Within the newest transfer in govt chairman and CEO James Dolan’s saga to generate income from MSG Networks, Madison Sq. Backyard Leisure has agreed to accumulate the cable and satellite tv for pc tv community and radio service in an all-stock deal, which might recombine the 2 entities following their separation in 2015.
Following the 2015 spin-off, Madison Sq. Co. rebranded final yr as Madison Sq. Backyard Sports activities, additional spinning off its leisure division as MSG Leisure. Dolan put MSG Networks up for sale in 2017 however potential consumers felt it wasn’t value what Dolan was asking. On the time, JPMorgan cited issues concerning the sale, together with decrease promoting income due to the New York Knicks’ ongoing points and decrease subscriber charges as a consequence of skinny streaming providers and outright cord-cutting. The belief on the time was that if he couldn’t discover a purchaser, Dolan would recombine the businesses. And now he has.
According to a press release, the deal would enable MSGE to “seize extra of the rising income alternative associated to the potential enlargement of legalized sports activities gaming in its market.” Moreover, “the mix of the businesses’ media, digital, and venue property creates a strong platform for potential sports activities gaming companions, which is predicted to generate vital incremental income within the years forward.”
“This transaction would create a number one leisure and media firm with a extra diversified income base that will be well-positioned to ship modern experiences throughout all of its property,” the assertion learn. “As well as, the brand new firm would have enhanced monetary flexibility to fund present development initiatives, together with its deliberate state-of-the-art venue in Las Vegas, MSG Sphere at The Venetian, in addition to future alternatives throughout each leisure and media.”
Traders apparently weren’t as excited concerning the association as the corporate hoped. According to the NY Post, shares of the businesses dropped, with MSGE falling nearly 10 % at $84.67, and MSGN down 7.6 % to $16.06. The aforementioned sphere venue additionally seems to be a supply of concern for buyers, with the transfer signaling that MSG Leisure is in determined want of money to proceed ahead. The corporate has additionally reportedly misplaced more than $250 million in the pandemic.
Not that MSG Networks are flying excessive both. That firm noticed a 6.5 percent subscriber drop in the middle of 2019, which led to its greatest inventory plunge ever. Additionally they noticed another eight percent decline in subscribers within the third quarter of 2020. The Knicks may not be the dumpster hearth they as soon as have been, however there’s solely a lot they will do concerning the existential threats dealing with RSNs and cable operators like MSG.
The old-new MSG firm is banking on having “enhanced monetary flexibility” and making the most of “significant tax efficiencies” as a part of their new association. A lot has been trending within the fallacious course for them in recent times, so it is going to be value watching to see if this deal does something to stem the tide.