MSG Sports (Knicks & Rangers)

🧠 The Takeaways

We’re prying the Knicks + Rangers away from the worst Sports Family the Dolans and turning this $5.7B unprofitable franchise into $20B+ mega-corp.

1. Claw MSG Networks back from the Sphere.

2. Launch MSG Prime for the Super Fans.

3. Merge MSG Networks with YES than sell the combined asset.

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 (Sports teams: Knicks, Rangers) is losing more money as the team gets better. 

• Share price: $237

• Market Cap: $5.7B

• L5 Performance: +30%

• P/E Ratio: N/A

No surprise one of the worst management families in all of sports can’t monetize a Knicks Semi-final playoff run and a Rangers Conference final playoff run.

Today we’re going to buy the crown jewel MSG Sports for $7.5B and turn it into a $15B franchise.

Link to the Stock Price

Financial Summary

2024 Financial Statements TOTAL (YoY Comparison)

Sales: $1B (+1%)
Gross Profits: $284m (-32%)
OPEX: $270m (+2%) 

Net Income: -$22m (-103%) 

Link to Company’s earnings

TLDR Analysis: Can’t Monetize the wins

• Exploding Direct Costs +22% on minimal Rev increases +1%.

• Everything else is flat.

• Eliminates thin margins on 1 cost increase.

MSG has an incredible model, but can’t properly monetize when they teams do considerably better. Frustrating but not surprising considering it’s run by the Dolans.

Let’s Fix This Biz

Here are the 3 ways we’re going to save 2 of the most valuable sports franchises in the world from one of the worst predatory families in sports.

1) Acquire back MSG Networks from the Sphere

It is ludicrous that the Sphere (The big immersive theaters in Vegas) own the $500m/yr MSG Networks (Cable + Streaming). 

I understand the self dealing:

1. Dolan’s new pet Project (Sphere) is the future of live sports.

2. It’s going to eat a TON of losses and capital to get off the ground.

3. Throw the high margin

But I HATE this corporate structure.

1. MSG Sports: owns the team but not the Media rights.

2. MSG Entertainment: Has the “old” event venue biz.

3. Sphere: The “new shiny” bizs

Now that the Sphere is a $500m run rate biz MSG Sports should get their broadcasting rights back and add the 20-30% Net margin biz back on top of the -2% Net Margin biz currently.

The spoils of the team success is captured in 2 key areas:

1. Higher tickets sales (Already monetizing)

2. Better TV and Advertising rights.

It’s criminal that a new movie theater in Vegas is capturing all of the margin and upside of a team’s incredibly playoff run vs. the team to invest more in their future.

Takeaway: Always monetize your upside.

2) MSG Prime

Monogamy is the holy grail for any business. The beauty of sports is your customers have a cult like loyalty to your biz.

MSG should launch MSG Prime to fully monetize the rabid loyalty their most obsessed fans.

You might say Jeremy they already have Season passes and exclusive events. But I’m talking about the benefits of College Sports mega donors but for an annual fee:

• VIP experiences (practice access, player meet-and-greets, play on the court/ice)

• Members-only merchandise and collectibles

• Discounts on food/bev, apparel, and partner brands

• Exclusive content (behind-the-scenes, original documentaries)

• Cut the line access at events (Food/Bev, bathrooms etc).

A simple annual fee that all seasonal ticket holders can add on to their package. Just like how Amazon does it. 

Customers are already spending $7-20k+ on Season tickets for 1 sport. Combining access and pushing customers to go to more of both is the real win here.

If a Knicks Season ticket holder goes to 5 more Rangers games/yr and vice verse and the Knicks have drastically increased their LTV and Rev on their customers.

Takeaway: Always find ways to deliver a 7 star experience for your top 1% of customers.

3) Merge w/ the YES Network & Sell to Paramount

Let’s be honest. Regional Sports Networks are dying.

10 years ago they were billion dollar/yr topline bizs with 30-40% margin. Now, they’re declining bizs with collapsing margins dying inside the old cable model.

These markets factors always leads to 2 changes:

1. Consolidation

2. Disruption

The 2 saving graces for both YES and MSG have going for them:

1. Insanely higher viewership from incredibly loyal fan bases.

2. Highest advertising value from dominating the New York market. 

MSG Networks alone is probably worth ~$2.5B + combined with Yes (est. val ~$3.5B) there’s an $6B Premium live sports media biz that is meaty enough to have a serious bidding war over.

If Paramount is willing to pay $200m for the Free Press (News) and $100B for Paramount (TV + Movies). We can probably sell MSG + YES to them for $15B.

The reality is Streamers are the new Cable companies that will own all of the content production. Live sports is the last Grade A piece of content everything wants. 

If Paramount is willing to spend through the nose. Let’s cash the biggest check in Sports history.

1. Dolan can build all the Spheres he wants. 

2. The Knicks + Rangers will have enough cash buy any player they want.

The opposite is watching both slowly die as cord cutting rips out their margin base + the jump to steaming doesn’t stick because Sports is a wildly seasonal biz. Especially when Hockey and Basketball are both winter sports.

Takeaway: Sell when the market is irrationally hot. The vals will never come back.

Final Thought

Will all sports teams eventually be public companies?

With 

1. The massive $$$ that has pumped into Sports franchises over the last 15 years.

2. The insane accelerating TV deals

3. The sheer size of these numbers

Is it possible to keep these franchises private?

Sports ownership doesn’t really seem like the cottage industry for wealthy people to blow hundreds of millions anymore on play.

Obviously we are looking at teams in the largest markets going public first (You can also own the Braves if you’d like), but at a certain point if every sports franchise is worth $5B, who else is going to purchase them?

Overall I think it’s the best possible thing for sports franchises. The Green Bay Packers ($6.3B) have always been owned by their fans. 

Don’t get me wrong the current owners are going to make a killing taking their team’s public, but it’s a fascinating evolution that takes the current sports betting phenomenon to another level. Allowing fans to trade their favorite teams on the stock market.