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Madison Square Garden Entertainment Corp. (MSGE) Q1 2022 Earnings Call Transcript

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Madison Square Garden Entertainment Corp. (NYSE: MSGE)
Q1 2022 Earnings Call
Nov 09, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day and thank you for standing by and welcome to the Madison Square Garden Entertainment Corp. fiscal 2022 first quarter earnings conference call. [Operator instructions] I'd now like to turn the call over to Ari Danes, investor relations. Please go ahead, sir.

Ari Danes -- Senior Vice President-Investor Relations

Thank you. Good morning and welcome to MSG Entertainment's fiscal 2022 first quarter earnings conference call. Our president, Andy Lustgarten, will begin today's call with a discussion on the company's Entertainment and Tao Group segment. It will be followed by an update from Andrea Greenberg, president and CEO of MSG Networks.

Our EVP and chief financial officer, Mark FitzPatrick, who will then review our financial results. After our prepared remarks, we will open up the call for questions. If you do not have a copy of today's earnings release, it is available in the Investors section of our corporate website. Please take note of the following.

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Today's discussion may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties and that actual results, developments and events may differ materially from those in the forward-looking statements as a result of various factors. These include financial community perceptions of the company and its business, operations, financial condition and the industry in which it operates as well as the factors described in the company's filings with the Securities and Exchange Commission, including the sections entitled Risk Factors and Management's Discussion and Analysis of Financial Condition and results of operations contained therein. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call.

On Pages 5 and 6 of today's earnings release, we provide consolidated statements of operations and a reconciliation of operating income to adjusted operating income, or AOI, a non-GAAP financial measure. And with that, I'll now turn the call over to Andy.

Andy Lustgarten -- President and Chief Executive Officer

Thank you, Ari and good morning, everyone. First quarter of fiscal '22 behind us. We are now seeing encouraging signs that our markets are beginning to turn the corner following the challenging past 20 months. Vaccination rates already high in the New York area and continue to rise and CDC's recent approval of vaccines for children should drive rates even higher.

Office occupancy, while still very low in New York City, has increased significantly in the last month and a half forecast to improve. International tourism to the U.S., which has been pretty much nonexistent, is starting to open up this week. And in Las Vegas, we see one of the city's biggest pre-pandemic staples, corporate conventions beginning to return. We believe these milestones could help propel our business, which is already experiencing promising momentum in a number of areas.

Our venues are starting to get busy again and are operating without any capacity restrictions. Concert touring is ramping up. The Knicks and Rangers have returned to Garden and are scheduled to play full regular seasons and the Christmas Spectacular is back with this year's run kicking off last week at Radio City. This momentum has also carried over to Tao Group, which delivered another quarter of strong results, again, led by robust performance in Las Vegas.

So while we're not fully back, what we are seeing is that when there are experiences that consumers find valuable, they're not only going out, but they are going out and spending more than they did before the pandemic. This has been reflected in double-digit percentage increases in F&B and merchandise per caps at our events as well as in average check sizes at Tao compared to pre-pandemic levels. This demand for premium live experiences plays to our strength, which we think will help continue to drive our business. We're also very encouraged by the activity we're seeing with marketing partnerships and premium hospitality as companies are back and finding ways to reconnect with consumers.

Finally, we made important progress on our construction of MSG Sphere in Las Vegas, which we continue to believe will launch an exciting new chapter for live entertainment. First, focus on our bookings business. While we hosted a number of concerts at our venues in July and August as expected, concert touring began to truly return in mid-September, followed by a very busy October. We expect this ramp-up to continue through the remainder of December quarter and we look forward to a packed schedule for the second half of fiscal '22.

And while the industry as a whole has recently experienced some pandemic-related cancellations and postponements that have affected future event schedules, we're grateful that our event calendar has only been modestly impacted for the balance of this fiscal year. In fact, the number of concerts that are venue scheduled in the second half of fiscal '22 is significantly ahead of how we were pacing two years ago for the second half of fiscal '20. And this robust pipeline of concert bookings is being met by strong consumer demand as tickets continue to sell extremely well for newly announced shows with many selling out. With regard to productions.

