Sphere Entertainment Co.

SPHR

US55826T1025

Entertainment Production

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MADISON SQUARE GARDEN ENTERTAINMENT : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

August 31, 2020 at 06:10 am EDT

This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. In this MD&A, there are
statements concerning the future operating and future financial performance of
Madison Square Garden Entertainment Corp. and its direct and indirect
subsidiaries (collectively, "we," "us," "our," "MSG Entertainment," or the
"Company"), including the impact of the COVID-19 pandemic on our future
operations, our anticipated operational cash burn on a go-forward basis,
cost-cutting measures the Company may or may not pursue to preserve cash and
financial flexibility, the potential for future impairment charges, the timing
and costs of new venue construction, our plans to pursue additional debt
financing and negotiate amendments to Tao Group Hospitality's credit facility,
increased investment in personnel, content and technology for the MSG Spheres,
and increased expenses of being a standalone public company. Words such as
"expects," "anticipates," "believes," "estimates," "may," "will," "should,"
"could," "potential," "continue," "intends," "plans," and similar words and
terms used in the discussion of future operating and future financial
performance identify forward-looking statements. Investors are cautioned that
such forward-looking statements are not guarantees of future performance,
results or events and involve risks and uncertainties and that actual results or
developments may differ materially from the forward-looking statements as a
result of various factors. Factors that may cause such differences to occur
include, but are not limited to:
•      our ability to effectively manage the impacts of the COVID-19 pandemic and

the government actions taken in response;

• the level of our expenses and our operational cash burn rate, including


       our corporate expenses as a stand-alone publicly traded company;


•      our ability to successfully design, construct, finance and operate new

venues in Las Vegas, London and other markets, and the investments, costs

and timing associated with those efforts, including the impact of the

temporary suspension of construction and any other construction delays

and/or cost overruns;

• the level of our revenues, which depends in part on the popularity of the


       Christmas Spectacular Starring the Radio City Rockettes ("Christmas
       Spectacular") and other entertainment and sports events which are
       presented in our venues;

• the level of our capital expenditures and other investments;

• general economic conditions, especially in the New York City, Las Vegas,

Chicago and London metropolitan areas where we have (or plan to have)

business activities;

• the demand for sponsorship arrangements and for advertising;

• competition, for example, from other venues and other sports and

entertainment options, including the construction of new competing venues;




•      changes in laws, guidelines, bulletins, directives, policies and
       agreements, and regulations under which we operate;

• any economic, social or political actions, such as boycotts, protests,

work stoppages or campaigns by labor organizations;

• seasonal fluctuations and other variations in our operating results and


       cash flow from period to period;


•      the successful development of new live productions or attractions,
       enhancements or changes to existing productions and the investments
       associated with such development, enhancements, or changes, as well as
       investment in personnel, content and technology for the MSG Spheres;

• business, reputational and litigation risk if there is a security incident


       resulting in loss, disclosure or misappropriation of stored personal
       information or other breaches of our information security;


•      activities or other developments (such as pandemics, including the
       COVID-19 pandemic) that discourage or may discourage congregation at
       prominent places of public assembly, including our venues;


•      the continued popularity and success of Tao Group Hospitality

entertainment dining and nightlife venues, as well as its existing brands,

and the ability to successfully open and operate new entertainment dining

and nightlife venues;

• the ability of Boston Calling Events, LLC ("BCE") to attract attendees and

performers to its future festivals;

• the acquisition or disposition of assets or businesses and/or the impact


       of, and our ability to successfully pursue, acquisitions or other
       strategic transactions;


•      our ability to successfully integrate acquisitions, new venues or new
       businesses into our operations;



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• the operating and financial performance of our strategic acquisitions and

investments, including those we do not control;

• the costs associated with, and the outcome of, litigation and other

proceedings to the extent uninsured, including litigation or other claims

against companies we invest in or acquire;

• the impact of governmental regulations or laws, including changes in how

those regulations and laws are interpreted and the continued benefit of

certain tax exemptions and the ability to maintain necessary permits or

licenses;

• the impact of any government plans to redesign New York City's

Pennsylvania Station;

• a default by our subsidiaries under their respective credit facilities;

• financial community and rating agency perceptions of our business,

operations, financial condition and the industry in which we operate;

• the ability of our investees and others to repay loans and advances we

have extended to them;

• our status as an emerging growth company;

• the tax-free treatment of the Entertainment Distribution (as defined below);




•      our ability to achieve the intended benefits of the Entertainment
       Distribution;

• the performance by MSG Sports of its obligations under various agreements

with the Company related to the Entertainment Distribution and ongoing

commercial arrangements;

• lack of operating history as an operating company and costs associated

with being an independent public company; and

• the additional factors described under "Part I - Item 1A. Risk Factors"

included in this Annual Report on Form 10-K.




We disclaim any obligation to update or revise the forward-looking statements
contained herein, except as otherwise required by applicable federal securities
laws.
All dollar amounts included in the following MD&A are presented in thousands,
except as otherwise noted.
Introduction
This MD&A is provided as a supplement to, and should be read in conjunction
with, the audited consolidated and combined financial statements and footnotes
thereto included in Item 8 of this Annual Report on Form 10-K to help provide an
understanding of our financial condition, changes in financial condition and
results of operations. Unless the context otherwise requires, all references to
"we," "us," "our," or the "Company" refer collectively to Madison Square Garden
Entertainment Corp., a holding company, and its direct and indirect subsidiaries
through which substantially all of our operations are actually conducted.
Through the period ended April 17, 2020, the Company operated and reported
financial information as one reportable segment. Following the Entertainment
Distribution on April 17, 2020, the Company has two segments (the Entertainment
business and the Tao Group Hospitality business). See Note 20 to the
consolidated and combined financial statements included in Item 8 of this Annual
Report on Form 10-K for further discussion of the Company's segment reporting.
Our MD&A is organized as follows:
Business Overview. This section provides a general description of our business,
as well as other matters that we believe are important in understanding our
results of operations and financial condition and in anticipating future trends.
Results of Operations. This section provides an analysis of our results of
operations for the years ended June 30, 2020, 2019 and 2018 on both a (i)
consolidated and combined basis and (ii) segment basis. Our reportable segments
are Entertainment and Tao Group Hospitality.
Liquidity and Capital Resources. This section provides a discussion of our
financial condition, as well as an analysis of our cash flows for the years
ended June 30, 2020, 2019 and 2018. The discussion of our financial condition
and liquidity includes summaries of (i) our primary sources of liquidity and
(ii) our contractual obligations and off balance sheet arrangements that existed
at June 30, 2020.
Seasonality of Our Business. This section discusses the seasonal performance of
our Entertainment and Tao Group Hospitality segments.

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Recently Issued Accounting Pronouncements and Critical Accounting Policies. This
section includes a discussion of accounting policies considered to be important
to our financial condition and results of operations and which require
significant judgment and estimates on the part of management in their
application. In addition, all of our significant accounting policies, including
our critical accounting policies, are discussed in the notes to our consolidated
and combined financial statements included in Item 8 of this Annual Report on
Form 10-K. See Note 2 to the consolidated and combined financial statements
included in Item 8 of this Annual Report on Form 10-K for further discussion of
the accounting for leases in connection with the adoption of ASC Topic 842,
Leases in fiscal year 2020.
Impact of the COVID-19 Pandemic on Our Business
Our operations and operating results have been, and continue to be, materially
impacted by the COVID-19 pandemic and actions taken in response by governmental
authorities and certain professional sports leagues. As of the date of this
Annual Report on Form 10-K, virtually all of our business operations have been
suspended and Tao Group Hospitality is operating at significantly reduced
capacity and demand. It is not clear when we will be permitted or able to resume
normal business operations.
As a result of government mandated assembly limitations and closures, events are
currently prohibited at The Garden, Hulu Theater at Madison Square Garden, Radio
City Music Hall, the Beacon Theatre and The Chicago Theatre. Virtually all
events at our venues have been postponed or cancelled through at least
September, and will likely be impacted through the remainder of the year. We are
not recognizing revenue from those events and, while events are being
rescheduled into calendar year 2021, it is unclear whether and to what extent
those events will take place. The 2020 Boston Calling Music Festival, which had
been slated for Memorial Day weekend, was also cancelled. On August 4, 2020, the
Company announced that it canceled the 2020 production of the Christmas
Spectacular.
The Company has long-term arena license agreements (the "Arena License
Agreements") with MSG Sports that require the New York Knicks (the "Knicks") of
the National Basketball Association (the "NBA") and the New York Rangers (the
"Rangers") of the National Hockey League (the "NHL") to continue to play their
home games at The Garden.
In March, the NBA and the NHL announced that their 2019-20 seasons were
suspended, and subsequently announced in June and May, respectively, plans for a
return to play in the designated cities of Orlando for the NBA and Edmonton and
Toronto for the NHL. With The Garden closed by government mandate, MSG Sports
made no payments under the Arena License Agreements for the period following the
Entertainment Distribution through June 30, 2020.
With the onset of the pandemic, Tao Group Hospitality's business was also
materially impacted by COVID-19-related restrictions imposed by state and local
officials, which included limiting restaurants and bars to take-out and delivery
service only and requiring the closure of nightlife establishments. As a result
of these restrictions, virtually all of Tao Group Hospitality's venues were
closed for approximately three months starting in mid-March. Some state and
local restrictions have gradually been lifted in certain cities where Tao Group
Hospitality operates, including Las Vegas, New York City, Chicago and Los
Angeles, which now permit limited in-person dining (typically required to be
outdoors) with capacity restrictions and social distancing requirements.
Although certain Tao Group Hospitality restaurants have re-opened for take-out
and delivery service, as well as limited outdoor dining where permitted, they
are operating at significantly reduced capacity, which, together with the
closures imposed earlier in the year, has materially impacted business. In
addition, these situations remain uncertain, making it possible that more
stringent restrictions could be imposed again if cities experience an increase
in COVID-19 cases. For example, in Los Angeles, indoor dining was permitted but
then later prohibited by the State of California, forcing Tao Group Hospitality
to close indoor dining at venues that had reopened. It is unclear how long, and
to what extent, these restrictions will be in effect.
The COVID-19 pandemic has materially impacted our revenues, most significantly
because we are currently not generating revenue from:
•      events at The Garden, Hulu Theater at Madison Square Garden, Radio City
       Music Hall, the Beacon Theatre and The Chicago Theatre;

• license fee payments under the Arena License Agreements;

• sponsorships, suite licenses and in-venue advertising;

• the 2020 production of the Christmas Spectacular; and

• the 2020 Boston Calling Music Festival.




