Let’s Buy MSG Sports (Knicks + Rangers)

🧠 The Takeaways

Today, I’m playing out a childhood fantasy and buy my 2 favorite sports teams, Madison Square Garden Sports (Owns Knicks + Rangers). Finally turning around this terrible portco of amazing franchises.

1. Capitalize on the international audience the NBA has been building for 15+ years.

2. Monetize the insane social followings the Knicks + Rangers have. Bring this biz into the 21st Century.

3. Merge/Acquire another NY Sports team to evolve into the next version of the sports conglomerate.

+ Expect market dips in the coming weeks. It doesn’t mean anything.

Let’s Community - Ignore the EOY Sell offs.

Ignore the stock market for the next 3 weeks. There are gonna be weird moves in the prices and the overall market.

Don't read into it too much.

Don't buy into the news cycle of analysts trying to read the tea leaves and people overanalyzing it because it’s a slow news period. 

There will be big sell offs in the market as major capital managers sell off positions to harvest tax losses. Essentially they’re going to sell their positions at a loss to reap the tax benefits. Sit their money on the sidelines for a short period of time and re-enter the market in Q1.

Basically they’re playing money games as they prep for their April tax returns.

This happens every year and every year there are swings in the market that look good and bad as everyone is basically playing the 2nd and 3rd order effects of this well practiced strategy.

I'm not saying it's a good or a bad time to get into the market.

It really is just gonna be a time where prices dip and bounce.

Everybody's gonna wanna overread into it. Every market movement has now become news. Whether it is or not.  

Because of the election, upcoming policy changes, consumer sentiment, and what you ate for lunch, the other day everyone will try to read into what this means. 

It means that people are trying to write off more on their Tax return.

Keys keep in mind.

• There's gonna be a bunch of movements that don't really matter. It happens every year.

• The trading around it will only increase as investing becomes more automated.

• The world will still turn.

What you really need to focus on. Keep hustling. 

Push through the final weeks of the year and build your 2025 plans.

To be honest, if you wanna trade, trade. Play the swings and all those other fun games. Just know what you’re getting into before hand.

But really at the end of the day, don’t over read into the market at the end of the year. Keep focusing on what you’re doing. Get ready for next year.

Hitting 2025 hard is much more valuable than playing in the market for a couple of weeks.

Let’s Examine This Biz

Note: As always, none of what follows is legal, tax, investing, financial, or any other sort of advice. And I was never here 😉.

Madison Square Garden Sports (MSGS), which owns the best professional + Hockey teams in New York (Knicks & Rangers), is bumbling along when they should be setting the golden example of how to run a major market Sports Franchise. 

Trading at $229.93/share with a $5.5B market cap, MSGS is +17% L5. For 2 perennial playoff teams that are raking in ticket sales + TV rights deals, this biz isn’t really going anywhere. And it’s all because of the Dolan Tax.*

Note: the Dolan family owns MSGS, founded Cablevision + HBO, and have a bunch of other media/venue holdings (e.g., AMC, BBC America, Radio City Music Hall). And I have thoughts about them.

The Dallas Cowboys are currently the only other sports franchise listed at a $10B+ valuation, but with the international appeal of Basketball + the fact that both MSGS teams are New York-based, they should be worth as much or more.

Also, there is undeniably more of an international appeal to a city like New York vs. Dallas, which should translate into more international sales of their scalable offerings (TV rights + Merch).

Sorry to everyone who’s a Cowboys fan, but as a native New Yorker + lifelong NY Giants fan, there’s no love lost here. 

Financial Summary

TLDR Analysis: Slow, solid growth.

• Rev outpaced COGS = fatter GM %. 👍👍

• SG&A is increasing 1/3 as fast as Rev. 🤤

• Net Income biggest winner of the year. 😍

For a large established biz, this is what solid, but not incredible performance looks like.

The YoY number you always want to see increase the most is Net Income, and it was the biggest winner. 

For a biz that operates at a 5% Net Income margin, operational excellence + growth are the only ways to increase the value.

While the operational piece is tight, with ever-growing COGS the only way this biz will continue to be able to grow profits is to grow topline. Which they are kind of doing, but not well.

Let’s Scale This Biz!

Here are the 3 ways I’d turn this into the 1st Basketball franchise to join the Deca-billion club and remove the Dolan tax from these power house teams.

1) Play more Games internationally.

Of the 4 major US sports leagues, the NBA has done the best job making the game appealing in other major markets (Europe + Asia). New Market = New Money.

