MSG Entertainment and MSG Networks Joint Webcast

Madison Square Garden Entertainment Corp. (SPHR 1.34%) and MSG Networks Inc. (MSGN)
May 10, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Gregg Seibert

Good afternoon. My name is Gregg Seibert. I'm vice chairman of Madison Square Garden Entertainment, which will sometimes be referred to as MSGE today; and also vice chairman of MSG Networks, which will also sometimes be referred by its ticker MSGN. I'm delighted to be able to welcome everyone here today.

I have with us Andrea Greenberg, who's the chief executive officer of Madison – MSG Networks; Andy Lustgarten, who is the president of MSGE. And we have with us Brandon Ross, who'll be moderating today's question-and-answer session. Before we get started, one of the reasons for having Brandon here is the fact that he's covered the MSG companies through from 2015. So he's been through numerous spin-offs and other corporate transactions with us.

And, Brandon, we're delighted to have you with us today. Just a couple of technical notes. There is a disclosure that should have been running on your screen for the last 30 to 60 seconds. If there were any questions on the disclosure statement, please contact our investor relations group after the discussion today.

And I'd like to point out that we filed a number of documents on Friday of last week. MSGE filed a Form-S4 registration statement with the SEC. Both MSGN and MSGE filed 10-Qs. And additionally, there was a joint investor deck that was filed to our website.

I would encourage those of you who haven't had an opportunity to go through the materials to please take the time to do so. Our ground rules today are pretty straightforward. We're going to be transparent. We're going to answer Brandon's questions.

To the extent there are other questions that, somehow or another, we don't get to today, again, feel free to come through our investor relations department, and we'll be happy to field whatever questions we can. And with that, Brandon, I'm going to turn it over to you.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Thanks for having me, Gregg. Why don't we just dive right in? And I think we should start with the deal because that's what investors want to hear about the most. And as long as I've been covering the stock and going back to Cablevision through the years, you've simplified the company through spins and making things easier to understand for shareholders and highlighting value. And I think a lot of investors were very surprised by this deal.

And to be honest, there's been a ton of investor pushback. And the first thing I wanted to ask you is what you say to investors who are concerned that the interest of the Class B shareholders are different from those of the Class A shareholders.

Gregg Seibert

You know, that's a good question, Brandon. I'm going to start with reference to a page in the investor deck. There's a page in there that, basically, I use as a touchstone and basically shows the value creation within the MSG family of companies since the time of the spin-off of MSG from Cablevision. It doesn't include any of the Cablevision transactions prior to that which created substantial value, but since the spin-off of MSG, the company has handily outperformed the S&P 500.

And you know, there are a number of reasons for that, and I'd like to go through them and talk about some of the transactions that created that value. But before I get into that, I do want to make one comment. Maximization of long-term shareholder value. You know, we don't manage the businesses on a quarter-by-quarter basis, at least the results.

We certainly don't pay attention to every tick in the stock. We do what's right on a long-term basis for the shareholders. Sometimes, some of those moves are popular, or sometimes, some of the moves are not as popular. What do we do well? Or what has the company done well? Well, I would argue that the management of our company is -- and I'll point to Andrea over here, who's been CEO of MSGN since the time of the spin, has done a wonderful job.

Andy is president of entertainment. He's been doing a wonderful job. But a lot of this does go back to the Dolan family and, you know, in Jim Dolan's leadership. And I'll just point to, you know, one particular transaction that I thought was very unpopular, and it actually was a Cablevision -- not even a transaction, an announcement.

It was, you know, investing in one of our core businesses through the transformation of Madison Square Garden, where we're sitting this afternoon. You know, it was a billion-dollar transformation, which was greeted with, you know -- greeted with an awful lot of skepticism. And I think that for any of our shareholders that have been here, they've seen not only the wonderful building that was created here, but they've seen the returns as shareholders. And I think we've got, you know, a couple of different groups of shareholders.

We have the very long-term shareholders who've seen the value creation over time, and we have some newer shareholders who haven't seen it. So what are some of the steps we've taken? You pointed out spinoffs.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Yup.

Gregg Seibert

You know, there've been four spinoffs out of Cablevision, which was, you know, first Madison Square Garden parent, then AMC, then MSGN out of Madison Square Garden, and then ultimately, Madison Square Garden Entertainment out of MSG Sports. So yes, we've used spinoffs an awful lot, but I think this time around, some of the -- you know, some of the pushback on the transaction is perhaps that we caught people a little bit by surprise. You know, as you say, we've been used to spinning companies in order to highlight value. In this case, you know, as I'm sure we'll get into, we saw an opportunity to bring a company back in in a way that could help to create value.

But let me just finish with a couple of the other ways that I think we've created value over the years. Again, acquisitions, the Forum. Forum wasn't very popular when it was first acquired. We ended up selling that at a very large profit.