While we have reduced certain operating expenses as a result of the COVID-19
pandemic (including (i) direct event expenses at our performance venues during
the period our business operations are suspended, (ii) advertising and
promotional spending for

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suspended and cancelled games and events and (iii) certain direct operating and
SG&A expenses, including at our Tao Group Hospitality business), these expense
reductions are not nearly enough to fully offset the revenue losses.
We are building a state-of-the-art venue in Las Vegas, called MSG Sphere. This
is a complex construction project with cutting-edge technology that relies on
subcontractors obtaining components from a variety of sources around the world.
In April, the Company announced that it was suspending construction of MSG
Sphere due to COVID-19 related factors that were outside of its control,
including supply chain issues.  As the ongoing effects of the pandemic have
continued to impact its business operations, the Company has revised its
processes and construction schedule, and has resumed work with a lengthened
timetable that enables the Company to better preserve cash in the near-term. The
Company remains committed to bringing MSG Sphere to Las Vegas and, based on its
new construction schedule, now expects to open the venue in calendar year 2023.
A subsidiary of the Company is party to arena license agreements (the "Arena
License Agreements") with subsidiaries of MSG Sports that require the Knicks of
the NBA and the Rangers of the NHL to play their home games at The Garden. Under
the Arena License Agreements, the Knicks and the Rangers pay an annual license
fee in connection with their respective use of The Garden. For each, the license
fee for the initial contract year ending June 30, 2020 was to be prorated based
on the number of games scheduled to be played at The Garden between the
Entertainment Distribution date and the end of that contract year. The license
fee for the first full contract year ending June 30, 2021 is approximately
$22,500 for the Knicks and approximately $16,700 for the Rangers, and then for
each subsequent year, the license fees will be 103% of the license fees for the
immediately preceding contract year. The teams are not required to pay the
license fee during a period in which The Garden is unavailable for home games
due to a force majeure event (including the government-mandated suspension of
events at The Garden as a result of the disruptions caused by the COVID-19
pandemic). As a result, we have not received any license fee payments under the
Arena License Agreements from the period following the Entertainment
Distribution through the year ended June 30, 2020, and will continue to not
receive any lease payments during the government mandated suspension of events
at The Garden as a result of the disruptions caused by the COVID-19 pandemic.
If, due to a force majeure event, capacity at The Garden is limited to 1,000 or
fewer attendees, the teams may schedule and play home games at The Garden with
amounts payable to the Company under the Arena License Agreements reduced by up
to 80%. After The Garden becomes available following a force majeure event,
future rent payments due under the Arena License Agreements will be payable by
the Knicks and the Rangers even if the NBA or NHL seasons do not resume
simultaneously or at all, and payments may be partially reduced in accordance
with terms of the Arena License Agreements if The Garden opens with materially
limited capacity greater than 1,000 attendees.
For more information about the risks to the Company as a result of the COVID-19
pandemic and its impact on our operating results, see "Part I - Item 1A. Risk
Factors - Our Operations and Operating Results Have Been, and Continue to be,
Materially Impacted by the COVID-19 Pandemic and Government Actions Taken in
Response."
Additionally, as a result of operating disruptions due to the COVID-19 pandemic,
the Company's projected cash flows were directly impacted. These disruptions
along with the deteriorating macroeconomic conditions and industry/market
considerations, were considered a "triggering event" for the Tao Group
Hospitality reporting unit, which required the Company to assess the carrying
value of Tao Group Hospitality's intangible assets, long-lived assets and
goodwill for impairment. Based on this evaluation, the Company recorded a total
impairment charge of $105,817. See "- Results of Operations - Comparison of the
Year Ended June 30, 2020 versus the Year Ended June 30, 2019 - Consolidated and
Combined Results of Operations - Business Segment Results - Impairment for
intangibles, long-lived assets, and goodwill" for further details on the
impairment charges recorded for the year ended June 30, 2020.
Due to the COVID-19-related shutdown of its venues, Tao Group Hospitality
continues to review its lease contracts and could decide to close additional
venues (which may later reopen elsewhere) if the landlords are unwilling to make
concessions acceptable to Tao Group Hospitality, which closures could result in
additional impairment charges related to the venue's long-lived assets.
There was no triggering event identified by the Company for the Entertainment
reporting unit during the year ended June 30, 2020. However, the duration and
impact of the COVID-19 pandemic may result in additional future impairment
charges that management will evaluate as facts and circumstances evolve over
time.
Business Overview
MSG Entertainment is a leader in live experiences comprised of iconic venues;
marquee entertainment content; popular dining and nightlife venues; and a
premier music festival that, together, entertain approximately 12 million guests
a year. We manage our business through the following two operating segments:
Entertainment: This segment includes our portfolio of the following venues:
Madison Square Garden ("The Garden"), Hulu Theater at Madison Square Garden,
Radio City Music Hall, the Beacon Theatre, and The Chicago Theatre. In addition,
the Company is building a state-of-the-art venue, MSG Sphere, in Las Vegas and
plans to build a second MSG Sphere in London,

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pending necessary approvals. Also included in this segment is the original
production, the Christmas Spectacular, as well as the Company's controlling
interest in BCE, the entertainment production company that owns and operates the
Boston Calling Music Festival. The Entertainment segment also includes our
booking business.
Tao Group Hospitality: This segment features the Company's controlling interest
in Tao Group Hospitality, a hospitality group with globally-recognized
entertainment dining and nightlife brands including: Tao, Marquee, Lavo, Avenue,
Beauty & Essex and Cathédrale. Tao Group Hospitality operates 28 entertainment
dining and nightlife venues in New York City, Las Vegas, Los Angeles, Chicago,
Singapore and Sydney, Australia.
The Company also owned and operated the Forum in Inglewood, CA until May 2020.
See Note 3 to the consolidated and combined financial statements included in
Item 8 of this Annual Report on Form 10-K for further discussion related to the
disposition of the Forum.
The Spin-Off from Madison Square Garden Sports Corp.
On April 17, 2020, the Company became an independent publicly traded company
through the Entertainment Distribution. In the Entertainment Distribution,
stockholders of MSG Sports received (a) one share of the Company's Class A
Common Stock for every share of MSG Sports Class A common stock, held of record
as of the close of business, New York City time, on April 13, 2020 (the "Record
Date') and (b) one share of the Company's Class B Common Stock for every share
of MSG Sports Class B common stock held of record as of the close of business,
New York City time, on the Record Date. In the Entertainment Distribution, an
aggregate of 19,461,991 shares of the Company's Class A Common Stock and
4,529,517 shares of the Company's Class B Common Stock were issued, with any
fractional shares converted to cash and paid to stockholders.
Description of Our Segments
Entertainment
Our Entertainment segment, which represented approximately 76% of our
consolidated and combined revenues for the year ended June 30, 2020, is one of
the country's leaders in live entertainment. Entertainment produces, presents
and hosts live entertainment events, including (i) concerts, (ii) other live
events such as family shows, performing arts events and special events and (iii)
sports events, in our diverse collection of venues. Those venues include The
Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon
Theatre, and The Chicago Theatre. The scope of our collection of venues enables
us to showcase acts that cover a wide spectrum of genres and popular appeal.
Although we primarily license our venues to third-party promoters for a fee, we
also promote or co-promote shows. If we serve as promoters or co-promoters of a
show, we have economic risk relating to the event.
Our Entertainment segment also creates, produces and/or presents live
productions that are performed in the Company's venues. This includes the
Christmas Spectacular, which is the top grossing live holiday family show in
North America, featuring the Rockettes. The Christmas Spectacular has been
performed at Radio City Music Hall for 87 years and more than one million
tickets were sold for performances during the 2019 holiday season.
In July 2016, the Company acquired a controlling interest in BCE, the
entertainment production company that owns and operates the Boston Calling Music
Festival. This company is part of the Entertainment segment. In November 2017,
the Company acquired a 100% controlling interest in Obscura, a creative studio,
recognized for its work in designing and developing next-generation immersive
experiences. Revenues generated by Obscura's third-party production business
(and related costs) are reflected in the Entertainment segment. In Fiscal Year
2019, the Company decided to wind down this third-party productions business to
focus on MSG Sphere development. Any costs incurred by Obscura that are
associated with MSG Sphere development that are not capitalized are reported in
the Entertainment segment.
Revenue Sources - Entertainment
The Company's Entertainment segment earns revenue from several primary sources:
ticket sales to our audiences for live events that we produce or
promote/co-promote, license fees for our venues paid by third-party promoters or
licensees in connection with events that we do not produce or
promote/co-promote, facility and ticketing fees, concessions, sponsorships and
signage, suite license fees at The Garden, merchandising and tours at certain of
our venues. The amount of revenue and expense recorded by the Company for a
given event depends to a significant extent on whether the Company is promoting
or co-promoting the event or is licensing a venue to a third-party or MSG
Sports. See "Venue License Fees" section below for further discussion of our
venue licensing arrangements with MSG Sports.
Ticket Sales and Suite Licenses
For our productions and for entertainment events in our venues that we promote,
we recognize revenues from the sale of tickets to our audiences. We sell tickets
to the public through our box office, via our websites and ticketing agencies
and through group sales. The amount of revenue we earn from ticket sales depends
on the number of shows and the mix of events that we promote,

