The Sphere in Las Vegas just had its grand opening (a U2 concert kicks off a two-month residency in Southern Nevada). The Internet is abuzz with footage from technology-enabled entertainment venues. No matter who sees it, this “multi-sensory” experience will not disappoint. Ticket prices for major events are commensurate with immersive entertainment, starting in the hundreds of dollars each.
For investors, perhaps the best part about The Sphere is that it is an investable real estate asset. sphere entertainment (SPHR 2.79%) — But there’s a catch. Is this a tech stock worth buying?
Technology that accelerates the future of entertainment venues
The aptly named “The Sphere” is a modern take on an ancient amphitheater. But rather than just seating surrounding a stage with performers, the amphitheater is housed in a giant spherical structure surrounded by giant LED screens. and Outside. That’s a big reason why it cost him $2.3 billion to build this huge structure.
The exterior features an incredible 580,000 square feet of LED screens that can be programmed with stunning visuals and, of course, advertising. Inside is his 160,000 square foot LED screen arranged planetarium style around the bottom stage. These indoor screens have a resolution of 16K, which is double the up to 8K you can typically buy at your local TV store (which is expensive in itself).
But the technology extends beyond immersive visual experiences. There are thousands of speakers, and about 10,000 of the venue’s 18,600 seats also include haptic sound features that transmit bass vibrations through the chairs. Other features include changing scent, temperature, and wind to create environmental effects to match the show or event you’re watching or hearing.
Another interesting aspect is that The Sphere’s engineers and architects rendered parts of the venue in virtual reality before construction.it is Nvidia‘s vision of a “digital twin” is a type of metaverse application that has real-world benefits for large enterprises, allowing them to test expensive concepts before spending real money to actually build them.
In addition to concerts, movies and shows, The Sphere will also host select sporting events in the future.
Well, The Sphere is cool, but investing in it isn’t that easy
Although the first concert has only just taken place and the source of their revenue (and ultimately the profit margin from it) is largely unknown, it’s not hard to imagine The Sphere being financially successful. . According to CEO and venue visionary James Dolan, management envisions The Sphere in Las Vegas to be “the first of many” and that future venues will likely be financial It will be built through a franchise model with partners.
However, there is a catch here. An investment in Sphere Entertainment stock is not a pure investment in high-tech real estate. In fact, Dolan shook up his real estate and sports empire to make The Sphere a reality. When the Las Vegas project broke ground in 2018, The Sphere was still part of what was then called the Madison Square Garden Company. Currently, the empire is divided into several separate businesses. In addition to Sphere Entertainment, MSG Sports (MSGS 0.39%), which owns the NBA’s New York Knicks and the NHL’s New York Rangers.and MSG Entertainment (MSGE)the holding company for The Garden itself, Radio City Music Hall, the Beacon Theatre, and the Chicago Theatre.
Then there’s MSG Networks, which provides media and television distribution for the MSG sports team. Sphere Entertainment still owns the business and will own nearly all of the company’s $574 million in revenue for fiscal year 2023 (12 months ending June 2023) until The Sphere’s grand opening. This business was occupied. A portion of MSG Network’s operating profits (his $96.5 million, to be exact) helped offset his $370 million fiscal year 2023 operating loss incurred by The Sphere itself.
My colleague Billy Duberstein also recently wrote about The Sphere’s financials, noting that Sphere Entertainment owns about 20% of MSG Entertainment.
But with a major venue now open, is it time to buy Sphere Entertainment stock? Management themselves say they don’t expect The Sphere’s full financial potential to be realized anytime soon. It states that there is no. But that didn’t deter market optimism. The stock price has risen more than 30% since early May 2023 (after completing the spinoff of MSG Entertainment), and as of this writing, Sphere Entertainment has a market capitalization of more than $1.4 billion. This is obviously a lot if you consider MSG Network’s revenue alone, but it probably won’t be if The Sphere starts generating solid revenue.
This is still a small-cap stock, but I think it’s interesting. I might take a bite of this stock soon to see how this new technology-enabled real estate wonder pans out over the next few quarters.