Last season marked the first time the Christmas Spectacular was canceled in 87 years, which made last week's debut of the 2021 season, all the more special. As you know, we scaled down a number of shows this season, understanding this year would be unique due to the pandemic. Our advanced ticket sales started slow, especially groups and international, which historically are among the first customer segments to buy. That said, leading up to the show's preview peer performances last week, we saw overall ticket sales increased significantly week-over-week for several weeks in a row.

This past week generating the highest percentage increase so far as we look forward to the show's official opening night this evening. In addition, some of the pandemic-related factors that have impacted sales to date are now headed in the right direction, help ticket sales later in the shows run. These include international tourism, which began to open up this week and the recently approved vaccine for children, obviously, a positive for a family show. We are really excited about opening our doors for those who want to celebrate the holidays at Radio City Music Hall and look forward to welcoming hundreds of thousands of guests this season, which we believe is a significant first step to this shows full return over time.

Tao Group is another part of our business that is clearly benefiting from people's desire to gather again. Tao's ability to ramp up operations quickly, to meet the public's demand led to impressive results for the second consecutive quarter, with select markets such as Las Vegas, even outperforming pre-COVID levels. Venues not yet deemed fully staffed is also reflected in Tao strong AOI margins, which we expect will normalize over time as we continue to make progress on the hiring front. And while we also believe how we'll face increased competition as the industry continues to come back, we feel good about the long-term trajectory of the business.

Tao's acquisition of Hakkasan created a global powerhouse across more than 20 domestic and international markets. Tao is now focused on optimizing. Team has been evaluating their existing portfolio, including possible lease extensions, rebrandings and select instances closures. At the same time, Tao has also returned to focusing on its venue expansion efforts with a robust pipeline of planned openings through calendar '22.

Tao recently debuted a new venue in Mexico City with others set to follow in several markets, including Miami, Los Angeles and Las Vegas. As you can imagine, we're incredibly pleased to see people embracing the return of live entertainment and that includes companies, which are now reengaging with the industry in meaningful ways. There are clear signs that corporate hospitality is making its way back. To help our partners, we took a customer-friendly approach, pausing our obligations for the last year through September 30, to obviously meant minimal suite revenue in the first quarter.

At the same time, we continue to work on new sales and renewals, which are now ahead of expectations. And, on a go-forward run rate basis, we're pleased to say that suite revenue has returned to pre-pandemic. Our marketing partnership business has also had an exciting few months. Last quarter, we renewed our valuable marketing partner, J.P.

Morgan Chase. This was followed by multiyear extensions with longtime partners, Lexus and Anheuser-Busch, both part of our signature roster. We then expanded by welcoming Infosys, a global leader in next-generation digital services and consulting. We are pleased with the terms of these comprehensive agreements, which involve a number of MSG Entertainment assets, including MSG Networks as well as MSG Sports, which our marketing partnership group also represents giving our sponsors access to a broader platform.

These deals have helped set the tone for our discussions with other existing and potentially new marketing partners, including in the mobile sports gaming space. Yesterday, New York State awarded licenses to nine operators, a significantly higher number than had initially been expected. On the heels of this positive news this morning, we announced our first significant partnership related to mobile sports gaming in New York with BetMGM. We've talked before about how our portfolio of assets uniquely positions us to help sports gaming operators grow their business in the nation's largest market.

Our extensive multiyear agreement with BetMGM utilizes our unique portfolio to provide the gaming operator with unparalleled exposure to millions of consumers. This includes our regional sports networks, digital apps, out-of-home signage and Madison's Square Garden Arena and through our relationship with MSG Sports, the New York Knicks and Rangers franchises. We are just getting started in terms of growing the sponsorship category. Our discussions with other mobile sports gaming operators have also meaningfully progressed over the past several months.