Back in the Cablevision days, the acquisition of Bresnan, then subsequently sold for a nice markup to our friends at Charter. They've operated it fabulously. Everybody made out well. You know, we've also returned capital in the various companies, particularly MSGN and AMC, over the last several years.

So longwinded way of saying I think everyone's interests are aligned, and that's in creating long-term value for our shareholders.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

But if you're so confident in the merits of the transaction and everybody's interests being aligned, as you just said, why not just let the merger be subject to a majority of the minority vote? Going back through, you know, some of the other deals, I think that was even like the old 36.26 Cablevision deal, you know, from -- I don't even know what year that was, a wave or something. There was a vote –

Gregg Seibert

That was even before I joined Cablevision. It was a long time ago.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. How come in this case, that wasn't the case, and shareholders have a vote?

Gregg Seibert

Yeah. Well, I think, Brandon, two parts to that answer. The first is very simply that, you know, transactions get negotiated with terms other than just what's the price and when is the deal going to close. So there's oftentimes a tremendous amount of back and forth between the parties negotiating the transaction.

And in this case, as you and as, hopefully, the investors that have reviewed the S4 filings saw, because of the fact that this is a related party transaction, neither management from MSGN or management from MSGE were involved in the negotiations. The negotiations took place between two special committees. Each of MSGN and MSGE appointed special committees of A directors who were tasked with hiring their own independent legal counsel and their own independent financial advisors. So in the case of MSGN, Davis Polk represented the special committee from a legal perspective, and Morgan Stanley and LionTree represented them.

I would say the three represented them in the negotiations with the MSGE special committee, which was represented by Wachtell, Lipton on legal side and Moelis and Raine. So there's a little bit more in the background of the merger, but that was a decision that was made by the special committee and their advisors.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. Why don't we just turn to the rationale for the transaction? And I think a lot of it was driven by financial benefits. Could you maybe just walk us through what the financial benefits were and what the unlock was there?

Gregg Seibert

Yeah. And I think there are financial benefits which, in order to -- excuse me, the shareholders on both sides. So if you take a look at what MSGN is as a separate public company, what it is today, it's a company that produces a substantial amount of free cash flow and has limited opportunities for the reinvestment of that free cash flow. They can buy back stock, which they've done.

They can repay debt, which they've done. But there's no sort of organic growth opportunity within MSGN. They're also a substantial cash taxpayer. And one of the things I think you'll agree is that, over time, we've been pretty sensitive in the transactions that we've done to try and to minimize the tax impact on our shareholders so that they can benefit from long-term compounding.

On the other side of the coin, MSGE is a company that also has a business that produces, pre-COVID, substantial amounts of EBITDA and free cash flow. That was obviously thrown into a little bit of a cocktail if you will. Well, yeah, a little shutdown, you know, when COVID basically shut our venues and ended up putting where we ultimately are today. Still having restrictions on spectators at events, etc.

And that generated, unfortunately, a $350 million NOL at MSGE. So there's an immediate tax benefit, which is basically the application of the $350 million NOL. That's a number as of approximately March 31 against MSGN's taxable income going forward. So that's going to create a lot of value.

But additionally, for both companies, putting them together creates more scale, more diversification, and it gives the MSGN shareholders, we believe, an opportunity to see their cash flow reinvested at a higher rate. And we removed the IRS as our partner in MSGN. So in effect, I think we've created between the tax synergies, between the elimination of corporate overhead, and I don't want to stress that one too heavily, but it is going to be north of $10 million in synergies. So it's still a number.

And then in terms of what we think we can do from a refinancing perspective, we believe the transaction has created $200 million in NPV benefits right off the bat that neither company could have achieved on their own.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

You talk about that substantial free cash flow that's coming out of MSGN. It sounds like there's a lot more liquidity at the combined entity. Can you just tell us what you plan to do with that liquidity? What are you going to buy?

Gregg Seibert

What are we going to buy? Well, let me sort of -- let me spend a minute on how I think the companies and the Madison Square Garden portfolio allocate their capital because it's very consistent. It's number one -- and I'm going to modify it a tiny bit right now. It's, number one, invest in your core business in which the transformation of Madison Square Garden, which I talked about before, was obviously a key factor. Today, it's going to be reopen your core business.

We're coming back from COVID. And thankfully, the signs are here that our businesses are going to reopen bigger and better than ever. We intend to invest in them. So that's sort of -- that's job 1.

Job 2 is to have a balance sheet that provides the flexibility to do what's necessary. And in this case, as we extend that over to a combined MSGE-MSGN, I think there will be opportunities, potentially, to explore more varied types of M&A activity should it be appropriate. Third is fund growth initiatives. Well, we've got a big growth initiative at MSGE in the form of MSG Sphere in Las Vegas, which obviously is more than -- it's a bigger business than just the one building in Las Vegas that we're building.