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the capacity of the venue used, the extent to which we can sell to fully utilize
the capacity and our ticket prices. During Fiscal Year 2017, we implemented
significant changes to how we sell Christmas Spectacular tickets. By eliminating
block sales to third party brokers, we brought a significant number of tickets
back in-house, which created the opportunity for more customers to buy tickets
to the production directly from us.
The Garden has 21 Event Level suites, 58 Lexus Madison Level suites, 18
Signature Level suites, the Madison Club, Suite Sixteen and the Loft Club. Suite
licenses at The Garden are generally sold to corporate customers with the
majority being multi-year licenses. Suite Sixteen is leased by the Company to
Tao Group Hospitality in exchange for lease payments.
Under standard suite licenses, the licensees pay an annual license fee, which
varies depending on the location of the suite. The license fee includes, for
each seat in the suite, tickets for events at The Garden for which tickets are
sold to the general public, subject to certain exceptions. In addition, suite
holders separately pay for food and beverage service in their suites at The
Garden. Revenues from the sale of suite licenses are shared between the Company
and MSG Sports. Revenue for the Company's suite license arrangements is recorded
on a gross basis, as the Company is the principal in such transactions and
controls the related goods or services until transfer to the customer. MSG
Sports' share of the Company's suite license revenue is recognized in the
consolidated and combined statements of operations as a component of direct
operating expenses. The revenue sharing expense recognized by the Company for
MSG Sports' share of suite licenses revenue at The Garden is based on a 67.5%
allocation to MSG Sports.
Venue License Fees
For entertainment events held at our venues that we do not produce, promote or
co-promote, we typically earn revenue from venue license fees charged to the
third-party promoter or producer of the event. The amount of license fees we
charge varies by venue, as well as by the size of the production and the number
of days utilized, among other factors. Our fees typically include both the cost
of renting space in our venues and costs for providing event staff, such as
front-of-house and back-of-house staff, including stagehands, electricians,
laborers, box office staff, ushers and security as well as production services
such as staging, lighting and sound.
In connection with the Entertainment Distribution, the Company entered into
Arena License Agreements with MSG Sports that, among other things, require the
Knicks and the Rangers to play their home games at The Garden in exchange for
fixed monthly license fees over the term of the agreement.  The Company accounts
for these license fees as operating lease revenue given that the Company
provides MSG Sports with the right to direct the use of and obtain substantially
all of the economic benefit from The Garden during Knicks and Rangers home
games. Operating lease revenue is recognized on a straight-line basis over the
lease term. In the case of the Arena License Agreements, the terms relate to
non-consecutive periods of use when MSG Sports uses the Arena for their home
games, and operating lease revenue will therefore be recognized ratably as
events occur.
With respect to the Arena License Agreements, the terms allow for certain
reductions in the license fees during periods when The Garden is not made
available for use. As a result of the impact of the COVID-19 pandemic and
related venue closures during the fourth quarter of Fiscal Year 2020, The Garden
was not made available for use by MSG Sports as of June 30, 2020, and
accordingly, the Company did not record any operating lease revenue for these
arrangements from the Entertainment Distribution Date through the year ended
June 30, 2020.
Facility and Ticketing Fees
For all public and ticketed events held in our venues aside from MSG Sports home
games, we also earn additional revenues on substantially all tickets sold,
whether we promote/co-promote the event or license the venue to a third party.
These revenues are earned in the form of certain fees and assessments, including
the facility fee we charge, and vary by venue.
Concessions
We sell food and beverages during substantially all events held at our venues.
In addition to concession-style sales of food and beverages, which represent the
majority of our concession revenues, we also generate revenue from catering for
our suites at The Garden. In connection with the Entertainment Distribution, the
Company and MSG Sports entered into the Arena License Agreements related to the
use of The Garden by MSG Sports, under which the Company will share with MSG
Sports revenues and related expenses associated with sales of food and beverages
(including suite catering) during Knicks and Rangers games at The Garden.
Revenue generated from in-venue food and beverage sales at MSG Sports' events is
recognized by the Company on a gross basis, with a corresponding revenue sharing
expense for MSG Sports' share of such sales recorded within direct operating
expense. These agreements require the Company to pay 50% of the net profits
generated from in-venue food and beverage sales to MSG Sports.

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Merchandise


We earn revenues from the sale of merchandise relating to our proprietary
productions and other live entertainment events that take place at our venues.
The majority of our merchandise revenues are generated through on-site sales
during performances of our productions and other live events. We also generate
revenues from the sales of our Christmas Spectacular merchandise, such as
ornaments and apparel, through traditional retail channels. Revenues associated
with Christmas Spectacular merchandise are generally recorded on gross basis (as
principal). Typically, revenues from our merchandise sales at our
non-proprietary events relate to sales of merchandise provided by the artist,
the producer or promoter of the event and are generally subject to a revenue
sharing arrangement, and are generally recorded on net basis (as agent).
As a result of the Arena License Agreements entered in connection with the
Entertainment Distribution, the Company receives 30% of revenues, net of taxes
and credit card fees, from the sale of MSG Sports teams merchandise sold at The
Garden.
Venue Signage and Sponsorship
We earn revenues through the sale of signage space and sponsorship rights in
connection with our venues, productions and other live entertainment events.
Signage revenues generally involve the sale of advertising space at The Garden
during entertainment events and otherwise in our venues.
Sponsorship agreements may require us to use the name, logos and other
trademarks of sponsors in our advertising and in promotions for our venues,
productions and other live entertainment events. Sponsorship arrangements may be
exclusive within a particular sponsorship category or non-exclusive and
generally permit a sponsor to use the name, logos and other trademarks of our
productions, events and venues in connection with their own advertising and in
promotions in our venues or in the community.
For sponsorship agreements entered into by the Company or that have performance
obligations satisfied solely by the Company, revenue is generally recorded on a
gross basis as the Company is the principal in such arrangements and controls
the related goods or services until transfer to the customer. MSG Sports' share
of the Company's sponsorship and signage revenue is recognized in the combined
statements of operations as a component of direct operating expenses. The
revenue sharing expense has been specifically identified where possible, with
the remainder allocated proportionally based upon revenue.
In connection with the Entertainment Distribution, the Company and MSG Sports
entered into the Arena License Agreements related to the use of The Garden by
MSG Sports, under which the Company shares certain sponsorship and signage
revenues with MSG Sports. Under these agreements MSG Sports has the rights to
sponsorship and signage revenue that is specific to Knicks and Rangers events.
In addition, in connection with the Entertainment Distribution, the Company and
MSG Sports entered into sponsorship sales representation agreements, under which
the Company has the right and obligation to sell and service sponsorships for
the sports teams of MSG Sports, in exchange for a commission.
Advertising Sales ("Ad Sales") Commission
In addition to the advertising sponsorship sales representation agreements with
MSG Sports discussed above, the Company and MSG Networks are parties to an
advertising sales representation agreement. Pursuant to the agreement, the
Company has the exclusive right and obligation to sell advertising
availabilities of MSG Networks. The Company is entitled to and earns commission
revenue on such sales. The expense associated with advertising personnel is
recognized in selling, general and administrative expenses.
Expenses - Entertainment
Our Entertainment segment's principal expenses are payments made to performers
of our productions, staging costs and day-of-event costs associated with events,
and advertising costs. In addition, expenses in our Entertainment segment
include costs associated with the ownership, lease, maintenance and operation of
our venues, along with our corporate and other supporting functions.
Depreciation expense on property and equipment related to the Company's
performing venues and offices is also included in the Entertainment segment's
results.
Performer Payments
Our productions are performed by talented actors, dancers, singers, musicians
and entertainers. In order to attract and retain this talent, we are required to
pay our performers an amount that is commensurate with both their abilities and
the demand for their services from other entertainment companies. Our
productions typically feature ensemble casts (such as the Rockettes), where most
of our performers are paid based on a standard "scale," pursuant to collective
bargaining agreements we negotiate with the performers' unions. Certain
performers, however, have individually negotiated contracts.

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Staging Costs
Staging costs for our proprietary events as well as other events that we promote
include the costs of sets, lighting, display technologies, special effects,
sound and all of the other technical aspects involved in presenting a live
entertainment event. These costs vary substantially depending on the nature of
the particular show, but tend to be highest for large-scale theatrical
productions, such as the Christmas Spectacular. For concerts we promote, the
performer usually provides a fully-produced show. Along with performer salaries,
the staging costs associated with a given production are an important factor in
the determination of ticket prices.
Day-of-Event Costs
For days on which our Entertainment segment stages its productions, promotes an
event or provides one of our venues to a third-party promoter under a license
fee arrangement, the event is charged the variable costs associated with such
event, including box office staff, stagehands, ticket takers, ushers, security,
and other similar expenses. In situations where we provide our venues to a
third-party promoter under a license fee arrangement, day-of-event costs are
typically included in the license fees charged to the promoter.
Venue Usage
The Company's combined financial statements include expenses associated with the
ownership, maintenance and operation of The Garden, which the Company and MSG
Sports use in their respective operations. Historically, the Company did not
charge rent expense to MSG Sports for use of The Garden. However, for purposes
of the Company's combined financial statements, a portion of the historical
depreciation expense as well as other non-event related venue operations costs
have been allocated to MSG Sports, in order to properly burden all business
units comprising MSG Sports' historical operations related to use of The Garden.
This allocation was based on event count and revenue, which the Company's
management believes is a reasonable allocation methodology. This allocation is
reported as a reduction of direct operating expense in the combined statements
of operations.
In connection with the Entertainment Distribution, the Company and MSG Sports
entered into Arena License Agreements related to the use of The Garden by MSG
Sports as discussed under Venue License Fees.
Revenue Sharing Expenses
As discussed above, MSG Sports' share of the Company's suites licenses, venue
signage and sponsorship and concessions revenue is reflected within direct
operating expense as revenue sharing expenses. For periods prior to the
Entertainment Distribution, such amounts were either specifically identified
where possible or allocated proportionally within the combined financial
statements.
Marketing and Advertising Costs
We incur significant costs promoting our productions and other events through
various advertising campaigns, including advertising on outdoor platforms and in
newspapers, on television and radio, and on social and digital platforms. In
light of the intense competition for entertainment events, such expenditures are
a necessity to drive interest in our productions and encourage members of the
public to purchase tickets to our shows.
Tao Group Hospitality
Our Tao Group Hospitality segment, which represented approximately 24% of our
consolidated and combined revenues for the year ended June 30, 2020, consists of
our controlling interest in Tao Group Hospitality, which strengthens the
Company's portfolio of live offerings with a complementary hospitality group
with widely-recognized brands that include: Tao, Marquee, Lavo, Avenue, Beauty &
Essex and Cathédrale. Since 2000, Tao Group Hospitality has been creating some
of the most innovative premium experiences in the entertainment dining and
hospitality industry.
Revenue Sources - Tao Group Hospitality
Revenues earned from dining, nightlife and hospitality offerings through Tao
Group Hospitality are recognized when food, beverages and/or services are
provided to the customer as that is the point in which the related performance
obligation is satisfied. In addition, management fee revenues which are earned
in accordance with specific venue management agreements are recorded over the
period in which the management services are performed as that reflects the
measure of progress toward satisfaction of the Company's venue management
performance obligations.