And with New York State's licensing process now complete, BetMGM is our first partner in this category. We certainly don't expect it to be our last. As we are increasingly confident about how impactful this revenue opportunity will be for our company. And lastly, we continue to make important progress on construction of the MSG Sphere at The Venetian as we push toward our expected opening in calendar 2023.

Since we last spoke, we have completed concrete pours for the venues domed roof and started installation of the steel framework that will eventually support the interior LED media display plane. At 160,000 square feet, which is larger than three football fields will play an important role in our ability to create immersive experiences at unparalleled scale. Over the next several months, work will continue on the venues interiors as well as the exterior, including the pedestrian bridge that will connect to MSG Sphere to The Venetian expo. I will end by reiterating that the ramp-up we're seeing across our Entertainment business reflects the strong desire of people to be together, especially for premium live experiences.

There's still work to do. There are still challenges. But the fact that our assets are uniquely positioned to fill the demand has made us very optimistic of where we're headed in fiscal '22. Now as we get back to doing what we love, we're also incredibly excited about the progress we've made on MSG Sphere, a beginning of our company's next chapter.

With that, I will now turn the call over to Andrea.

Andrea Greenberg -- President and Chief Executive Officer, MSG Networks

Thank you, Andy and good morning. With the recent start of the NBA and NHL regular seasons, we've seen strong interest from viewers and advertisers for our live professional product, which features five teams across both leagues. As the seasons continue, we hope to build on the success we had last year, which included double-digit percentage ratings increases for a number of our teams, all-time high levels of viewership and engagement on our streaming app, MSG GO and robust advertiser demand for our programming. Our content has played a big part in our ability to renew our affiliate agreements, including most recently with Verizon Fios, one of our largest affiliates, among several others.

And while we are certainly disappointed with our current Comcast situation, which has impacted approximately 10% of our subscribers, we stand ready to negotiate a fair and reasonable deal. We value of our content and we'll continue to innovate with programming designed to broaden our viewership and increase overall engagement. To that end, to capitalize on the introduction of mobile sports gaming in Connecticut, which will soon be followed by New York, we have launched an original block of entertaining and energetic sports betting content, featuring athletes, experts and other personalities. This includes two new programs, The Bettor Half Hour and The Betting Exchange, which aired back-to-back Monday through Thursday prior to our free game programming.

We've also debuted a new Sunday morning football focus show Odds With Ends, hosted by former NFL players David Tyree and Mathias Kiwanuka. We continue to work with a growing list of sports betting operators, which now includes FanDuel, Caesars, BetMGM and bet365 on traditional spot buys as well as with a number of these partners, in-game integrations and other unique content. It's clear that sports gaming operators are recognizing the value we deliver as we've already secured from this category a substantially higher level of advertising commitments for fiscal '22 as compared with our last fiscal year. We also continue to see growth in other sectors that have become an increased focus for us, including technology companies, web-based services and brands that have thrived over the past two years.

The '21/'22 season, we've welcomed a number of new partners, including TikTok, DoorDash and Infosys and have seen a significantly increased presence on our air from existing partners such as Amazon and Verizon. As we look ahead, we know the media landscape is evolving. However, we also know that live local professional sports remains some of today's most valuable programming and we continue to explore new ways to offer and monetize our content, including with the direct-to-consumer product. We are confident that our long history of innovation will serve us well as we look to capitalize on these future opportunities, all with the continued goal of driving value for our partners, advertisers and viewers.

With that, I will turn the call over to Mark.

Mark FitzPatrick -- Executive Vice President and Chief Financial Officer

Thank you, Andrea. Let me start by reviewing our first quarter financial performance, which now includes the MSG Networks segment. I'll note that while the acquisition was completed on July 9, MSG Networks results are included for all periods presented. In the fiscal first quarter, we generated total revenue of $294.5 million and adjusted operating income of $10.3 million.

