Madison Square Garden (Nasdaq: MSG) reported its first-quarter earnings with a rise in profits despite the ongoing renovation at the Garden venue. What effect might the NBA lockout have going forward? Let's take a closer, Foolish look.

A look at the scoreboard
Despite the world-famous Garden's unavailability throughout the quarter because of a transformation project, MSG was able to generate growth in adjusted operating cash flow by 9% from the previous year's quarter to $46 million.

Revenue for the quarter did drop by 7% to $177.6 million, but net income managed to defy gravity, growing at 11% from the previous year's quarter to $21.3 million -- mainly because of lower tax expenses and the absence of an insurance settlement paid in the previous quarter.

MSG Media's revenues increased by 3.9% to $138 million, as much higher affiliate-fee rates were considerably offset by the ending of some other affiliation agreements. An increase in advertising revenues and lower marketing costs also contributed to the segment's operating income, which increased by 13.7% to $57.2 million.

The sports division, on the other hand, showed a 21.9% decline in revenues, primarily because of the offseason closure of the Garden. Lower preseason and regular-season ticket revenues, coupled with lower revenues from other sporting events -- including a decline in suite-rental revenues -- contributed to the overall decrease in this segment.

The entertainment segment also saw revenue drop by 27.7% to $27.6 million, again mainly because of lower event-related revenues resulting from the Garden shutdown, although the revenue drop was slightly offset by higher event-related revenues from Radio City Music Hall and The Beacon Theatre.

The NBA headache
Besides the fallout from the high-expenditure renovation of the venue in Manhattan, the NBA lockout has also hit MSG right in the bread basket. Experts believe that the company could face losses in the ballpark of $70 million if the entire 82-game basketball season goes down the drain. With NBA Commissioner David Stern claiming that the conclusion of negotiations is a distant reality, it seems that MSG executives would have to scratch their heads to come up with new ways to fill all those empty seats. And that's exactly what they're planning to do.

Singing MSG's troubles away
MSG CEO Hank Ratner said the company is actively exploring the possibility of bringing in other live events for the venue to fill the void. Jay-Z and Kanye West are touring together to promote their new album Watch the Throne and will perform for two nights at the Garden in lieu of the Knicks game that was cancelled for Nov. 8, much to the delight of Live Nation Entertainment (NYSE: LYV), the concert organizer. But those shows were just a lucky fluke for MSG, as these events are usually prepared for way in advance.

Another event coming to MSG's rescue is the 25th Annual Survivor Series being presented by World Wrestling Entertainment (NYSE: WWE) on Nov. 20.

The Foolish bottom line
Given that the NBA lockout is going to have a costly impact on the Garden, not to mention the expenses relating to its transformation, it seems MSG is going to take a severe hit in the near term, although it will be interesting to see what other events the Garden can rope in to make up for the loss. To stay up to speed on the latest news for MSG, feel free to add it to your very own Foolish watchlist. It's absolutely free, and it helps you to stay in touch with the latest news and events for your favorite companies.