And I'm sure you'll have questions on that later. And then the fourth is return of capital and opportunistic acquisitions. So an example of an opportunistic acquisition, not what are we going to buy but what did we just buy. Tao Group just purchased Hakkasan, which expands our strategic position in the restaurant and nightclub business, which we think has benefits --

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

I think you have most of the nightclubs in Vegas now between Hakkasan and Tao – or at least the biggest ones.

Gregg Seibert

We certainly have a nice portfolio of them. And I think that those will fit into as we get into talking about gaming and we get into talking about the Sphere, I think there'll be some threads that get pulled together in terms of why we view that business as bullishly as we do.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. And since you brought the Sphere up, I think in the S4, it said that costs were going up another 10%. Obviously, the cost of Sphere has some investor concern. Is that part of the reason you did this deal, for that extra liquidity to finance the Sphere, for this increased costs and potentially further increased costs if that came to it?

Gregg Seibert

You know, when the -- first off, no, sort of the simple answer. But I will tell you that when you're in a demand shock, like we're having right now in the economy, and when we do see the price of the Sphere increasing, and our best estimate, 10% from where we had previously been from a construction perspective, the extra liquidity is nice to have, but that's not the model. That's not the reason we're looking to have these two companies come together. I think I've outlined a pretty strong financial case.

There's an operating case which Andy and Andrea --

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Yeah. Maybe we should just jump right over to what that operating case may be. I don't know if maybe we should -- let's start with, Andrea. I mean, from our perspective, you have MSGE here or -- which is a reopening story, has this growth Sphere story.

And then you have Networks, which is a little bit more of a challenged business. And how do these two fit together? And what are the actual operational synergies between them that you're going to unlock by putting them together?

Andrea Greenberg -- Chief Executive Officer

Sure. Well, Brandon, I think we think there are several strategic advantages to combining the company, not just, as Gregg mentioned, asset and revenue diversification, which is important to us, and increased financial flexibility but also a really -- a closer and better collaboration with MSG Entertainment and enhanced -- and this is really, I think, one of the growth stories of the combined company, enhanced data analytics and intelligence, which, we believe, is going to really help drive growth and innovation. If you just, for a second, step back and focus on data and you think about the aggregation of data between our linear networks, our venues, and our digital properties, we are really going to understand our view and our customer more than we do today when you combine all that together. And I think Andy would agree.

This will provide a really meaningful roadmap for development activity going forward. What are you saying?

Andy Lustgarten -- President

Absolutely. Data is a big piece of the future. But when I sit here at MSG, what do we have, right? We -- especially in the New York market, we really -- we could blanket the New York market. But what we -- before doing this deal, we really had people in the four walls of our venue.

Outside, we own signage screens right outside their garden, across the street. We recently did a deal with a train station. We'll have all the signage there. But how do we really get to people, right? We needed -- so we're thinking about it.

We say, OK, look, there's a linear path through networks, digitally through both our apps, social, and in person. What does that mean? We're able to offer promoters a whole new opportunity. When they come into the building, we could say, well, wait a second, we can now promote you online. We can now drive it across our social platforms, our digital platforms, when we think about a gaming partner.

There's a way to really blanket the New York Market.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

I'm sure sports betting is harder.

Andy Lustgarten -- President

Yeah. And I'm sure we'll talk about it a little bit more. But as we think about really controlling the New York market, this allows us to go really deep.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. In the past, though, you've done these things through -- as you've done spins intercompany agreements. And it seemed like the different MSG Sports, Entertainment, and Networks were very tightly aligned anyway. Why do you need to put them all together under the same roof to achieve that? Why can't you just continue to have --

Andy Lustgarten -- President

So look, the agreement works to a certain extent. It's not -- it definitely puts you in the right direction, but there's nothing like being under the same roof, rolling together with one focus on the bottom line, same, similar goals, similar –

Andrea Greenberg -- Chief Executive Officer

Similar objectives.

Andy Lustgarten -- President

Yeah, similar objectives incentivized together. And we just think that this is a really great opportunity to really grow the business.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. And then, I mean, obviously, Sports is still separate. And it's hanging out there. And some investors have asked us, well, if you're going to put Entertainment and Networks back together, why not put Sports in with it.

Is that a possibility going forward? Are we going to wake up one day and surprise?

Gregg Seibert

And then we're going to put Madison Square Garden back into Cablevision again.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Well, I think Altice might have something to say about that.

Gregg Seibert

No, I think, Brandon, if you take a look at the rationale behind the MSG Sports spinoff of MSG Entertainment, it was pretty straightforward. Number one, we have a set of companies that are valued on a cash flow or EBITDA or other operating and growth potential metrics, which are MSGN and MSGE. On the other hand, we have MSG Sports, which is valued. Every time I read something about the value --

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

I don't know. Just ask Forbes. I think Sportaco is now in that business, too. So maybe they --

Gregg Seibert

Yeah. No, I just saw a revised Forbes estimate for the valuation of the NICS. And so there's an asset value play, which I think that the board wanted to unlock as part of the spin of Sports. We actually got it done in probably the second or third week of April of 2020, so right in the middle of COVID.