Entertainment segment generated $34.2 million revenue, which primarily reflects live events starting to ramp up in mid-September. This segment had an adjusted operating loss of $71.4 million in the quarter. As we indicated on our last call, we have been strategically hiring across our entertainment segment to support the ramp-up of live events and MSG Sphere content development plan. This hiring is reflected in higher segment SG&A expenses in the quarter.

Turning to MSG Networks. The segment generated $141.5 million in revenue and $55.8 million in adjusted operating income in the quarter. MSG Networks year-over-year results were impacted by a number of items, such as higher accruals for potential affiliate fee rebates and lower advertising as the prior-year quarter benefited from the timing of the NHL's return to play and Islanders appearance in the playoffs. And finally, the Tao Group generated revenues of $119.5 million and adjusted operating income of $26.2 million, as reopening momentum continued in key markets such as Las Vegas.

Now, let's turn to our balance sheet. As of September 30, we had approximately $1.33 billion of cash on hand, while our debt balance was $1.71 billion. In terms of capital expenditures, we had $137 million of capex in the fiscal first quarter, primarily related to the construction of the MSG Sphere in Las Vegas. Through September 30, project-to-date construction costs incurred were approximately $976 million, which includes $121 million of accrued costs that were not paid as of September 30 and is net of the $65 million received from the Las Vegas Sands.

As a reminder, we previously disclosed a cost estimate of the MSG Sphere in Las Vegas of approximately $1.865 billion and we will continue to aggressively manage costs as we work toward the planned opening in calendar 2023. With that, I will now turn the call back over to Ari.

Ari Danes -- Senior Vice President-Investor Relations

Thanks, Mark. Can we open up the call for questions, please?

Questions & Answers:


Operator

[Operator instructions] Your first question comes from the line of Brandon Ross with LightShed Partners. Brandon, your line is open.

Brandon Ross -- LightShed Partners -- Analyst

Hey, guys. Good morning. I wanted to start with MSG Networks. And there's been a lot of discussion around the future of the RSN business lately.

Obviously, you have the Comcast drop and there's been public posturing from Sinclair and the leagues. And I was wondering if you could just talk broadly about your DTC vision for MSG Networks. First of all, what rights do you even have? And then how are you going to balance your need to maximize revenues the distributor's desire for lower rates and the leagues leads and team's goals of maximizing distribution and eyeballs on their product. How do you solve that puzzle?

Andrea Greenberg -- President and Chief Executive Officer, MSG Networks

Hi, Brandon. I'll take that one. Well, as you said, the landscape is absolutely involved, evolving and it's certainly a delicate ecosystem with a whole host of constituents. And we have our affiliates.

We have our leagues. We have other distributors. We have fans. We have sponsors, but we believe these constituents do, in fact, recognize the value of our programming, which is why we are confident that we're going to work together to find an appropriate model that balances all of these constituents interest.

And we think that as we go through this process, there will be opportunities that come from that for us. We've talked before about how the viewing experience is transforming. It's going from a lean back experience to a lean forward experience. We've got interactive games.

We've got sports betting on the horizon. And they're all -- as we've seen from what we've been doing, they're all driving engagement and viewership. So we think that all of that is a value-creating opportunity for us that we're already beginning to see. Our network business, this fiscal is set up to see a substantial increase in advertising revenue, in part due to what's happening in the mobile gaming space.

And as you say, direct-to-consumer is another developing opportunity. There are millions and millions of homes in our region that don't receive our networks. So finding a way to serve those homes is obviously of interest to us. And we've been actively talking with our partners about different DTC models we could deploy.

All that said, over the last 12 months, we've grown our database by over 25% with an eye toward deeper consumer insights and developing more direct relationship with our customers. We've also conducted research to better understand what our customers might want, including various pricing options. And it is very moment right now, we're absorbing all of this information, which, along with the many discussions that we're having will help us formulate the best path forward. As to your last -- or one of your questions on rights, as we've said in the past, we have the flexibility in both our rights and affiliate agreements to offer a direct-to-consumer product.