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Expenses - Tao Group Hospitality
Entertainment Dining and Nightlife Offerings Costs
The Tao Group Hospitality restaurants and nightlife and hospitality venues incur
costs for providing food and beverage as well as banquet hosting services to
customers. Dining and nightlife offering costs primarily include the following:
•   labor costs, consisting of restaurant management salaries, hourly staff

payroll and other payroll-related items, including taxes and fringe benefits;




• food and beverage costs;

• operating costs, consisting of maintenance, utilities, bank and credit card

charges, and any other restaurant-level expenses; and

• occupancy costs, consisting of both fixed and variable portions of rent,

common area maintenance charges, insurance premiums and taxes.




Other Expenses
The Company's selling, general and administrative expenses primarily consist of
administrative costs, including compensation, professional fees, as well as
sales and marketing costs, including non-event related advertising expenses.
Operating expenses in the Company's Entertainment segment also include corporate
overhead costs and venue operating expenses. Venue operating expenses include
the non-event related costs of operating the Company's performance venues, and
include such costs as rent for the Company's leased venues, real estate taxes,
insurance, utilities, repairs and maintenance, and labor related to the overall
management of the venues. Depreciation expense on property and equipment related
to The Garden, Hulu Theater at Madison Square Garden and the Forum (prior to its
sale in May 2020) is reported in the Entertainment segment. In addition, the
Company incurs non-capitalizable content development and technology costs
associated with the Company's MSG Sphere initiative and these costs are reported
in the Entertainment segment.
Factors Affecting Operating Results
In addition to the discussion under the section "Impact of the COVID-19 Pandemic
on Our Business" above, the operating results of our Entertainment segment are
largely dependent on our ability to attract concerts and other events to our
venues, revenues under various agreements entered with MSG Sports in connection
with the Entertainment Distribution, as well as the continuing popularity of the
Christmas Spectacular at Radio City Music Hall.
Our Company's future performance is dependent in part on general economic
conditions and the effect of these conditions on our customers. Weak economic
conditions may lead to lower demand for our entertainment and nightlife
offerings, suite licenses and tickets to our live productions, concerts, family
shows and other events, which would also negatively affect concession and
merchandise sales, as well as lower levels of sponsorship and venue signage.
These conditions may also affect the number of concerts, family shows and other
events that take place in the future. An economic downturn could adversely
affect our business and results of operations.
The Company continues to explore additional opportunities to expand our presence
in the entertainment industry. Any new investment may not initially contribute
to operating income, but is intended to become operationally profitable over
time. Our results will also be affected by investments in, and the success of,
new productions.
Factors Affecting Comparability
Adoption of ASC Topic 606, Revenue From Contracts With Customers
The Company's combined and segment operating results for the year ended June 30,
2019 (and thereafter) were impacted by the adoption of Accounting Standards
Codification ("ASC") Topic 606. As a result, the Company's revenues were lower
by $23,860 and direct operating expenses were lower by $26,239 for the year
ended June 30, 2019, primarily due to the application of principal versus agent
revenue recognition on event-related revenues from food, beverage and
merchandise activities and accounts for its performance obligations of
multi-year sponsorship agreements and suite license arrangements as a series for
the Entertainment segment.
Prior year period results have not been adjusted to reflect the adoption of ASC
Topic 606 and, therefore, the Company's combined and segment operating results
for the year ended June 30, 2019 are not directly comparable to results for the
year ended June 30, 2018.

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Purchase Accounting Adjustments
In connection with the acquisitions completed in the fiscal years 2018 and 2017,
the Company recorded certain fair value adjustments related to acquired assets
and liabilities in accordance with ASC Topic 805, Business Combinations. For the
Company's acquisitions, the Company recognized fair value adjustments primarily
for (i) recognition of intangible assets such as trade names, venue management
contracts, favorable leases, and festival rights, (ii) step-up of property and
equipment, (iii) step-up of inventory, (iv) unfavorable lease obligation, and
(v) goodwill. The aforementioned fair value adjustments, except for goodwill,
will be expensed as incremental non-cash expenses in the Company's consolidated
and combined statements of operations based on their estimated useful lives
("Purchase Accounting Adjustments"). With the exception of impairment of
goodwill, the Company does not allocate any Purchase Accounting Adjustments to
the reporting segments and reports any Purchase Accounting Adjustments as
reconciliation items in reporting segment operating results. See "Item 8
Financial Statements and Supplementary Data - Consolidated and Combined
Financial Statements - Notes to Consolidated and Combined Financial Statements -
Note 20. Segment Information" for more information on the presentation of
Purchase Accounting Adjustments.
Investments in Nonconsolidated Affiliates
In July 2018, the Company acquired a 30% interest in SACO, a global provider of
high-performance LED video lighting and media solutions for a total
consideration of approximately $47,244. The Company is utilizing SACO as a
preferred display technology provider for MSG Spheres and is benefiting from
agreed upon commercial terms.
In addition, the Company also has other investments in various entertainment and
hospitality companies and related technologies, accounted for either under the
equity method or at fair value. See Note 7 to the consolidated and combined
financial statements included in Item 8 of this Annual Report on Form 10-K for
more information on our investments in nonconsolidated affiliates.

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Results of Operations
Comparison of the Year Ended June 30, 2020 versus the Year Ended June 30, 2019
Consolidated and Combined Results of Operations
The table below sets forth, for the periods presented, certain historical
financial information.
                                       Years Ended June 30,                    Change
                                       2020            2019           Amount         Percentage
Revenues                           $   762,936     $ 1,048,909     $  (285,973 )          (27 )%

Direct operating expenses              508,122         670,641        (162,519 )          (24 )%
Selling, general and
administrative expenses ("SG&A")       344,637         314,522          30,115             10  %

Depreciation and amortization 104,899 109,343 (4,444 )

           (4 )%
Impairment for intangibles,
long-lived assets, and goodwill        105,817               -         105,817             NM
Gain on disposal of assets held
for sale and associated
settlements                           (240,783 )             -        (240,783 )           NM
Operating loss                         (59,756 )       (45,597 )       (14,159 )          (31 )%
Other income (expense):
Earnings (loss) in equity method
investments                             (4,433 )         7,062         (11,495 )           NM
Interest income, net                    15,693          14,901             792              5  %
Miscellaneous income (expenses),
net                                     38,855          (6,061 )        44,916             NM
Loss from operations before
income taxes                            (9,641 )       (29,695 )        20,054             68  %
Income tax expense                      (5,046 )          (443 )        (4,603 )           NM
Net loss                               (14,687 )       (30,138 )        15,451             51  %
Less: Net loss attributable to
redeemable noncontrolling
interests                              (30,387 )        (7,299 )       (23,088 )           NM
Less: Net loss attributable to
nonredeemable noncontrolling
interests                               (1,534 )        (4,945 )         3,411             69  %
Net income (loss) attributable
to Madison Square Garden
Entertainment Corp.'s
stockholders                       $    17,234     $   (17,894 )   $    35,128             NM

NM - Percentage is not meaningful


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The following is a summary of changes in segments' operating results for the year ended June 30, 2020 as compared to the prior year.


                                                                                    Impairment for     Gain on disposal
                                                                                     intangibles,     of assets held for
                                       Direct                      Depreciation       long-lived           sale and
Changes                               operating                        and           assets, and          associated          Operating
attributable to       Revenues      expenses (b)      SG&A (c)     amortization        goodwill          settlements        income (loss)
Entertainment
segment(a)          $ (211,850 )   $    (124,662 )   $ 42,722     $     (2,716 )   $            -     $       (240,783 )   $      113,589
Tao Group
Hospitality
segment (a)            (73,450 )         (37,331 )    (12,480 )          1,719             94,946                    -           (120,304 )
Purchase
accounting
adjustments                  -               121         (518 )         (3,447 )           10,871                    -             (7,027 )
Inter-segment
eliminations              (673 )            (647 )        391                -                  -                    -               (417 )
                    $ (285,973 )   $    (162,519 )   $ 30,115     $     (4,444 )   $      105,817     $       (240,783 )   $      (14,159 )



(a)  See "Business Segment Results" for a more detailed discussion of the
     operating results of our segments.


(b)  Direct operating expenses primarily include:

• event costs related to the presentation, production and marketing of

our events;

• revenue sharing expenses associated with the venue-related signage,


          sponsorship and suite license fee revenues that are attributable to MSG
          Sports;

• venue lease, maintenance and other operating expenses, net of recovery

charges for venue usage from MSG Sports for hosting the home games of


          the Knicks and Rangers at The Garden;


•         the cost of concessions, merchandise and food and beverage sold at our
          venues; and

• restaurant operating expenses, inclusive of labor costs.

administrative costs, including compensation, professional fees, sales and

marketing costs, including non-event related advertising expenses, and

business development costs, as well as costs associated with the development

of MSG Sphere, including technology and content development costs.




Depreciation and amortization
Depreciation and amortization for the year ended June 30, 2020 decreased $4,444,
or 4%, to $104,899 as compared to Fiscal Year 2019 primarily due to certain
assets and purchase accounting adjustments being fully depreciated and
amortized.
Impairment for intangibles, long-lived assets, and goodwill
The disruptions caused by the COVID-19 pandemic directly impacted the Company's
projected cash flows resulting in operating disruptions. These disruptions along
with the deteriorating macroeconomic conditions and industry/market
considerations, were considered a "triggering event" for the Company's Tao Group
Hospitality reporting unit, which required the Company to assess the carrying
value of its goodwill for that reporting unit for impairment. In connection with
the goodwill impairment test, the Company also evaluated the intangibles and
long-lived assets for the Tao Group Hospitality reporting unit for impairment.
Based on this evaluation, the Company recorded a non-cash impairment charge of
$105,817 for the year ended June 30, 2020, which consisted of the following:
                                                     Tao Group             Purchase
                                                    Hospitality           accounting
                                                      Segment            adjustments          Total
Intangibles                                      $              -     $          3,541     $    3,541
Long-lived assets                                           6,363                7,330         13,693
Goodwill                                                   88,583                    -         88,583
                                                 $         94,946     $         10,871     $  105,817