Difficult to sort of get it done at that point, but we did, and there was another very important factor to that. So we didn't necessarily see right out of the gate, you know, huge stock price appreciation as the world seemed to be coming down around our ears. But the other part of that that's very important is that MSG Sports operates these two professional sports franchises, the New York Knicks and the New York Rangers. The Knicks are part of the NBA.

The Rangers are part of the NHL. So there's a lot of league rules and regulations, particularly as they pertain to leverage. There are ways that they can impact operating flexibility. It was very important to be able to get MSG and MSGS apart.

So I don't see any reasonable scenario at any point --

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Where Sports comes back into the fold.

Gregg Seibert

Going forward where Sports comes back into the fold. We're delighted with Sports as an independent public company and excited about its future as an independent public company.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. And then as far as Network is concerned, and we've written about it a lot, I think a lot of investors had assumed that one day it would be part of a larger RSN group. Does putting Networks back into Entertainment, does it make that more difficult if that was something in the future? Like you wanted to --

Gregg Seibert

I actually think it provides more flexibility potentially from an M&A perspective for MSGN, although I will tell you, the initial reason for the spin-out was to see if there was a way for MSGN to participate in the consolidation of the regional Sports business. But as we all know, that business has changed dramatically over the six years that MSGN has been a separate public company. But I see no reason why MSGN would be hamstrung as part of MSGE in participating in any type of an M&A transaction. But we're not -- we didn't buy it to sell it.

It's basically -- we think this combination is a very good combination for the reasons that Andrea and Andy pointed out. And on top of it, the financial characteristics are very attractive.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Yeah. Well, we learned, I think, in the registration statement that MSG Networks was approached, I think, about a strategic transaction sometime -- I think it was January, sometime before this happened. And can you give a little more color on that? I'm not necessarily asking who it was, but...

Andrea Greenberg -- Chief Executive Officer

Earlier this year, we did look at another potential strategic transaction with a third party. We ultimately determined that it wouldn't have resulted in a viable transaction for us. We're, right now, very focused on this particular merger and on combining MSG Entertainment with MSG Networks. We think that ultimately, this is going to be a unique and very beneficial opportunity for everyone involved in this.

That said, as Gregg said, there is nothing that precludes us from looking at other strategic alliances or opportunities, including M&A.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Yeah. As I think about it, and SNY, YES, and MSG Networks are all separate now, and then you have the NBCU RSNs, which were sitting out there, and there were articles, I think, last week about NBC potentially pursuing something. Does a closer alignment with those RSNs, whether it's M&A or something else, makes sense to you?

Andrea Greenberg -- Chief Executive Officer

Well, we're not going to --

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Not to put you on the spot or --

Andrea Greenberg -- Chief Executive Officer

Yeah. We're not going to speculate on a hypothetical transaction. But as you know, we have a very, very long history of being opportunistic and of looking for ways to drive growth. So to the extent that a transaction of that nature makes sense for us, of course, we'd look at it.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. Just -- but the business itself, if I -- when we looked through the registration statement, I'll be honest, I was a little surprised to see that you showed, I think, revenue growth kind of continuing over the next -- I don't know whether it was four or five years and pretty steady AOI. And as we've hinted that already, it's a fairly challenged business in a lot of regards, cord cutting, whatever it may be. Can you discuss why you think there will be revenue growth in that business?

Gregg Seibert

Brandon, just to refer to the numbers and the prospectus, I just want to make clear that those are internal numbers that were used by the special committees in the negotiations, and they're not intended to be guidance for investors.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. All right.

Andrea Greenberg -- Chief Executive Officer

But having said that, we definitely understand and acknowledge that the media landscape is changing. That said, in this market, we have extremely valuable rights to premium content. And if you think about it, we have the rights to seven professional sports franchises. We do approximately 400 live local professional sporting events each year.

We have multiyear agreements with our professional team partners and with 14 more years with the Knicks and the Rangers. Our live game content is among the most popular of all sports programming on the dial and, very often, popular among any content genre on cable. So when you start with that as a foundation, we are very confident that we can continue to innovate to drive significant free cash flow.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Let's talk about -- you just used the word innovate. And we keep saying the RSN business is going to need to change pretty significantly, and the model is going to have to adapt. Where do you see the RSN business in like five years? What does the model look like? Or 10- year -- whatever time period.

Andrea Greenberg -- Chief Executive Officer

Well, first, let me say I think we've been at the forefront of these trends, of all these trends of innovation. We were the first RSN to integrate live stacks into MSG GO, which is our authenticated mobile gaming platform. We were the first RSN to include an interactive game into MSG GO. We were the first RSN to launch a free-to-play app, which we've done during this past season.