I’m not just talking about press events like Dennis Rodman playing a game in North Korea. I mean playing multiple games a season in those markets (Europe + Asia).

An 82 game season is so long they can easily break it up where sections are played on different continents. The season runs half the year from Mid-October to Mid-April.

Instead of having these silly mid-season tournaments (NBA Cup) that mean nothing, take them on the road and have the: Euro-Cup, Middle East-Cup, Asia Cup. Create high pressure, meaningful games in markets where it will matter.

AND include the local teams. 

Let 2-4 entries of the best local teams compete against the NBA teams. Bring the magic of the Olympics every year. The games are more interesting. Drawing in local markets to watch the games as well.

Having the Knicks always featured in those markets will lift all Revenue lines.

1. More TV deal $$$. Americans will always watch. + local market customers will watch to see if their hometown favorites can beat the NBA greats.

2. Sell more Merch. Kids are inspired by the best players no matter what language they speak. Going to a game gives them an excuse to buy.

3. Bring in new sponsors who are bigger in other markets. Emirates sponsored the 2024 NBA Cup. There are plenty of other big bizs in other regions who’d get in on the power of Sports Branding.

As soon as a local team upset any NBA team, and if 1 ever won their regional Cup, the Sports world would lose their minds. It’d bring the Cinderella magic of March Madness to the NBA—increasing its appeal even more.

In the best case scenario, this would turn the NBA more into the Premier League of international Football (what Americans call Soccer) where teams could potentially be Promoted + Demoted, turning the NBA into the IBA.

The players will hate all of the travel but with the additional Revenues + the new endorsement opportunities they’d have in new markets, they’d be able to make enough it’d be worth it for them.

You could replicate the same playbook with Hockey in select markets. A similar playbook at a smaller scale.

Takeaway: Always expand your market. If you’re saturated at home, it’s time to move abroad.

2) Scale Media Sponsorships to the Digital Age

The Knicks + Rangers are the masters of the old school Media advertising biz. They monetize the eyeballs out of everything in old school channels (TV, Print, in-Stadium), but they are missing the lowest hanging fruit to probably doubling their Media Revenue (29% of Rev).

Events Rev (Tickets Sales + Food & Bev + Onsite Merch sales) is still their largest Rev driver (45% of Rev), but is pretty much tapped.

They’ll continue to increase prices + make at-games purchases more expensive over time, but there isn’t a real scalable path to increase the number of customers at a game.

Media + eCom merch sales, on the other hand, has enormous potential. And on that front all I can say is what are they doing?

1. The Knicks and Rangers both don’t have their own dedicated websites. I’m not joking. Look it up.

2. Despite collecting Billions of views across socials (Knicks @ 11.5m Followers + Rangers @ 3.6m across platforms), they run 0 sponsored posts across Social.

3. They don’t even have a podcast they own.

How in 30 years did MSGS never think that maybe our teams should have their own dedicated websites like nyknicks.com and nyrangers.com?

I’m not kidding. Google it. It just redirects you to nested pages on NBA.com and MSG.com. 

What’s even more insane is the NBA forces every team to have their own sites as a part of the League’s Online Presence policy.

All they would need to build is a blog.

Repurpose all of the content for TV and Social packages. We’re talking about a blog that teenagers have built. This could launch in months as a Wordpress blog attached to a Shopify site (sell merch).

They also don’t own their own podcast.

If you search for “New York Knicks podcast”, Fan podcasts are all that come up. And I don’t have the heart to look for the Rangers, because if the Knicks don’t have it, I can’t imagine they will.

I’d venture to guess the Knicks alone would capture 250m impressions/yr on their Social posts + site alone. Without looking too deeply into the numbers, this could easily add another $100m+/yr in Sponsorship sales for them. 

“Hey Coca-Cola, want to sponsor the Key Moment highlights from our games that get a combined 1m views across platforms for 82 games out of the year?”

Fun fact: ☝️ is actually where I started my career. My College freshman internship was in Turner’s Integrated Sports Marketing team (NBA, MLB, PGA, March Madness and NASCAR) where my team created these exact sponsorship packages to sell to Fortune 500s.

Then, layer on a coherent Merch sales strategy to buy more Knicks + Rangers gear to monetize the social + site audience.

Bring in considerably more digital, high margin Rev without creating anything new.

It’d take a decade but they’d but it’d become their largest most profitable biz unit.

Takeaway: Always Own your Owned Media.

3) Acquire another NY Sports Team

All my fellow NY fans will hate this, but as PE and BIG money enters the sports world, mergers + consolidation are bound to happen.