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Earnings (loss) in equity method investments
Loss in equity method investments for the year ended June 30, 2020 was $4,433 as
compared to earnings of $7,062 in Fiscal Year 2019. The year-over-year decrease
is primarily due to the absence of (i) equity earnings from Azoff MSG
Entertainment LLC ("AMSGE") and (ii) losses from Tribeca Enterprises LLC
("Tribeca Enterprises") as the Company sold these investments in December 2018
and August 2019, respectively.
Miscellaneous income (expenses), net
Miscellaneous income, net for the year ended June 30, 2020 increased $44,916 to
$38,855 as compared to net miscellaneous expense of $6,061 in Fiscal Year 2019.
The increase was primarily due to realized and unrealized gains recognized on
the Company's investment in DraftKings Inc. ("DraftKings"). The Company
previously recorded its investment in DraftKings under the measurement
alternative for equity securities without readily determinable fair values in
accordance with ASC Topic 321, Investments - Equity Securities. See Note 7 to
the consolidated and combined financial statements included in Item 8 of this
Annual Report on Form 10-K for further discussion of the measurement
alternative. In April 2020, DraftKings became a publicly traded company and is
listed on the NASDAQ Stock Market ("NASDAQ") under the symbol "DKNG."
Accordingly, the Company began to record the investment in DraftKings at fair
value based on the quoted price on NASDAQ. In Fiscal Year 2020, the Company
recorded a total of $40,726 of realized and unrealized gains associated with the
investment in DraftKings.
Income taxes
Income tax expense for the year ended June 30, 2020 of $5,046 differs from
income tax benefit derived from applying the statutory federal rate of 21% to
the pretax loss primarily due to (i) state income tax expense of $4,016, (ii)
tax expense of $6,704 relating to noncontrolling interest, (iii) tax expense of
$6,961 relating to nondeductible transaction costs, and (iv) tax expense of
$4,407 related to nondeductible officers' compensation, partially offset by a
decrease in valuation allowance of $14,220. See Note 18 to the consolidated and
combined financial statements included in Item 8 of this Annual Report on Form
10-K for further details on the components of income tax and a reconciliation of
the statutory federal rate to the effective tax rate.
Income tax expense for the year ended June 30, 2019 of $443 differs from income
tax benefit derived from applying the statutory federal rate of 21% to the
pretax loss primarily due to tax expense of $7,655 relating to nondeductible
officers' compensation and tax expense of $2,571 relating to noncontrolling
interest, partially offset by tax benefit of $454 resulting from a change in the
state rates used to measure deferred taxes.
Adjusted operating income
The Company evaluates segment performance based on several factors, of which the
key financial measure is their operating income (loss) before (i) adjustments to
remove the impact of non-cash straight-line leasing revenue associated with the
Arena License Agreements with MSG Sports, (ii) depreciation, amortization and
impairments of property and equipment, goodwill and other intangible assets,
(iii) amortization for capitalized cloud computing arrangement costs (see Note
2. Summary of Significant Accounting Policies to the consolidated and combined
financial statements included in Item 8 of this Annual Report on Form 10-K for
further details), (iv) share-based compensation expense or benefit,
(v) restructuring charges or credits, and (vi) gains or losses on sales or
dispositions of businesses and associated settlements, which is referred to as
adjusted operating income (loss), a non-GAAP measure. In addition to excluding
the impact of items discussed above, the impact of purchase accounting
adjustments related to business acquisitions is also excluded in evaluating the
Company's consolidated and combined adjusted operating income (loss). See Note
20. Segment Information to the consolidated and combined financial statements
included in Item 8 of this Annual Report on Form 10-K for further discussion on
the definition of adjusted operating income (loss). The Company has presented
the components that reconcile operating income (loss) to adjusted operating
income (loss).
Management believes that the exclusion of share-based compensation expense or
benefit allows investors to better track the performance of the various
operating units of the Company's business without regard to the settlement of an
obligation that is not expected to be made in cash. In addition, the Company
believes that given the length of the arena license agreements and resulting
magnitude of the difference in leasing revenue recognized and cash revenue
received, the exclusion of non-cash leasing revenue provides investors with a
clearer picture of the Company's operating performance.
The Company believes adjusted operating income (loss) is an appropriate measure
for evaluating the operating performance of its business segments and the
Company on a consolidated basis. Adjusted operating income (loss) and similar
measures with similar titles are common performance measures used by investors
and analysts to analyze the Company's performance. The Company uses revenues and
adjusted operating income (loss) measures as the most important indicators of
its business performance, and evaluates management's effectiveness with specific
reference to these indicators.
Adjusted operating income (loss) should be viewed as a supplement to and not a
substitute for operating income (loss), net income (loss), cash flows from
operating activities, and other measures of performance and/or liquidity
presented in accordance with GAAP. Since adjusted operating income (loss) is not
a measure of performance calculated in accordance with GAAP, this

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measure may not be comparable to similar measures with similar titles used by
other companies. The Company has presented the components that reconcile
operating income (loss), the most directly comparable GAAP financial measure, to
adjusted operating income (loss).
The following is a reconciliation of operating loss to adjusted operating income
(loss):
                                          Years Ended June 30,                  Change
                                          2020            2019          Amount        Percentage
Operating loss                        $   (59,756 )   $  (45,597 )   $  (14,159 )         (31 )%
Share-based compensation                   42,190         35,401

Depreciation and amortization (a) 104,899 109,343 Impairment of intangibles, long-lived assets and goodwill

            105,817              -
Gain on disposal of assets held for
sale, including legal settlement         (240,783 )            -
Other purchase accounting
adjustments (b)                             4,367          4,764

Adjusted operating income (loss) $ (43,266 ) $ 103,911 $ (147,177 ) NM

________________

NM - Percentage is not meaningful (a) Depreciation and amortization included purchase accounting adjustments of

$12,454 and $15,901 for the years ended June 30, 2020 and 2019,

respectively.

(b) Other purchase accounting adjustments for the years ended June 30, 2020 and

2019 primarily included rent expenses associated with the amortization of

favorable leases in connection with the Tao Group Hospitality acquisition.




Adjusted operating income for the year ended June 30, 2020 decreased $147,177 to
adjusted operating loss of $43,266 as compared to Fiscal Year 2019. The net
decrease was attributable to the following:
Decrease in adjusted operating income of the Entertainment segment         $ (123,947 )
Decrease in adjusted operating income of the Tao Group Hospitality segment    (22,813 )
Inter-segment eliminations                                                       (417 )
                                                                           $ (147,177 )

Net loss attributable to redeemable and nonredeemable noncontrolling interests



For the year ended June 30, 2020, the Company recorded a net loss attributable
to redeemable noncontrolling interests of $30,387 and a net loss attributable to
nonredeemable noncontrolling interests of $1,534 as compared to $7,299 of net
loss attributable to redeemable noncontrolling interests and $4,945 of net loss
attributable to nonredeemable noncontrolling interests for Fiscal Year 2019.
These amounts represent the share of net loss of Tao Group Hospitality and BCE
that is not attributable to the Company. In addition, the net loss attributable
to redeemable and nonredeemable noncontrolling interests includes a proportional
share of expenses related to purchase accounting adjustments.

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Business Segment Results
Entertainment
The table below sets forth, for the periods presented, certain historical
financial information and a reconciliation of operating income (loss) to
adjusted operating income for the Company's Entertainment segment.
                                          Years Ended June 30,                  Change
                                          2020            2019          Amount        Percentage
Revenues                              $   585,208     $  797,058     $ (211,850 )         (27 )%
Direct operating expenses                 388,643        513,305       (124,662 )         (24 )%
Selling, general and administrative
expenses                                  282,043        239,321         42,722            18  %
Depreciation and amortization              84,289         87,005         (2,716 )          (3 )%
Gain on disposal of assets held for
sale and associated settlements          (240,783 )            -       (240,783 )          NM
Operating income (loss)               $    71,016     $  (42,573 )   $  113,589            NM
Reconciliation to adjusted
operating income:
Share-based compensation                   41,227         35,264
Depreciation and amortization              84,289         87,005
Gain on disposal of assets held for
sale, including legal settlement         (240,783 )            -

Adjusted operating income (loss) $ (44,251 ) $ 79,696 $ (123,947 ) NM

-----


NM - Percentage is not meaningful
Factors Affecting Results of Operations
The activities from April 18, 2020 to June 30, 2020 included on the statement of
operations for the year ended June 30, 2020 are prepared on a consolidated
basis, as the Company became a standalone public company on April 17, 2020. The
Company's combined statements of operations for the year ended June 30, 2019, as
well as the financial information for the period of July 1, 2019 to April 17,
2020 that is included in the results of operations for the year ended June 30,
2020 were prepared on a standalone basis derived from the consolidated financial
statements and accounting records of the Company's former parent, MSG Sports,
and are presented as carve-out financial statements as the Company was not a
standalone public company prior to the Entertainment Distribution.
The combined statements of operations for the year ended June 30, 2019, as well
as the financial information for the period of July 1, 2019 to April 17, 2020
that is included in the results of operations for the year ended June 30, 2020,
include allocations for certain support functions that were provided on a
centralized basis and not historically recorded at the business unit level by
MSG Sports, such as expenses related to executive management, finance, legal,
human resources, government affairs, information technology, and venue
operations among others. As part of the Entertainment Distribution, certain
corporate and operational support functions were transferred to the Company and
therefore, charges were reflected in order to properly burden all business units
comprising MSG Sports' historical operations. These expenses were allocated on
the basis of direct usage when identifiable, with the remainder allocated on a
pro-rata basis of combined revenues, headcount or other measures of the Company
and MSG Sports.
Management believes the assumptions underlying the combined financial
statements, including the assumptions regarding allocating general corporate
expenses, are reasonable. Nevertheless, the combined financial statements may
not include all of the actual expenses that would have been incurred by the
Company and may not reflect its combined results of operations, financial
position and cash flows had it been a separate, standalone company during the
periods presented. Actual costs that would have been incurred if the Company had
been a separate, standalone company would depend on multiple factors, including
organizational structure and strategic decisions made in various areas,
including information technology and infrastructure.