So when you step back and you think about the viewing experience, historically, sports viewing was very passive. I think that's changing. I think that's changing with interactivity. I think that's changing with sports gaming.

And I think that we've seen how gamification can really increase length of tune and frequency of tune. So gamification, lean-forward interactivity, that drives data. Data drives better decisions and better product development. And I think as a combined company, Andy and I both agree, we're going to be very focused on creating a very, very strong user base and using that to drive new offers, new experiences.

Also, I think just in terms of the way we offer our content, we're going to look to be innovative in terms of different types of packages.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

What do you mean by that? Is there a scenario where you can go direct to consumer and be as profitable as you are now?

Andrea Greenberg -- Chief Executive Officer

Well, from our perspective, I think direct-to-consumer is incremental. Right? We have -- it's not a --

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

What do you mean by incremental?

Andrea Greenberg -- Chief Executive Officer

Meaning it's not a replacement for our current model or our current distribution. We do understand that things are changing. But we still serve about 5.6 million subscribers on average between our two 24/7 networks. And that's a significant business.

So when we think about direct-to-consumer, we think about the homes in our market that don't receive our product today. And the question for us is how we serve those homes and when we serve those homes.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

And the reaction maybe to your partners, your distribution partner.

Andrea Greenberg -- Chief Executive Officer

Well, we certainly have a long history of dealing with our distribution partners. And there are a bunch of different ways you can offer these new products. One way is to actually collaborate with our partners, and we can offer packages, let's say, to their broadband-only customers, which, I think, is an opportunity for us.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Right. Yeah, we've seen plenty of companies do that.

Andrea Greenberg -- Chief Executive Officer

Right. We can go direct-to-consumer, pure direct-to-consumer, or another alternative that we think about is creating different content packages that we can sell to other market players. So wholesale sell our content in different ways. For us, this requires a little bit further exploration and definition.

But we certainly see it as a developing market opportunity that we're looking to exploit in a smart way.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. And you've -- earlier, you brought up sports betting. Obviously, that's a huge topic with legalization and everything. But just starting with the RSN side, is there actual data out there that shows that sports betting improves viewership? Because everyone talks about that as sort of being a bit of the holy grail for teams and leagues and broadcast partners.

I don't know. I mean –

Andrea Greenberg -- Chief Executive Officer

I think general research shows that sports betters watch two times more sports coverage. And I think the number that I've seen is 62% of adults who bet on a game watch that game. So that's intuitive. That makes sense.

But we've actually seen firsthand how this works. We introduced an interactive matching game into MSG GO at the beginning of the 2019, '20 season. And we saw that users of that game in '19, '20, watched four to five more games and watched for 200-plus more minutes than they did in 2018.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Nothing on the line.

Andrea Greenberg -- Chief Executive Officer

And that was just the interactivity, the engagement that the game created. And that was all without regard to team performance. It was all normalized for team performance. So we've seen how it works.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Got it. And just -- let's broaden out a little bit on sports betting. Obviously, I'm sure you guys are excited that New York State passed it in Connecticut and joined New Jersey. Could we just take a step back, and I don't know, probably start with Andy maybe? Can you talk about what the benefits are for the combined company and how investors should think about that? And maybe, Andrea, if you could talk about the RSN angle to it.

Andy Lustgarten -- President

And they're very interrelated, right? So again, go back to live what I was talking about before, what we have is the four walls, right? So when we have somebody in the building, we know what they're paying attention to, but that's only one part of it, right? So we think about how do we expand outside the market. And so obviously, linear adds a tremendous amount of reach. Andrea, 5.6 million homes?

Andrea Greenberg -- Chief Executive Officer

Yeah. I mean, if you think about the number of impressions we collectively deliver in this market, MSG Networks has 5.6 million homes on average to Networks. Take two and a half people in each home, that's over 14 million impressions.

Andy Lustgarten -- President

Right. Plus our 8 million people that both MSGN and Tao sees in the market. On top of our database of roughly 8 million people in the market and growing, like we're able to reach and we're really able to blanket the market. We're able to do it inside the building.

We're able to do it outside building. We're able to do it digitally –

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

From a sponsorship.

Andy Lustgarten -- President

From a -- well, partnership.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Absolutely. OK.

Andy Lustgarten -- President

It's really important because I don't --

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Can you make that distinction?

Andy Lustgarten -- President

I do make the distinction because a sponsor, somebody who just puts their brand. A partner, somebody who you work together to drive business. And that's the way we really think about it. And I think the gaming aspect, and we talked about it a few months ago, like, what is it? How many -- how do you know that people actually -- it matters, right? What's the engagement? I've always loved this, right, just from one simple thing.

When the game is over, 20 points out, if you have a bet on the line, you're probably going to watch the game. So it just adds a whole another level of engagement, whether you're in the building or outside the building. But then the other angle that most people miss on us is between Tao and Hakkasan, right? So very strategic for us for many reasons. But from a gaming reason, we're able to reach people not only in the building, when we have our own lounge, we also reach them outside.

