertising revenue increases, partially offset by the impact of fewer live regular season professional sports telecasts as compared to the prior year quarter, primarily as a result of the timing of the 2021-22 NHL regular season in the prior year.
Fiscal 2023 fourth quarter direct operating expenses of $81.6 million increased $2.8 million, or 4%, as compared to the prior year quarter, primarily due to higher rights fees expense of $3.1 million, which mainly reflects annual contractual rate increases in the fiscal 2023 fourth quarter.
Fiscal 2023 fourth quarter selling, general and administrative expenses of $19.3 million decreased $6.4 million, or 25%, as compared to the prior year quarter, primarily due to lower advertising and marketing expenses, lower employee compensation and related benefits (including share-based compensation) and other net cost decreases.
Fiscal 2023 fourth quarter operating income of $24.8 million decreased $5.7 million, or 19%, and adjusted operating income of $30.6 million decreased $8.7 million, or 22%, both as compared to the prior year quarter, primarily due to the decrease in revenues and increase in direct operating expenses, partially offset by the decrease in selling, general and administrative expenses.
Other Matters
The Company remains on track to open Sphere in Las Vegas next month. Primary construction of the venue was completed in June, while installation and testing of the majority of the technological systems inside the venue was completed earlier this month. The Company is currently in the process of finishing the interior spaces and exterior grounds, ahead of the venue’s opening.
The venue’s exterior – the Exosphere – was completely illuminated for the first time with a special show to celebrate the Fourth of July that generated media coverage globally and was shared widely on social media. Global rock band U2 will open the venue on September 29th with the first of 25 performances, which will be followed by the October 6th public debut of The Sphere Experience, featuring the original immersive production, Postcard from Earth, directed by Darren Aronofsky. And in mid-November, Formula 1 will have a multi-day takeover of Sphere for its inaugural Las Vegas Grand Prix.
With Sphere in Las Vegas nearing completion, the Company expects final construction costs, inclusive of core technology and soft costs, to be approximately $2.3 billion. Actual construction costs paid through August 18, 2023 were approximately $2.25 billion, which was net of $65 million received from The Venetian Resort.
As of August 18, 2023, the Company had approximately $341 million in unrestricted cash and cash equivalents. This includes the benefit of approximately $205 million of proceeds from the Company’s sale of approximately 6.9��million shares of MSG Entertainment Class A common stock in June 2023, in addition to last month’s full drawdown of the $65 million delayed draw term loan facility with Madison Square Garden Entertainment Corp. (“MSG Entertainment”). Earlier this month, the Company
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