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Revenues


Revenues for the year ended June 30, 2020 decreased $211,850, or 27%, to
$585,208 as compared to Fiscal Year 2019. The net decrease was attributable to
the following:
Decrease in event-related revenues from concerts, as discussed below   $  (77,282 )
Decrease in venue-related signage and sponsorship revenues, as
discussed below

(32,524 ) Decrease in event-related revenues from other live sporting events due to the closure of venues after March 12, 2020 as a result of the COVID-19 pandemic

(26,273 ) Decrease in suite license fee revenues due to the closure of venues after March 12, 2020 as a result of the COVID-19 pandemic

(25,535 ) Decrease in event-related revenues from other live entertainment events, as discussed below

(23,631 ) Decrease in BCE event-related revenues due to the cancellation of Boston Calling Music Festival in May 2020 as a result of the COVID-19 pandemic

(10,578 ) Decrease in revenues from Obscura due to the decision to wind down its third-party production business to focus on the development of MSG Sphere

(9,790 ) Decrease in revenues associated with the expiration of the Wang Theatre booking agreement in February 2019

                                 (3,888 )
Other net decreases, as discussed below                                    (2,349 )
                                                                       $ (211,850 )


The decrease in event-related revenues from concerts was primarily due to (i)
the impact of the closure of venues after March 12, 2020 as a result of the
COVID-19 pandemic, (ii) lower per-event revenues prior to the closure of venues
after March 12, 2020, partially offset by the additional events held at the
Company's venues prior to the closure of venues on March 12, 2020 as compared to
Fiscal Year 2019.
The decrease in venue-related signage and sponsorship revenues was primarily due
to (i) the impact of the closure of venues after March 12, 2020 as a result of
the COVID-19 pandemic and, to a lesser extent, (ii) lower sales of existing
sponsorship and signage inventory in Fiscal Year 2020.
The decrease in event-related revenues from other live entertainment events was
primarily due to (i) the impact of the closure of venues after March 12, 2020 as
a result of the COVID-19 pandemic, and (ii) a large-scale special event held at
Radio City Music Hall during Fiscal Year 2019. The Company did not have a
comparable special event in Fiscal Year 2020. The decrease was partially offset
by higher per-event revenue from a theatrical production at Hulu Theater at
Madison Square Garden and The Chicago Theatre in the second quarter of Fiscal
Year 2020.
Other net decreases reflect the impact of lower revenues from venue tours due to
the closure of venues after March 12, 2020 as a result of the COVID-19 pandemic
offset by an increase in revenue from the 2019 presentation of the Christmas
Spectacular.

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Direct operating expenses
Direct operating expenses for the year ended June 30, 2020 decreased $124,662,
or 24%, to $388,643 as compared to the prior year. The net decrease was
attributable to the following:
Decrease in event-related direct operating expenses associated with
concerts primarily due to the impact of the closure of venues after
March 12, 2020 due to the COVID-19 pandemic                            $

(37,159 ) Decrease in direct operating expenses associated with venue-related signage and sponsorship primarily due to lower revenue sharing expenses with MSG Sports associated with venue related signage and sponsorship revenue decreases

(19,094 ) Decrease in direct operating expenses associated with suite licenses primarily due to lower revenue sharing expenses with MSG Sports associated with suite license fee revenue decreases

(18,695 ) Decrease in event-related expenses associated with live sporting events primarily due to the impact of the closure of venues after March 12, 2020 due to the COVID-19 pandemic

(16,774 ) Decrease in BCE event-related expenses due to the cancellation of Boston Calling Music Festival in May 2020 as a result of the COVID-19 pandemic

(14,536 ) Decrease in event-related direct operating expenses associated with other live entertainment events, as discussed below

(14,143 ) Decrease in direct operating expenses associated with Obscura due to the decision to wind down its third-party production business to focus on the development of MSG Sphere

(9,260 ) Decrease in direct operating expenses associated with the expiration of the Wang Theatre booking agreement in February 2019

(2,525 ) Increase in venue operating costs, net of recovery charges from Madison Square Garden Sports Corp., as discussed below


12,634
Other net decreases                                                        (5,110 )
                                                                       $ (124,662 )



The decrease in event-related direct operating expenses from other live
entertainment events was primarily due to (i) the impact of the closure of
venues after March 12, 2020 as a result of the COVID-19 pandemic, and (ii) a
large-scale special event held at Radio City Music Hall during Fiscal Year 2019.
The Company did not have a comparable special event in Fiscal Year 2020. The
decrease was partially offset by higher per-event direct operating expenses from
a theatrical production at Hulu Theater at Madison Square Garden and The Chicago
Theatre in the second quarter of Fiscal Year 2020.
The increase in venue operating costs reflects higher labor-related venue
operating costs as the Company continued to pay event-level employees through
May 2020 during the government-mandated closure of its venues, net of certain
payroll tax credits.
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended June 30, 2020
increased $42,722, or 18%, to $282,043 as compared to Fiscal Year 2019 primarily
due to (i) an increase in employee compensation and related benefits of $37,023,
mostly related to content and technology development for MSG Sphere initiatives,
and (ii) a net increase in professional fees reflecting higher content and
technology development for MSG Sphere initiatives of $14,118, partially offset
by, (iii) lower selling, general and administrative expenses associated with
Obscura of $6,542 due to the Company's decision to wind down Obscura's
third-party production business to focus on the development of MSG Sphere, and
(iv) lower litigation related costs of $3,700.
Depreciation and amortization
Depreciation and amortization decreased $2,716, or 3%, to $84,289 as compared to
Fiscal Year 2019 primarily due to certain assets being fully depreciated and
amortized in The Garden and lower depreciation and amortization associated with
the Forum as the recording of depreciation stopped on March 24, 2020 when the
venue was classified s assets held for sale, partially offset by higher
depreciation expense for equipment used in the development of the MSG Sphere
initiative.
Gain on disposal of assets held for sale and associated settlement
In May 2020, pursuant to a Membership Interest Purchase Agreement (the "MIPA")
that a subsidiary of the Company entered into with CAPSS LLC on March 24, 2020,
the Company sold the Forum to CAPSS LLC, and the parties settled related
litigation for cash consideration in the amount of $400,000. In connection with
this transaction, the Company recorded a gain of $240,783 in the fourth quarter
of Fiscal Year 2020, which included $140,495 attributable to the Forum
associated settlement.

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Operating income (loss)
Operating income for the year ended June 30, 2020 increased $113,589 to $71,016
as compared to Fiscal Year 2019 primarily due to (i) the gain on disposal of the
Forum in Inglewood and associated settlement recorded in Fiscal Year 2020, and
(ii) lower direct operating expenses and selling, general and administrative
expenses in the current year, partially offset by the decrease in revenues as
described above.
Adjusted operating income (loss)
Adjusted operating income for the year ended June 30, 2020 decreased $123,947 to
a loss of $44,251 as compared to Fiscal Year 2019. The decrease in adjusted
operating income was greater than the increase in operating income primarily due
to the gain on disposal of the Forum in Inglewood and associated settlement
being excluded in the calculation of adjusted operating income (loss).
Tao Group Hospitality
The table below sets forth, for the periods presented, certain historical
financial information and a reconciliation of operating income to adjusted
operating income for the Company's Tao Group Hospitality segment.
                                          Years Ended June 30,                  Change
                                          2020            2019          Amount        Percentage
Revenues                              $   180,201     $  253,651     $  (73,450 )         (29 )%
Direct operating expenses                 116,638        153,969        (37,331 )         (24 )%
Selling, general and administrative
expenses                                   63,049         75,529        (12,480 )         (17 )%
Depreciation and amortization               8,156          6,437          1,719            27  %
Impairment for intangibles,
long-lived assets, and goodwill            94,946              -         94,946            NM
Operating income (loss)               $  (102,588 )   $   17,716     $ (120,304 )          NM
Reconciliation to adjusted
operating income:
Share-based compensation                      963            137
Depreciation and amortization               8,156          6,437
Impairment for intangibles,
long-lived assets, and goodwill            94,946              -
Adjusted operating income             $     1,477     $   24,290     $

(22,813 ) (94 )%




Factors Affecting Results of Operations
In the fourth quarter of Fiscal Year 2020, the Company eliminated the
three-month lag to reflect Tao Group Hospitality's results in the Company's
consolidated and combined financial statements. The elimination of Tao Group
Hospitality's reporting lag represented a change in accounting principle which
the Company believes to be preferable as it provides our investors the most
current and timely information regarding Tao Group Hospitality's results of
operations. A change in accounting principle typically requires retrospective
application, if material. Based on our review, the impact related to the
elimination of the reporting lag for the years ended June 30, 2020, 2019 and
2018 was deemed immaterial; therefore, the Company accounted for the aggregate
change in accounting principle in its consolidated and combined results for the
year ended June 30, 2020. Except certain interim quarter information, the
elimination of the three-month lag in Fiscal Year 2019 was also not considered
material and the results were not restated. See Note 2. Summary of Significant
Accounting Policies to the consolidated and combined financial statements
included in Item 8 of this Annual Report on Form 10-K for more information on
the impact surrounding the elimination of the three-month lag in Fiscal Year
2020 and interim quarter information in Fiscal Year 2019. Accordingly, the
results of Tao Group Hospitality from July 1, 2019 to June 28, 2020 were
included in the Company's consolidated and combined statement of operations for
the year ended June 30, 2020 as compared to April 2, 2018 to March 31, 2019 for
year ended June 30, 2019.
Due to government actions taken in response the COVID-19 pandemic, Tao Group
Hospitality began temporarily closing its venues on March 11, 2020. On May 6,
2020, Tao Group Hospitality began resuming some of its operations in a
significantly limited capacity. As a result, Fiscal Year 2020 operating results
were materially impacted by the COVID-19 pandemic. In addition, in order to be
in compliance with the regulatory requirement for venue reopening, Tao Group
Hospitality implemented certain reconfigurations of the layouts of its venues to
allow for more distance between groups of customers in a reduced capacity.