So we -- when we talk to our partner, one of the things we've realized is when you think about casinos, especially in Las Vegas or Atlantic City or any fixed location, there's a huge loyalty program opportunity. When you think about online sports book or a partner, right, there is no real fixed location for loyalty or hospitality. We're able to offer that. And we could think about many things we could do, such as an in-venue sports bar lounge, outside sports bar lounges powered by Tao and Hakkasan, and we really could deliver to the most premium customers the most amazing experiences.

So we're really able to blanket. But when you add in the linear --

Andrea Greenberg -- Chief Executive Officer

I mean, you add in Networks. You've got content development capabilities. You've got production capabilities. You've got integration opportunities into MSG GO, MSG PICAM.

You've got branded content opportunities, things that we're exploiting today, but really blown out to an extent that if you add that to the physical assets of MSG Entertainment, I think it's just -- it's unparalleled in this market.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Right. You've become, I guess, a necessary -- not necessary, but an important partner to anyone who's in the market --

Andrea Greenberg -- Chief Executive Officer

Absolutely, Brandon.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Who has Sportsbook. And I know that hasn't been determined yet, who that's going to be in New York state. I'm not even sure if I like fully understand what's going on. But have you started having any discussions with potential folk partners, as you put it?

Andy Lustgarten -- President

Well, we've never stopped having those discussions. This goes back a long time, too. The only fantasy. I mean, we've focused on this for a very long time.

As I mentioned, I think sports betting or gaming is incredibly important. You think about sport just driving engagement. We see it across the world when you look at other places where that's already been legal. So long as you will have a partner who is established, has trust, which -- by the way, I think the state has done a great job setting up a structure whereby the operator will be somebody who's very successful, who's got the trust and the infrastructure behind it.

And so we feel really good about the future and the opportunity.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

And you have a deal in place with DraftKings. And does that preclude you from bringing other books into the arena? Or I think is it FanDuel on the network? Is it --

Andrea Greenberg -- Chief Executive Officer

MSG Networks has deals with FanDuel, DraftKings, and bet365. So we have a multiple –

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

I guess that answers that question on the Networks but --

Andy Lustgarten -- President

And in terms of -- DraftKings is a partner and an amazing partner. Jason Robins has been an excellent leader and really has been a pioneer in this space, and I'm thrilled with our relationship and our friendship goes as long as we have. He's really ran a great business as well as the rest of that company. But we think that there's -- could be other partners.

As Andrea mentioned, FanDuel, bet365. There are a lot of people in the space, and we could have one partner or maybe multiple.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

If you look at what Sinclair did with Bally's, does it make sense for you to have equity in a specific sportsbook like they did kind of creating that tight alignment in incentive? And maybe for you, Andrea, have you had discussions about branding the network as something else?

Andy Lustgarten -- President

So on the equity side, I'd go back to the point we just discussed, what's the difference between a sponsor and a partner. A partner is somebody who we entwine our business. And I think about it across our whole partnership book. That's how we do business.

We need to drive our partner's business and our partner needs to help our business. So I don't know whether or not equity or profit interest, a revenue share, pure dollar, there's lots of ways to structure. But what it really comes down to is how do you make sure that you're driving your partner's business, and that's what we're going to do because that's all -- that's what matters here.

Andrea Greenberg -- Chief Executive Officer

And nothing specific is on or off the table. It will really be customized depending on our brand partner.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

But as you said, discussions have continued, I think.

Andy Lustgarten -- President

They never stopped, actually.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Right, never stops. Maybe if we could get into reopening a little bit, just kind of put the sports betting. Can you give us an update on the -- I guess its fiscal '22 bookings calendar and kind of how that's going? We heard from Live Nation last week, it sounds like on both the supply side and demand side, things are kind of bananas right now. Is that what you're seeing, too, in the New York market, Vegas, whatever, I don't know.

Andy Lustgarten -- President

We have a very robust booking backlog right now. So when you take a step back, we've had 16 months where we've been shut here. So I have all those artists that we've had to move or basically all those artists that I've had to move to other dates on top of every other artists who would have wanted to come for the next year or two. So to me, it's not about like how big of our book is, but it's where are we going to put them.

Now the big issue, though, is where are we on capacity? Because that's going to be the constraint, right? So right now, Governor Cuomo and the state have allowed us, starting the NBA playoffs, to start going up to 30% capacity, potentially even higher depending on vaccinated zones.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Yes, I saw that where -- there's like people who are vaccinated are on one side and unvaccinated on the other. Is there any clarity as to how dense the vaccinated section can be? Or --

Andy Lustgarten -- President

Right now, the guidance is you can have a vaccinated section. Children can come into a vaccinate section who are not vaccinated, and you need a seat between pods. But otherwise, it's pretty high-density. Outside, though, governor, on Friday, announced that baseball stadiums and outdoor events could have 100% capacity if they're fully vaccinated.