 Let’s get ahead of it and bring another NY franchise into the 21st century.

1. The Yankees ~$7.5B cap (Also own NYC Football Club). [Source]

2. The NY Giants ~$7.3B cap [Source]. 

3. NY Mets (~$2.9B cap) [Source]

*They’re all private so we don’t know for sure the value or what the market clearing price would be to acquire them.

The major challenge with the way MSGS is currently set up means extending into other NY Sports makes the most sense. It would be wild for the group to own competing Sports teams, so that only leaves NY based Football, Baseball, and Soccer teams left. 

This will probably be a situation where we go to acquire them and BIG money acquires us, but it needs to be explored. 

That being said, prying either the Yankees or Giants from their historied private family owners will be a considerable challenge (vs. the Mets, which have had 3 owners in the past 25 years).

Coming off a NLCS high, the Mets are the most promising for an acquisition out of this list, as their valuation has the most room to grow in this top cohort. 

The current management group bought them 4 years ago. Owners usually hold Sports teams for 20 years, but I think there’s a short-term premium option to buy a consistently inconsistent team at a relative high where everyone looks like a winner.

It’d be paying top dollar for a team that history shows will probably fall back to a losing record within 2 years but is still the 6th most valuable team in all of baseball.

Adding their $2.9B to our cap + growing the biz through the exact same playbook we’d run for the Knicks + Rangers would make the group overall more valuable and put us in that $10B bracket.

Takeaway:  When a related biz fits in your playbook. Acquire + Run it.

Final Thought

I have to give the Dolans credit.

Sorry, I just really hate them with every fiber of my being.

But I do have to give them credit for splitting up the Venue bizs + the Sports Biz.

There are actually 3 bizs that they own.

1. MSGS (What we talked about today): The Sports teams.

2. MSG Entertainment (1.7B cap): the old school Venue biz: MSG (the building), Radio city music hall, other venues + other Event Rev.

3. Sphere Ent. (1.4B cap): Owners of the Sphere (Big Bubble venue in Vegas).

It was smart to break out the 3 bizs into 3 stocks, avoid the conglomerate tax, and reap the benefit of how each performs.

The major mistake the Dolan’s are making (and why we’ll make a killing buying MSGS) is they’re still running the Sports group like an Events biz from 2010. 

• The Revenue is completely focused on in-stadium. 

• The lack of “digital innovation” (AKA DTC basics).

• Prioritizing local experience vs. International appeal.

Sports is the ultimate cult-like, community-driven biz that all brands aspire to build. But what’s even better about this biz model is that the core product creates 3-4 biz models off of a bunch of grown men playing kids games.

The playbook and the majority of the Rev is built around the old school model of getting butts in stadium seats and capturing everyone else on TV (essentially all profits until Cable TV dies with Boomers).

But they’ve so under-invested in modern channels.

1. They don’t have a site or podcast.

2. Their social media game is weak to say the least.

3. For all the money they spend on Marketing push 2-3 salespeople into digital ads sales.

The wildest part to me is how long they’ve had to do this and how little they’ve done. 

I understand how hard it is with all the stakeholders between the League, players, sponsors, and other Corp interests, but still the writing has been on the wall here for 15 years. 

In that time, Disney was able to build, launch and make its own streaming service profitable. MSGS could have figured out how to launch a blog or podcast.

Hell audition 2k local fans to see who is the best to host a podcast. Get them a mic + a Riverside account.

I get wanting to milk the cash cow, but they have to know there’s hopefully 1 more meaningful classic Linear TV deal left before the Streamers own them and their Regional Sports Network shrivels and dies.

Just look at who has all of the Christmas Football games this year.

But what surprises me the most is their lack of studying other industries and willing to adapt. 

What I’m recommending here is 90% what every other media/consumer brand has done in the last decade. We don’t need to reinvent the wheel here to bring immense value to an already incredibly valuable org.

This reeks of Nepo-baby mismanagement where the son of the king is holding court with 2 of New York’s most beloved sports franchises. And ruining both because he can’t step out of the spotlight.

Another Dolan-note: Charles Dolan is the 98-year-old HBO/Cablevision founder who is the still majority owner of everything, and James Dolan is the son of the king running the show. 

This combined entity should easily be worth $7B, on par with the Yankees or Giants, and really should grow even more than both of them as Basketball is such a bigger international sport than either. + there’s a whole second team.

Honestly, I believe that this entity would just be more valuable with different management. This stock is traded lower than it should because of the ridiculous and very public poor management from the owner’s family.