Las Vegas (Special to ZennieReport.com) – There’s something really wrong with media folks (and indeed many people) who just don’t understand the factor of time and the dynamics of flows, be it water or, in this case, money. Take Las Vegas Sphere, the giant ball of digital media entertainment that’s got the World’s attention. The headline is “Las Vegas Sphere Lost $100 Million 1st Quarter”. OK, so you would be right to assume that Sphere wasn’t making money at all because it started business in the 1st Quarter, right? Except it didn’t.
Las Vegas Sphere didn’t open for business until the 3rd Quarter, and while one might say that Sphere was wowing us with never-before-seen images before it opened (Remember the 4th of July show that shocked the World?) – that was the exterior. No one was prepared for the gargantuan response the public offered to the U2 Show in September. The giant device called Sphere, with its many hundred thousand-plus cameras, brings a level of resolution that many say must be seen to be believed.
The point is, OK, the $2.3 billion Las Vegas Sphere started a mere $100 million in the hole. That would bring the total construction cost down to $2.2 billion if you think about it. Just a little relational math for folks who can’t see. The point is, given the nature of Las Vegas Sphere, it’s going to have giant swings in revenue over time. But, because of that, Las Vegas Sphere will make up that deficit and from the looks of things, quickly. Here’s why.
A Little Las Vegas Sphere Math For You
Ok, let’s say there are 18,600 seats in the Las Vegas Sphere, because, well, there are. Now, let’s say there are 120 shows between now and the end of the year, because, well, there are. If the average price per show is $169, because, well, it is, then the total revenue (assuming 100 percent sales) is $282,906,000. In other words, Las Vegas Sphere would clear $182,906,000 over its deficit. But what if sales were not 100 percent, but 50 percent, or 9,300 attendees?
Well, at $9,300 attendees, with the same average ticket price of $169, that would be $141,453,000, or $41,453,000 over the deficit of $100 million. Now, I don’t know what the operating costs are per show, but it’s also obvious the news reports aren’t reporting the matter correctly.
For example, on that matter of reporting, this was in the Las Vegas Sun: “Revenue for the quarter included $4.1 million in event revenue — those two sold out U2 shows — and $2.6 million from suite licensing and advertising on the Sphere exosphere.” Uh, ok, but if you look at the entire schedule for Sphere for the year to December 31, there are 120 shows, a lot more than “ those two sold out U2 shows” and include the “Postcards From Earth” show. So, tickets up to years end, per-show, reveal a roughy 60 percent sales rate. That’s more where our 50 percent rate will get us, if we’re the Sphere managers.
Maybe Just Stay The Las Vegas Sphere Course And Not Raise Prices, James Dolan?
Reports are that Madison Square Garden AKA MSG CEO James Dolan was considering raising prices. But considering the price point of $169, and the 60 percent response rate to date, it’s better to focus on increasing marketing efforts, including social media, to make sure people continue to buy tickets for the events. It’s clear that the enormous costs associated with getting Sphere to opening day put the facilitity in deficit catch up mode. But the good news is, it’s performance is showing that’s not a problem Las Vegas Sphere can’t overcome.
So What Was The Real Problem, Anyway?
Ok, now that it is clear the mainstream media can’t do math, one has to ask what the real problem may have been? Well, this author believes it may have been the CFO who quit Las Vegas Sphere because James Dolan yelled at him. Note, Dolan didn’t fire him. While managers who yell isn’t a good thing at all, and Dolan’s not known for the best behavior toward folks, just ask Spike Lee, he didn’t fire anyone – they quit on their own.
Perhaps Gautam Ranji was so pissed off he decided to make Dolan look bad by timing his departure so that it was a part of the earnings call? Whatever the case, from a 30,000 foot view, it’s not a real issue. Dolan said “We are building positive momentum across Sphere and remain confident that we are well positioned to drive long-term value for shareholders.” So far, the very nature of Sphere and what it does, and the financial results, confirm that view.