So I think that's the path forward. But when you bring it back to the concert business, the booking business, until we're close to 100%, we really don't have a business. So 30%, it doesn't work. I don't know if it needs to be 100% or something similar but it's in that range.

But given last week as well, Governor Cuomo announced that Broadway can start selling at 100% starting September while --

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

On blueprint.

Andy Lustgarten -- President

Yes, it's a blueprint, and I'm very optimistic that, to me, that's -- to me, I'm hopeful that, that's the outside date, and then maybe we'll go something sooner. But until I know for sure, depending where the data and science is going, which all looks like it's going in the right direction, we feel pretty good.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. I mean, I noticed that some stuff has gone on sale. It seems -- like full capacity. I -- like one band at the Beacon in the fall.

So I guess you're selling as if, right? Can you talk about what the demand side has been like?

Andy Lustgarten -- President

So we put up five nights of Tedeschi Truck clean, shows that have gone on -- Genesis went on last week. Went on sale and so well, they added a second date. So the demand is there. There's other artists that are looking at finding second dates.

We feel pretty good about where this is going. We haven't seen -- the -- each month, every time we put up more on sales, the pace of sales quicker than it was before. So I feel demand is coming back.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. I think the biggest question for the future for your company is around MSG Sphere, which we touched on at the beginning. Cost estimates did go up for whatever reason, pandemic. Can you remind investors what the MSG Sphere exactly is because it's a little different than most of the venues?

Andy Lustgarten -- President

That's exactly right. So when you start with what an arena is, it is an arena. But it's very different, as you pointed out, Brandon. Most arenas, not every single one, but almost every arena in the world is built around the same structure where you have a big rectangle in the middle.

That rectangle is either basketball court, ice hockey rink or something similar with every seat facing dead middle, with a big scoreboard in the middle, what's it -- so it's purpose for sports and then gets used for other purposes. So we said, let's turn this on its head. And on top of it, you've got a building that's based around a rectangle that's also living on either the sports event that's the home -- the host or the content that can come through. So you're very reliant on promoters or others to bring content to you.

So we said, let's flip it on his head. So let's start with a venue and arena of the same size but more like a theater, with every single seat facing forward, every single seat facing the stage or the main focal point, much closer like tighter. Like a Beacon or any theater that you could think about but big enough to hold 17,500 people seated, 20,000 people when you include some GA. So it's a big event, but it's close and tight.

It's really amazing. I was just out there actually two weeks ago. And I could -- I was blown away when I was sitting in the balcony, how close it was to the stage. It's really going to blow people's minds.

Now, on top of that, so we've got a venue that's built in circular where everyone's facing forward. We put the world's largest indoor LED screen on top. Spherical, around it, about three football fields size. So why spherical? Well, the way the human eye works is actually, if you were in a room of sphere with a high-end -- a spherical screen of a high-enough resolution, your brain and your eye pick up the depth.

So if there was a plane flying by, you would see the depth of the plane moving. You won't see the screen. So that's the base essence of what we're thinking about, right? So we're going to take our guests places. So we will do all the typical concerts.

We're going to do corporate events. We'll be doing certain sporting events. But on top of -- we're going to be doing these things that we'd call original experiences, content that we're creating or we're having others create for us that uses all of the both the sound -- I mentioned we've got a new form of sound that we've invested in, a direct beam-forming sound that goes right to each seat. The seats will be able to move, they'll be smell.

We're going to be able to take people to places they've never been before.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Smell?

Andy Lustgarten -- President

Smell as well, yes.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

That's a new one.

Andy Lustgarten -- President

So you know why it's really important. If you see a volcano, you'll smell the sulfur. If you see some grass, it's that little hint of fresh cut grass that makes your brain think you're there. Those are the type of things we're going to do now.

What does that do for us it allows us two things. One is we have our own content. So we're not forced to live around what a promoter or the touring schedules are of artists. There'll be residents who come in regularly, but we're going to be able to have that type of business as well as drive a very busy building that can able to play at 12, two, four, six, maybe have a concert that night and be very flexible and all built in together.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

So there's obviously, a lot of questions. I mean, it's an expensive building any way you cut it. And so ROI is obviously the issue that investors ask about. And you mentioned some of the things that are unique to your building.

Can you take us to revenue? And just give us the revenue drivers if we were building our models that get you to getting real ROI in there?

Andy Lustgarten -- President

Absolutely. So as I mentioned, look, we'll have residencies in concerts, probably those will be more weekend focus, which is typically what the Vegas business is around. During the week, a lot of corporates come in. So we'll be tying into with our partner at Sands.

In addition, we're going to be running these experiences. These experiences are going to be running all the time. So we're able to have people come in. We've got our screens.