We are working on a renewal of our agreements right now with the NBA and NHL, which as we've said, we've successfully renewed many, many times in the past. And we're confident that we'll continue to have the digital rights that give us the ability to take MSG networks to our consumers. So yes, while things are certainly evolving, we believe that on balance, the RSN business will remain incredibly valuable and we'll continue to generate significant cash flow going forward.

Brandon Ross -- LightShed Partners -- Analyst

OK. And then maybe for Andy. The Tao Group performed massively above 2019, if you look at the numbers. Can you expand on what you're seeing there? And if you think that's sustainable? And how much Hakkasan contributed to the mix? And if all those synergies are in I mean, overall, I look at the AOI this quarter, can this be a $100 million AOI business?

Andy Lustgarten -- President and Chief Executive Officer

Thanks, Brandon. So yes, we are very pleased with Tao's results this -- actually the past two quarters. But I think it's clearly driven by what we see everywhere right now. People's pent-up demand, pent-up demand to come together, pent-up demand to celebrate and pent-up demand in doing it in a way of premium, excellent place that they feel safe.

And I think the Tao Hakkasan merger is a great example of one of those types of business. And people have been really willing to pay for it. We see it in our check sizes, we see it across the business. I will say and I've said this before, we do think we're benefiting right now from some reduced staffing levels and reduced competition that's beginning to come into some of our markets.

But that's not to say we're going from no competition to full competition. There is already competition occurring. We feel really good about the upside in the future of this business. The team has been working on integration, both organizational and operational.

They've taken out some of the savings, but they're continuing to focus on it. There will be further synergies across marketing, across promotion, databases, procurement, purchasing and introduction of corporate sponsorship. So around this merger, we think there's still a lot of opportunity in front of us. And it comes not only from our current stores, but our future stores, so our expansion plan.

And this team is really the best in the -- I think the best in the industry or among the best, if not the best, right? We just recently opened up in Mexico City. We have a plan to open up a few other markets coming soon. Pakistan immediately increased Tao's footprint and added a number of international markets and the ability to reach international markets. And we think that this company has got growth for years to come and we've already begun to see it.

So we feel really good about bringing these two businesses together and we feel really good about this business.

Brandon Ross -- LightShed Partners -- Analyst

OK. And just very quickly, there's been news around Penn Station renovation once again. I feel like it's been going on for decades, but can you just address the risk of relocation? And on the flip side, if there's potential upside to the air rights or maybe use of the Hulu Theater in the renovation? Thanks.

Andy Lustgarten -- President and Chief Executive Officer

Sure, absolutely. So last week, Governor Hochul unveiled her plans for the redevelopment of Penn Station and the surrounding area. We think it will significantly improve this area, which is adjacent to the Garden. We've been working with the governor and we have been working to bringing the state back and she's really done an excellent job and we really -- we fully support her efforts.

And we look forward to continuing to work with our on many things to come that are currently in progress and innovation. So I will say though, we expect to continue hosting Memorial events right here where the Garden's current location. And to your point about, air rights or Hulu Theater look, these are very valuable piece of assets in our portfolio, both strategically and financially. And I do think there will be a time to monetize, but I will say, I don't think that time is tomorrow or the next week, right? But we are closely watching the developments around Penn Station and when the opportunity presents, we'll make -- that makes sense, both strategically and financially, we will take that opportunity to create value.

So thank you.

Brandon Ross -- LightShed Partners -- Analyst

Thanks a lot.

Operator

Your next question comes from the line of David Karnovsky with J.P. Morgan.

David Karnovsky -- J.P. Morgan -- Analyst

Hi. Thank you. Maybe to follow on Brandon's MSG Networks question. It does look like some of the lease in RSN model are interested in creating their our own DTC platforms that could combine in-market and out-of-market streaming.

And just given your mix in the underwriter through 2035 I think, can you remind us what protections you have if a competing streaming product did come to the market? And then at the same time, would you see room to potentially participate in an OTT product that the NBA or NHL can offer?