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Revenues


Revenues for the year ended June 30, 2020 decreased $73,450, or 29%, to $180,201
as compared to the prior year. The net decrease was attributable to the
following:
Decrease in revenues due to the temporary closure of venues as a
result of the COVID-19 pandemic                                        $

(72,436 ) Decrease in revenues associated with the permanent closing of (i) Vandal, (ii) Stanton Social, and (iii) Avenue in New York

(12,013 ) Decrease in revenues associated with comparable sales primarily in New York venues prior to the temporary closure of venues due to the COVID-19 pandemic

(7,282 ) Increase in revenues associated with new venue sales primarily due to the opening of Tao Chicago in September 2018 prior to the temporary closure of the venue due to the COVID-19 pandemic

14,802

Other net increases primarily due to higher revenues from special events and consulting fees for venue developments


3,479
                                                                       $  (73,450 )


Direct operating expenses
Direct operating expenses for the year ended June 30, 2020 decreased $37,331, or
24%, to $116,638 as compared to the prior year. The net decrease was
attributable to the following:
Decrease in (i) employee compensation and related benefits, (ii) costs
of food and beverage, and (iii) costs of venue entertainment due to
the closure of venues as a result of the COVID-19 pandemic             $

(32,509 ) Decrease in direct operating expenses associated with costs of food and beverage during the comparable periods prior to the closure of venues due to the COVID-19 pandemic

(3,530 ) Decrease in direct operating expenses associated with rent expense primarily due to rent concessions received

(2,404 ) Decrease in direct operating expenses associated with employee compensation and related benefits during the comparable periods prior to the closure of venues due to the COVID-19 pandemic

                      (1,624 )
Other net increases primarily due to a higher allowance for doubtful
accounts                                                                    2,736
                                                                       $  (37,331 )


Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended June 30, 2020
decreased $12,480, or 17%, to $63,049 as compared to Fiscal Year 2019 primarily
due to (i) the absence of venue pre-opening costs of $5,281 primarily associated
with rent expenses that were recorded in the prior year, (ii) lower professional
fees of $2,804, and (iii) lower marketing costs for fees to promoters of $2,654
primarily due to the temporary closure of venues due to the COVID-19 pandemic.
Depreciation and amortization
Depreciation and amortization for the year ended June 30, 2020 increased $1,719,
or 27%, to $8,156 as compared to Fiscal Year 2019 primarily due to capital
expenditures associated with the opening of a new venue in September 2018.
Impairment for intangibles, long-lived assets, and goodwill
The disruptions caused by the COVID-19 pandemic directly impacted the Company's
projected cash flows resulting in operating disruptions. These disruptions along
with the deteriorating macroeconomic conditions and industry/market
considerations, were considered a "triggering event" for the Company's Tao Group
Hospitality reporting unit, which required the Company to assess the carrying
value of Tao Group Hospitality's intangible assets, long-lived assets and
goodwill for impairment. Based on this evaluation, the Company recorded a
non-cash impairment charge of $94,946 during the third and fourth quarter of
Fiscal Year 2020, which included (i) an impairment charge of $88,583 related to
goodwill and (ii) impairment charges associated with Vandal and Avenue in New
York of $6,363 for certain long-lived assets (including net impact of
right-of-use assets and liabilities associated with leases).
Due to the COVID-19-related shutdown of its venues, TAO Group Hospitality
continues to review its lease contracts and could decide to close additional
venues (which may later reopen elsewhere) if the landlords are unwilling to make
concessions acceptable to Tao Group Hospitality, which closures could result in
additional impairment charges related to the venue's long-lived assets.

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Operating income (loss)
Operating income for the year ended June 30, 2020 decreased $120,304 to an
operating loss of $102,588 as compared to Fiscal Year 2019 primarily due to (i)
the impairment of intangible assets, long-lived assets and goodwill, and (ii) a
decrease in revenues, partially offset by decreases in direct operating expenses
and selling, general and administrative expense, as discussed above.
Adjusted operating income
Adjusted operating income for the year ended June 30, 2020 decreased $22,813, or
94%, to $1,477, as compared to Fiscal Year 2019. The decrease in adjusted
operating income was lower than the decrease in operating income primarily due
to the impairment of intangibles, long-lived assets, and goodwill being excluded
from adjusted operating income.
Comparison of the Year Ended June 30, 2019 versus the Year Ended June 30, 2018
Factors Affecting Operating Results from Acquisitions
Obscura's Operating Results
The results of operations of the Company and the Entertainment segment for the
year ended June 30, 2018 include approximately six months of Obscura's results
of operations from November 20, 2017, the date of acquisition, as compared to a
full fiscal year for the year ended June 30, 2019. In June 2019, the Company
made a decision to wind down Obscura's third-party production business to focus
those resources on the MSG Sphere development.
Combined Results of Operations
The table below sets forth, for the periods presented, certain historical
financial information.
                                          Years Ended June 30,                  Change
                                          2019            2018          Amount        Percentage
Revenues                              $ 1,048,909     $  988,990     $   59,919             6  %

Direct operating expenses                 670,641        635,218         35,423             6  %
SG&A                                      314,522        272,996         41,526            15  %
Depreciation and amortization             109,343        112,058         (2,715 )          (2 )%
Operating loss                            (45,597 )      (31,282 )      (14,315 )         (46 )%
Other income (expense):
Earnings (loss) in equity method
investments                                 7,062         (3,758 )       10,820            NM
Interest income, net                       14,901          9,198          5,703            62  %
Miscellaneous expense, net                 (6,061 )       (3,101 )       (2,960 )         (95 )%
Loss from operations before income
taxes                                     (29,695 )      (28,943 )         (752 )          (3 )%
Income tax benefit (expense)                 (443 )       30,830        (31,273 )          NM
Net income (loss)                         (30,138 )        1,887        (32,025 )          NM
Less: Net loss attributable to
redeemable noncontrolling interests        (7,299 )         (628 )       (6,671 )          NM
Less: Net loss attributable to
nonredeemable noncontrolling
interests                                  (4,945 )       (4,383 )         (562 )         (13 )%
Net income (loss) attributable to
Madison Square Garden Entertainment
Corp.'s stockholders                  $   (17,894 )   $    6,898     $  (24,792 )          NM

NM - Percentage is not meaningful


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The following is a summary of changes in segments' operating results for the year ended June 30, 2019 as compared to the prior year.


                                             Direct

Depreciation


                                            operating                         and            Operating

Changes attributable to Revenues expenses SG&A amortization income (loss) Entertainment segment (a) $ 50,518 $ 20,081 $ 37,066 $

     (2,624 )   $       (4,005 )
Tao Group Hospitality
segment (a)                    10,837          16,246          4,921             (804 )           (9,526 )
Purchase accounting
adjustments                         -            (395 )          391              713               (709 )
Inter-segment
eliminations                   (1,436 )          (509 )         (852 )              -                (75 )
                            $  59,919     $    35,423     $   41,526     $     (2,715 )   $      (14,315 )



(a)  See "Business Segment Results" for a more detailed discussion of the
     operating results of our segments.


Depreciation and amortization
Depreciation and amortization for the year ended June 30, 2019 decreased $2,715,
or 2%, to $109,343 as compared to Fiscal Year 2018 primarily due to certain
assets being fully depreciated and amortized.
Earnings (loss) in equity method investments
Earnings (loss) in equity method investments for the year ended June 30, 2019
were $7,062 as compared to a loss of $3,758 in Fiscal Year 2018. The
year-over-year improvement is primarily due to (i) the improvement in net
earnings of $10,480 attributable to the Company's investees as compared to
Fiscal Year 2018 and (ii) gains of approximately $9,000 related to the sale of
the Company's interest in AMSGE during Fiscal Year 2019 as well as the sale of
an AMSGE investment during Fiscal Year 2019 prior to the Company's sale of its
interest in AMSGE. The increase was partially offset by an impairment charge of
$8,113 recorded for the Company's investment in Tribeca Enterprises and the
amortization of basis difference of $3,348 attributable to intangible assets for
new investment acquired in Fiscal Year 2019. The Company sold its interest in
Tribeca Enterprises, including the outstanding loan and payments-in-kind
interest, effective August 5, 2019.
Interest income, net
Net interest income for the year ended June 30, 2019 decreased $5,703, or 62%,
to $14,901 as compared to Fiscal Year 2018 due to higher interest income earned
by the Company as a result of higher interest rates. The increase was partially
offset by higher interest expense incurred under the Tao Senior Credit Agreement
and 2017 Tao Credit Agreement.
Miscellaneous expense, net
Miscellaneous expense, net for the year ended June 30, 2019 increased by $2,960,
or 95%, as compared to Fiscal Year 2018 primarily due to a loss of $3,977
recorded on the extinguishment of debt in connection with the 2017 Tao Credit
Agreement in the fourth quarter of Fiscal Year 2019.
Income taxes
On December 22, 2017, the enactment of the Tax Cuts and Jobs Act ("TCJA")
significantly changed U.S. tax law and included a reduction in the corporate
federal income tax rate from 35% to 21% effective January 1, 2018. Since the
Company did not have any current federal tax expense for the year ended June 30,
2018, the federal rate of 21% was used for the entire year.
The income tax expense or benefit has been determined on a stand-alone basis as
if the Company filed separate income tax returns for the periods presented.
Although deferred tax assets have been recognized for net operating loss
("NOLs") carry forwards and tax credits in accordance with the separate return
method, such NOLs and credits did not carry over with the Company in connection
with the Entertainment Distribution.
Income tax expense for the year ended June 30, 2019 of $443 differs from income
tax benefits derived from applying the statutory federal rate of 21% to pretax
loss primarily due to tax expense of $7,655 relating to nondeductible officers'
compensation and tax expense of $2,571 relating to noncontrolling interest,
partially offset by tax benefit of $454 resulting from a change in the state
rates used to measure deferred taxes.
Income tax benefit for the year ended June 30, 2018 of $30,830 differs from the
income tax benefit derived from applying the statutory federal rate of 21% to
pretax loss primarily as a result of a deferred income tax benefit of $32,348
related to the

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remeasurement of deferred tax assets and liabilities under provisions contained
in the new tax legislation, of which (i) $33,852 was due to the reduction of net
deferred tax assets in connection with the lower federal income tax rate of 21%,
and (ii) $66,200 was due to a reduction in the valuation allowance attributable
to the new rules, which provide that future federal NOLs have an unlimited
carry-forward period. These rules on future federal NOLs allow the Company to
recognize a portion of its unrecognized deferred tax assets for future
deductible items. Partially offsetting this tax benefit was an increase in the
valuation allowance of $7,495 related to current year changes in deferred assets
and liabilities.
See Note 18 Income Taxes to the consolidated and combined financial statements
included in Item 8 of this Annual Report on Form 10-K for further details on the
components of income tax and a reconciliation of the statutory federal rate to
the effective tax rate.
Adjusted operating income
The following is a reconciliation of operating loss to adjusted operating income
(loss):
                                                Years Ended June 30,                  Change
                                                2019            2018          Amount       Percentage
Operating loss                              $   (45,597 )   $  (31,282 )   $  (14,315 )        (46 )%
Share-based compensation                         35,401         27,286
Depreciation and amortization (a)               109,343        112,058
Other purchase accounting adjustments (b)         4,764          4,768
Adjusted operating income                   $   103,911     $  112,830     $   (8,919 )         (8 )%


________________


(a)  Depreciation and amortization included purchase accounting adjustments of
     $15,901 and $15,188 for the years ended June 30, 2019 and 2018,
     respectively.


(b)  Other purchase accounting adjustments for the year ended June 30, 2019 and

2018 primarily included the amortization of favorable leases in connection

with the Tao Group Hospitality acquisition.