We've got our sound. We've got our -- an experience that no one else can -- anywhere else in the world, here at Las Vegas first. In addition, I --

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

First.

Andy Lustgarten -- President

First, yes. Well, we do this in our platform.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. Yes. I want to get to that, but keep going. OK.

Andy Lustgarten -- President

But the other thing I left out before is outside the sphere is also a huge LED screen. So big that when you're flying from L.A., you will see the sphere lit up below. What does that mean? It's going to be an unbelievable sponsor opportunity. We could brand.

Think about during CES, somebody coming in, think about all these events that occur in Las Vegas. We're going to be able to show it off in ways that nobody else has ever seen before. So it's a big sponsor and also a premium. I should mention that as well.

Tao and Hakkasan have been incredibly strategic to us. They're helping us work on -- they help us a lot of different ways, but especially in the Las Vegas market. They know the consumer and also, they're helping us program the premium there.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. And you just used the word platform. Just expansion of the Sphere in general. And I think you said first a little earlier.

How many of these things are there going to be? How does London fit into it? I know that there's been some holdup in London. Is there still going to be a London venue? Just take us through once Vegas is built, where we go from here.

Andy Lustgarten -- President

So again, as I mentioned, it's a platform, really, it's an IP ownership. We understand we're going to be creating our own content. We know how to build this sphere. We have a construction company that's actually building our Las Vegas Sphere.

We have ownership around the IP on the sound, also on how you actually construct an LED of this nature. But I will tell you and make it very clear. It's the first -- we're very focused on getting our first one right. Las Vegas has to be done correct in a very thorough, measured fashion.

We're going to think about how do we expand it. Now, when I say expand, that doesn't necessarily mean we're going to put our capital to work. So as I talked about a little bit, this is a platform. It's about a content platform, an IP ownership.

We view there's lots of different business models out there. We're going to be going to people and saying, do you want to license the sphere from us, and we will deliver content. Do you want us to manage it for you, where you put up the capital, we bring in our know-how, we deliver content. We deliver all the technologies and the platforms.

And then sometimes we will put our own capital, but we don't view this as really -- we're really thinking more like asset, like, real capital, not capital intensive, using other people's money to drive this platform.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. I think we're actually over time. So if you forgive me, can I just ask one more question? And earlier, I asked Andrea about the projections that were in the registration statement for MSG Networks. And if you look at the ones that are in there for MSGE, I think it was like 2025 or something, you had $370 million of AOI, which, yes, I was a little surprised about it.

I think others were coming from -- I think you had like $100 million in your first pre-pandemic year. Can you bridge us maybe -- I know you can't give like guidance or whatever, but bridge us to a little bit to that $370 million and what that says about the Sphere maybe?

Andy Lustgarten -- President

Gregg, do you want to take it?

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Am I making you uncomfortable, Gregg?

Gregg Seibert

No, but I think I --

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

This is the last question. Give us some juice.

Gregg Seibert

The numbers are in the S4, and the numbers don't get there randomly. And we have different parts of the business that are also growing along with -- at the same time that the Sphere numbers are growing. So I think Andy has provided a pretty good overview of sponsorship opportunities, advertising opportunities, attraction opportunities, residency opportunities with the Sphere. There are certainly high expectations for the Sphere, but there are also high expectations for our other businesses.

We feel like we are -- and this will sound like it's been heard elsewhere, but we're looking forward to the roaring 20s in terms of the entertainment business. I think the core business should be fantastic. There's the pent-up customer demand. There's the pent-up artist demand.

So we just need to get things reopened, and we need to get the business pointed in the right direction. But yes, high expectations for profitability on the Las Vegas Sphere. And importantly, going forward, Brandon, to your earlier question, capital light is really the way that the management of MSG Entertainment is looking at rolling Spheres out more. The project in Las Vegas is being built with equity.

It's being built off the balance sheet because it's something that people haven't seen or experienced before. So at this point, it's time for us to prove the technology, prove the viability, show the financial model. And then we'd like to roll it out on a broader basis. I say we, that being the management of MSG.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Got it. Well, thank you guys for -- and one extra question, I guess, going over by a few minutes, and I appreciate the opportunity to --

Gregg Seibert

Well, let me thank you. And also, let me thank our investors. And again, to the extent that we can be helpful with other topics, we'll be out again. I look forward to the time when our next investor meeting is an in-person investor conference or an in-person investor launch.

It's been a very interesting time. Thank you, all, for attending today. And, Brandon, thank you for moderating. Let me wish everyone a good evening.

Andrea Greenberg -- Chief Executive Officer

Thanks, Brandon.

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

OK. Thanks, guys. Take care.

Duration: 56 minutes

Call participants:

Gregg Seibert

Brandon Ross -- Partner and TMT Analyst at LightShed Partners

Andrea Greenberg -- Chief Executive Officer

Andy Lustgarten -- President

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