Andrea Greenberg -- President and Chief Executive Officer, MSG Networks

Yeah, I'll answer that one. I mean the NBA, NHL has always recognized that the RSNs are a very important part of their overall ecosystem. And we've -- through our team deals worked in partnership with both leagues to ensure over the years that there's a continued robust ability for us to offer regional products to customers in this market and we fully expect that to continue going forward. As I said many times in the past, there has been nothing that precluded us from launching a direct-to-consumer product.

And we'll continue to explore models that are beneficial for all involved, as I indicated in the first question. We are confident that working with our leagues and our distributors and our sponsors that will continue to have broad digital rights that will give us the ability to exploit direct-to-consumer along with our current linear distribution.

David Karnovsky -- J.P. Morgan -- Analyst

OK. And then, Andrew, as you noted yesterday, New York moved to approve nine betting operators in the state. I think that's more than double what we talked about on the last earnings call. Just wanting to your thoughts on what this market dynamic means for you in terms of the number of partners you could potentially take on? And then just the overall importance of your assets that these operators look to gain market share?

Andy Lustgarten -- President and Chief Executive Officer

Thanks, David. So let me start by saying what I've said many times before, but I'm going to continue to say it because I think it's incredibly important. Before we even talk about the revenue opportunity today, we love sports gaming and what it's impact is on viewership and fan engagement. And we think this is going to bear fruit not only today, but for years to come.

And Andrea hit on it a little bit as we -- as you talked about the interest in consumers and through MSG GO, right? So it's -- this is going to play out in many places. That said, we are talking about what it is today. So the state originally talked about having a minimum of four operators. Yesterday, they announced 9.

Obviously, for us, this is a great opportunity, more competition, more competitive environment. Operators are going to have to aggressively market themselves to find their consumers, raise awareness and draw their customers in, right? And that's where we come in. I think that our brands have unmatched presence in New York market. We have tremendous value for partners, fixed assets, including entertainment, Tao venues.

As Andrea mentioned before, MSG Networks linear networks and our outdoor signage. Our relationship across MSG Sports with the Knicks and Rangers. And this drove us to signing our first agreement with BetMGM. It's an expansive agreement, multiyear.

It demonstrates the value we can deliver to a partner. But I will say it's nonexclusive and we do not expect them to -- this to be our only partner. We're in active discussions with additional operators. We're very selective about who would be our partner and the number.

But I will, I want to emphasize that we are increasingly confident about how impactful this category will be for our company.

Andrea Greenberg -- President and Chief Executive Officer, MSG Networks

And just adding to Andy's comments, at Networks, sports betting operators are already clearly recognizing the value we deliver today. And as I mentioned during our prepared remarks, we continue to work with a growing list of these operators. Today, we have partnerships at the network side, obviously, with BetMGM, with FanDuel, with Caesars, with bet365 and we've seen considerable growth in revenue from this category for this fiscal versus last with, as Andy indicated, additional opportunities beyond that -- different opportunities that will come in the future.

David Karnovsky -- J.P. Morgan -- Analyst

Thank you.

Operator

Your next question comes from the line of John Janedis with Wolfe Research.

John Janedis -- Wolfe Research -- Analyst

Thanks. I've got one for Mark and one for Andy. First, for Mark, given the Comcast situation, can you give us an update on any potential covenant or compliance issues at the networks related to the term loan? And then Andy, can you give us the expectation on how the Christmas show is going to perform relative to historical norms, maybe on a per-show basis, how impactful is slower tourism? Is that the majority of guests? And on the international travel restrictions being lifted, did that come at a time where it's going to be difficult to capture, given typical lead times of bookings of holiday travel plans? Thanks.

Mark FitzPatrick -- Executive Vice President and Chief Financial Officer

Great. This is Mark. I'll jump in and answer your first question and then hand it over to Andy. I'll start by noting that we fully expect to remain in compliance with all our covenants under the term loan.

