Epic disaster and Madison Square Garden CEO James Dolan are terms that New York Knicks and New York Rangers fans group together more often than any sports fan deserves.
Under the leadership of Dolan, those two storied franchises, which have a pretty significant financial advantage of calling New York and the "world's most famous arena," Madison Square Garden, home, combined have won two championships over the past 50 years.
The Knicks last stood atop the NBA in 1973, and the Rangers have not carried the Stanley Cup since Mark Messier, arguably the greatest leader in sports history, carried them way back in 1994.
Since then, the franchise highlights have been few and far between and many New York sports fans place that blame squarely on Dolan's leadership.
DON'T MISS: The End Nears for Two Las Vegas Strip Icons
Now, Dolan has brought some of his magic to the Las Vegas Strip, where his company has been building the Madison Square Garden Entertainment (MSGE) Sphere, essentially in a parking lot at the Venetian. It's an incredibly impressive-looking venue that will be the first of its kind.
The problem is that Dolan's now $2.2 billion (and rising) project may have a business model that makes no sense. It's also possible that aside from its opening headliner, no bands actually want to play there.
MSG Sphere Las Vegas
Here's How Much U2 Is Getting Paid to Open MSG's Sphere
If you saw the Super Bowl, you likely saw the $7 million 30-second spot that confirmed that U2 would be the first headline act for MSG's Sphere. That's a good get: Even though U2 hasn't had a hit since the '90s, the band remains one of the world's biggest live acts.
The problem is that Dolan and MSG made a deal with the band that makes no financial sense, according to a report in The New York Post.
"According to sources close to the situation, the billionaire Knicks owner has quietly agreed to pay the legendary rock group $10 million to produce a splashy show to open the MSG Sphere -- a 17,500-seat, ball-shaped arena that aspires to become the world’s ultimate concert venue," the paper reported.
The $10 million number doesn't seem that big given what major names get paid for playing Las Vegas residencies. But the payment comes on top of what U2 will collect for ticket sales.
"That’s on top of the guaranteed proceeds U2 will reap from the gigs, collecting more than 90% of earnings from ticket sales for roughly 12 shows — with the first slated for around Sept. 29 and the rest spread over a few months," according to sources briefed on the talks, the paper added.
Let's assume that the average ticket in the 17,500-seat venue will cost $200 and that 17,000 tickets sell each night (there are always some comps and maybe some tickets won't sell). That's a gate of $3.4 million per night, of which U2 will get roughly $3.06 million.
Over 12 nights, MSG will take in roughly $400,000 per night -- or $4.8 million -- less than half the $10 million U2 will be paid on top of its cut of ticket sales. MSG still gets to keep concession sales, one would assume, but popcorn and soda seem unlikely to make up $5.2 million.
“Without getting into specifics, we are very confident in the investment we made with U2 as the opening performer for the Sphere,” a Madison Square Garden Entertainment spokesperson told The Post.
MSG Has a Lot of Bad Plans
MSG hopes to offset its losses from paying big-name bands huge money by selling sponsorships. It has not actually sold any yet, but Casino.org reported that MSG is seeking "a company willing to pay $50 million to have the Sphere named after it.
That number seems farfetched as the largest U.S. naming deal not involving crypto companies that will almost certainly default on the payments was SoFi Stadium. That's home to the National Football League's Chargers and Rams, which got a $650 million 20-year deal ($32.5 million a year) when economic times were much brighter.
MSG will, of course, bring in some sponsorship revenue and sell its luxury boxes and other tiers of partnerships. It's not likely, however, to do that for anywhere near the levels that the company projected when it began the project. That's because companies that are laying people off or even just trying to project fiscal responsibility don't sponsor cool music venues.
The biggest issue MSG faces may be that bands big enough to sell out the Sphere for a residency may not want to play there.
During its most recent earnings call, MSG Entertainment said it planned on four to six residency headliners a year, but did not name any specific bands.
"That’s because the MSG Sphere is having trouble booking other rock bands and top entertainers, sources said. Many acts are balking at the idea of producing splashy visual spectacles that might overpower their music, a source close to the situation said," the Post reported,
