While Sinclair plans to launch a Bally Sports product directly to the consumer in the first half of 2022, MSG Networks is still evaluating its options.
“Selling direct to the consumer is a developing market opportunity for us and for the RSN industry in general. We believe that DTC will make an additional contribution to our business and not replace distribution through our current partnerships, ”MSG Networks Chairman and CEO Andrea Greenberg said on Monday on the results conference call. 4Q21 from MSG Entertainment.
She acknowledged that traditional pay-TV subscribers have declined, but said MSG Networks still reaches 5.5 million “substantial” homes through MVPD partnerships in the region. MSG is examining how to use DTC to reach the millions of households in the region who do not subscribe to video. “We believe there are a number of ways to do this, which we are all currently and actively exploring,” Greenberg said. “We could potentially work with our existing distributors to serve broadband customers only across our entire market. We could offer a pure DTC product ourselves; we may offer a DTC product through a third party; or we could license some of our content to other market players.
This is the first earnings call since MSG Entertainment completed the acquisition of MSG Networks in early July, bringing the companies together in an all-equity transaction. “Our acquisition of MSG Networks has created a business with greater scale and diversity of revenues as well as improved financial flexibility,” said MSG Entertainment President Andy Lustgarten during the earnings call .
The RSN business may help boost the company’s live event activity, which includes Madison Square Garden, Radio City Music Hall, and the Hulu Theater, although management is optimistic about the intensification of concerts in September. MSG also feels supported by operating primarily in New York City, which has high vaccination rates and policies. “Fiscal 2022 is currently running ahead of Fiscal 2020, which, as you may recall, was to be a record year of bookings for our business before the start of the pandemic,” Lustgarten said.
The New York State Gaming Commission is currently reviewing applications from companies to participate in mobile sports betting in February. While MSG Entertainment is not among the nominees (in part because it would not be able to put the Knicks and Rangers games on its platform), it does consider itself a beneficiary. “We think there is one company in the best position to help and work with them, and that’s us. We have mixed up the market. We have always had a great opportunity between our relationship with [Knicks and Rangers owner] MSG Sports and the teams, our asset tied up here at the arena, Tao for hospitality… But then, with the addition of MSG Network, we are able to add linear and digital online content, ”said Lustgarten. “We can cover the market like no other company can and be the partner of whoever wins, be it four [operators] or more.”
As for the MSG Networks and MSG Entertainment reunion, management said it is expected to result in tax savings as well as about $ 10 million in annual savings, mostly related to SOE costs. Lustgarten added that it should improve the ability to optimize capital structure and reduce interest payments, noting that MSG Entertainment plans to explore refinancing its term loan with an interest rate of 7%. and $ 647 million outstanding as of June 30.
Shares of MSG Entertainment jumped 16% on Monday to close at $ 72.55. In 4Q21, MSG Networks generated total revenue of $ 166.1 million, an increase of 9% from the prior year quarter. Affiliate fee revenue decreased $ 9.7 million, primarily due to the impact of an approximately 7% decrease in the number of subscribers. Overall, the company recorded a net loss of $ 117.8 million compared to net profit of $ 126.6 million a year ago. Revenue climbed to $ 99.8 million from $ 9 million in 4Q20.