But also note that there's no recourse to the parent company as the loan was issued by our subsidiary of MSG Entertainment. Just a little background on the loan. There's currently approximately $1 billion outstanding and it matures in October 2024. It's subject to two key financial covenants, maximum leverage of 5.5 times.

and minimum interest coverage of two times. The main governing covenant is the leverage ratio. We have the ability to net up to $175 million in cash as the borrower toward the leverage covenants. And with that, I'll turn it over to Andy.

Andy Lustgarten -- President and Chief Executive Officer

So Christmas Spectacular show. So we just -- we had a preview period at last weekend or opening of this evening and we're thrilled to have the show back. It was difficult for us to have take a year off after 87 years of being on. But we knew coming into this year, this was going to be not the typical year given the impact of the pandemic.

So we reduced our number of shows as we headed into the year compared to a typical year, as I mentioned and we picked up on. Now the show sales started much slower than where they historically have been. Now Jack, we think, is part -- driven by a number of factors. But when we lost two of our key segments, both our tourists or especially international and our groups.

And the reason the groups is a lot of them are tied in with the children. The children show unknown position where we were going to be with the vaccine and rules. So we had to make some difficult decisions. I will say the last -- each week has improved.

The sales had improved prior to the following week and every day has been stronger than the day before. So typically, Mondays are not our strongest day. We had a very strong Monday of sales yesterday. But to your point, it's a little -- it's showing up a little bit closer toward the second half of the run, not these next few weeks.

Those weeks typically have been more where our group sales have gone into, especially schools, which really weren't buyers this period. We are starting to hear about schools coming of interest. But again, they need to take a few weeks, they need a plan. They need to get themselves set.

So this -- we're hoping this could be helpful post Thanksgiving, which -- when most of our tickets get sold. So excitement seems to be building. And we have seen some compressed and last-minute buying, which is also completely consistent with Broadway. So -- and the other thing that's an interesting point is our ticket yields have remained strong.

So -- and better than what we were expecting. So while this year will not be our typical year, will not hit our 2019 numbers, we are still very happy and excited to welcome hundreds of thousands of guests this season. And I do think this is the first sign of coming back. And we do believe in the long term, very strongly in this business.

John Janedis -- Wolfe Research -- Analyst

Thanks, Andy.

Operator

Our next question comes from the line of David Katz with Jefferies.

Unknown speaker

Hi. Good morning. This is Cassandra asking on behalf of David. I just have one on the Sphere.

Have you seen or foresee any challenges with supply chain? And how are you managing the risk there?

Mark FitzPatrick -- Executive Vice President and Chief Financial Officer

Thanks for your question. Just I'll start off by saying when you think about the Sphere and the complexity associated with it, we've been actually managing our supply chain since day 1. I think as we mentioned in our prepared remarks, we're on track to open in 2023. We don't see anything changing in the near term.

I think as we mentioned on our last call, we have accelerated the purchase of higher risk items, including securing the majority of our structural steel for the project. In addition, where possible, we've identified alternative manufacturers and delivery methods for certain components such as semiconductors to minimize any potential delays. I think overall, we've done a good job of managing our supply chain and making sure we continue to be on track for 2023 opening.

Unknown speaker

Got it. Thank you very much.

Ari Danes -- Senior Vice President-Investor Relations

We have time for one last question.

Operator

Your last question comes from the line of Ben Swinburne with Morgan Stanley.

Ben Swinburne -- Morgan Stanley -- Analyst

Thanks, good morning. Andy, could you talk a little bit more about sort of how you think the BetMGM relationship evolves? And how much bigger the business could be if you look two to three years out, especially as you bring in additional partners? And if you guys can help us at all think about where that revenue is going to show up across your segments? That would also be helpful. And then I just wanted to follow up on the conversation on streaming rights. Again, Andrea mentioned that you're in discussions with the leagues right now on the renewal.

Do you think that will have any impact on expense growth? I think we typically see expenses grow kind of in the escalator level, but I didn't know if because of the focus on streaming, there might be some volatility there we should be looking to as you renew these two agreements.

Andy Lustgarten -- President and Chief Executive Officer

Thanks, Ben. So as I mentioned, BetMGM is our first partner. It's not exclusive. We think this category is very meaningful across all parts of our business.

It starts with simplest advertising on MSG Network, integrations and games, but then more so across our fixed assets. So we're able to provide something that I don't think a mobile operator could reach on their own, which is fixed land-based hard reach of the consumer, our ability to connect directly with the consumer to really provide both a loyalty program. So think about our Tao venues. We have 60 venues in five continents.

Think about the Arena and premium areas in seating. Think about or just our ability to -- by the way, deeper reach outside of sports to other types of both dining and concerts. So we're able to provide really a robust offering to a partner or let them to really drive their business. We clearly have a valuable collection of assets and we think that we really blanket the New York market and the greater New York market in a way nobody else in the industry does across online, linear networks, media, on the web and in person.

And finally, the other piece of the value that we have that is extremely important to partners is our data, knowing our customer. We do it better than I think anyone else and we want to continue -- and we provide it to our partner and ability to go back and forth and really build their business. So we think it's a tremendous opportunity. In terms of across our assets, obviously, there's a piece of the business that will go through MSG Network.

There will be a piece that comes to the Arena depending on where it fits to what type of activations we provide, sponsorship gets shared between the teams and the Arena as well. So it's shared between MSG Sports and MSG Entertainment. And there'll be a part of it, obviously, that goes to the team for official branding. But I will say that this is a very robust deal and we expect -- we feel very good about this category and what we're going to able to drive from it.

Andrea Greenberg -- President and Chief Executive Officer, MSG Networks

And on any potential expense growth, as Andy just indicated, there's significant offsetting revenue opportunities. If you just think about networks and Andy touched on a few of these opportunities, in addition to just our traditional spot inventory, we could and are looking to launch new products and services centered around sports gaming, including married to our live game content. We have more programming and production opportunities. As we indicated, we've just launched a suite of new sports betting shows that will air on Sundays during the football season and prior to our pregame programming.

So in prime viewership spots, branded content opportunities. There's a whole host of bet cast opportunities. We've done some of that in the past. We will look to do more of that with some of the partners that we've outlined during the season, hopefully and just general integrations.

We have a free to play app. Our MSG GO streaming app, which is performing wonderfully this year compared to prior seasons. So we see this as -- just on the network side alone, as being a tremendous opportunity for growth.

Ben Swinburne -- Morgan Stanley -- Analyst

Yeah. I guess that makes sense, Andrea. I was actually specifically asking about the streaming rights that you said. I think you said you were in negotiations with the NBA and NHL and the renewal in those were big enough to impact expense growth of the networks as you look forward?

Andrea Greenberg -- President and Chief Executive Officer, MSG Networks

Yes. I wouldn't expect any considerable expense growth related to those rights. As I've said in the past, we've had the rights with the NBA and the NHL to offer direct-to-consumer -- to offer our machine networks direct to consumer.

Operator

I'd now like to turn the call back over to Ari Danes for any closing remarks.

Ari Danes -- Senior Vice President-Investor Relations

Thank you all for joining us. We look forward to speaking with you on our next earnings call. Have a great day.

Andrea Greenberg -- President and Chief Executive Officer, MSG Networks

Good bye.

Operator

[Operator signoff]

Duration: 45 minutes

Call participants:

Ari Danes -- Senior Vice President-Investor Relations

Andy Lustgarten -- President and Chief Executive Officer

Andrea Greenberg -- President and Chief Executive Officer, MSG Networks

Mark FitzPatrick -- Executive Vice President and Chief Financial Officer

Brandon Ross -- LightShed Partners -- Analyst

David Karnovsky -- J.P. Morgan -- Analyst

John Janedis -- Wolfe Research -- Analyst

Unknown speaker

Ben Swinburne -- Morgan Stanley -- Analyst

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