Adjusted operating income for the year ended June 30, 2019 decreased $8,919, or
8%, to $103,911 as compared to the prior year. The net decrease was attributable
to the following:
Increase in adjusted operating income of the Entertainment segment   $      1,517
Decrease in adjusted operating income of the Tao Group Hospitality
segment                                                                   (10,361 )
Inter-segment eliminations                                                    (75 )
                                                                     $     (8,919 )


Net income (loss) attributable to redeemable and nonredeemable noncontrolling
interests
For the year ended June 30, 2019, the Company recorded a net loss attributable
to redeemable noncontrolling interests of $7,299 and a net loss attributable to
nonredeemable noncontrolling interests of $4,945 as compared to $628 of net loss
attributable to redeemable noncontrolling interests and $4,383 of net loss
attributable to nonredeemable noncontrolling interests for Fiscal Year 2018.
These amounts represent the share of net loss of Tao Group Hospitality and BCE
that is not attributable to the Company. In addition, the net loss attributable
to redeemable and nonredeemable noncontrolling interests includes a proportional
share of expenses related to purchase accounting adjustments.

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Business Segment Results
Entertainment
The table below sets forth, for the periods presented, certain historical
financial information and a reconciliation of operating income (loss) to
adjusted operating income for the Company's Entertainment segment.
                                          Years Ended June 30,                  Change
                                          2019            2018          Amount        Percentage
Revenues                              $   797,058     $  746,540     $   50,518             7  %
Direct operating expenses                 513,305        493,224         20,081             4  %
Selling, general and administrative
expenses                                  239,321        202,255         37,066            18  %
Depreciation and amortization              87,005         89,629         (2,624 )          (3 )%
Operating loss                        $   (42,573 )   $  (38,568 )   $   (4,005 )         (10 )%
Reconciliation to adjusted
operating income:
Share-based compensation                   35,264         27,118
Depreciation and amortization              87,005         89,629
Adjusted operating income             $    79,696     $   78,179     $    1,517             2  %


Factors Affecting Operating Results
Obscura's Operating Results
The results of operations of the Company and the Entertainment segment for the
year ended June 30, 2018 include approximately six months of Obscura's results
of operations from November 20, 2017, the date of acquisition, as compared to a
full fiscal year for the year ended June 30, 2019. In June 2019, the Company
made a decision to wind down Obscura's third-party production business to focus
those resources on the MSG Sphere development.
Revenues
Revenues for the year ended June 30, 2019 increased $50,518, or 7%, to $797,058
as compared to the prior year. The net increase was attributable to the
following:
Increase in event-related revenues from concerts, as discussed below $    19,966
Increase in event-related revenues from live sporting events due to
higher per event revenue, slightly offset by fewer events

16,172

Increase in revenues from the presentation of the Christmas Spectacular, as discussed below

14,797

Increase in venue-related signage and sponsorship revenues due to increased sales of existing sponsorship and signage inventory

8,069


Increase in revenues from Obscura, as discussed below

5,311

Increase in suite license fee revenues due to rate increases and, to a lesser extent, the impact of the new revenue recognition standard in Fiscal Year 2019, partially offset by lower sales of suite products

4,528

Increase in ad sales commission due to increased sales in advertising availabilities of MSG Networks

1,912

Decrease in event-related revenues from other live entertainment events, as discussed below

(16,899 ) Decrease in BCE event-related revenues primarily due to lower ticket-related revenues from the Boston Calling Music Festival


(3,255 )
Other net decreases                                                          (83 )
                                                                     $    50,518


The increase in event-related revenues from concerts was primarily due to
additional events and higher per event revenue during Fiscal Year 2019 and, to a
lesser extent, the impact from the recognition during the current year of $1,278
of revenue associated with events that took place in Fiscal Year 2018 as a
result of the ticketing agreement renewal. The increase was partially offset by
the impact of the new revenue recognition standard in Fiscal Year 2019.
The increase in revenues from the presentation of the Christmas Spectacular was
primarily due to (i) higher ticket-related revenue mainly as a result of higher
average ticket prices, (ii) an increase in paid attendance in Fiscal Year 2019
as compared to Fiscal

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Year 2018, and (iii) the recognition during the current year of $880 of revenue
associated with performances that took place in Fiscal Year 2018 as a result of
the ticketing agreement renewal. The Company had 210 performances of the
production in Fiscal Year 2019, as compared to 200 performances in Fiscal Year
2018 due to an extension of the show's run announced in December 2018. For
Fiscal Year 2019, more than one million tickets were sold, representing a
mid-single digit percentage increase as compared to Fiscal Year 2018.
Revenues from Obscura are included as a result of its acquisition by the Company
on November 20, 2017. Fiscal Year 2019 results include revenues from Obscura for
a full fiscal year as compared to approximately seven months (from November 20,
2017 to June 30, 2018) in Fiscal Year 2018. Revenues from Obscura are
principally related to its third-party production business.
The decrease in event-related revenues from other live entertainment events was
primarily due to (i) the impact of a large-scale special event series held at
The Garden and Hulu Theater at Madison Square Garden during Fiscal Year 2018,
(ii) lower per event revenue during Fiscal Year 2019 as compared to Fiscal Year
2018 and, to a lesser extent, (iii) the impact of the new revenue recognition
standard Fiscal Year 2019. The decrease was slightly offset by additional events
held at the Company's venues during the current year as compared to Fiscal Year
2018.
Direct operating expenses
Direct operating expenses for the year ended June 30, 2019 increased $20,081, or
4%, to $513,305 as compared to the prior year. The net increase was attributable
to the following:
Increase in event-related expenses associated with live sporting
events due to higher per event expenses, slightly offset by fewer
events                                                               $

10,501

Increase in direct operating expenses associated with Obscura, as discussed below

5,871

Increase in direct operating expenses associated with the presentation of the Christmas Spectacular, as discussed below

5,187

Increase in direct operating expenses associated with suite licenses primarily due to higher revenue sharing expenses associated with suite license fee revenues increases

3,914

Increase in venue operating costs, net of recovery charges from MSG Sports primarily due to lower recovery charges for venue usage from MSG Sports for hosting the professional sports franchises' home games of the Knicks and Rangers at The Garden

2,192

Increase in direct operating expenses associated with the venue-related signage and sponsorship primarily due to increased sales of existing sponsorship inventory

2,063

Increase in direct operating expenses associated with the Company's exploration of a new theatrical production

1,485

Decrease in event-related direct operating expenses associated with other live entertainment events as discussed below

(9,757 ) Decrease in BCE event-related direct operating expenses due to lower costs related to the Boston Calling Music Festival

                        (1,914 )
Decrease in event-related direct operating expenses associated with
concerts, as discussed below                                                (978 )
Other net increases                                                        1,517
                                                                     $    20,081


Direct operating expenses from Obscura are included as a result of its
acquisition by the Company on November 20, 2017. The current year results
include direct operating expenses from Obscura for a full fiscal year as
compared to approximately seven months (from November 20, 2017 to June 30, 2018)
in Fiscal Year 2018. Direct operating expenses from Obscura are principally
related to third-party production business.
The increase in direct operating expenses associated with the presentation of
the Christmas Spectacular was primarily due to (i) higher labor costs,
(ii) higher costs associated with more performances in Fiscal Year 2019,
(iii) costs related to show enhancements, and (iv) higher marketing expenses
during Fiscal Year 2019 as compared to Fiscal Year 2018. The Company had 210
performances of the production in Fiscal Year 2019, as compared to
200 performances in Fiscal Year 2018 due to an extension of the show's run
announced in December 2018.
The decrease in event-related direct operating expenses associated with other
live entertainment events was primarily due to (i) the impact of a large-scale
special event series held at The Garden and Hulu Theater at Madison Square
Garden during Fiscal Year 2018, (ii) the impact of the new revenue recognition
standard in Fiscal Year 2019, and (iii) to a lesser extent, lower per event

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expenses during Fiscal Year 2019 as compared to Fiscal Year 2018. The decrease
was slightly offset by additional events held at the Company's venues during
Fiscal Year 2019 as compared to Fiscal Year 2018.
The decrease in event-related direct operating expenses associated with concerts
was primarily due to the impact of the new revenue recognition standard in
Fiscal Year 2019. The decrease was largely offset by additional events held at
the Company's venues and higher per event expenses during Fiscal Year 2019 as
compared to Fiscal Year 2018.
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended June 30, 2019
increased $37,066, or 18%, to $239,321 as compared to Fiscal Year 2018 mainly
due to (i) higher employee compensation and related benefits of $15,462, (ii) an
increase in professional fees of $11,467, and (iii) the inclusion of Obscura's
selling, general and administrative costs related to its third-party production
business for a full fiscal year as compared to approximately seven months (from
November 20, 2017 to June 30, 2018) in Fiscal Year 2018 of $2,125.
Depreciation and amortization
Depreciation and amortization for the year ended June 30, 2019 decreased $2,624,
or 3%, to $87,005 as compared to Fiscal Year 2018 primarily due to due to
certain assets being fully depreciated and amortized in The Garden.
Operating loss
Operating loss for the year ended June 30, 2019 improved $4,005 to $42,573 as
compared to Fiscal Year 2018 due to higher revenues and lower depreciation and
amortization expenses, partially offset by increases in direct operating
expenses and selling, general and administrative expenses, as discussed above.
Adjusted operating income
Adjusted operating income for the year ended June 30, 2019 improved by $1,517 to
$79,696 as compared to Fiscal Year 2018. The increases in adjusted operating
income were higher than the increase in operating losses primarily due to the
net increase in operating expenses from share-based compensation and
depreciation and amortization of $5,522 were excluded in the calculation of
adjusted operating income.
Tao Group Hospitality
The table below sets forth, for the periods presented, certain historical
financial information and a reconciliation of operating income to adjusted
operating income for the Company's Tao Group Hospitality segment.
                                        Years Ended June 30,                    Change
                                        2019            2018           Amount         Percentage
Revenues                           $    253,651     $   242,814     $    10,837              4  %
Direct operating expenses               153,969         137,723          16,246             12  %
Selling, general and
administrative expenses                  75,529          70,608           4,921              7  %
Depreciation and amortization             6,437           7,241            (804 )          (11 )%
Operating income                   $     17,716     $    27,242     $    (9,526 )          (35 )%
Reconciliation to adjusted
operating income:
Share-based compensation                    137             168
Depreciation and amortization             6,437           7,241
Adjusted operating income          $     24,290     $    34,651     $   (10,361 )          (30 )%



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Revenues


Revenues for the year ended June 30, 2019 increased $10,837, or 4%, to $253,651
as compared to the prior year. The net increase was attributable to the
following:
Increase in revenues associated with new venue sales primarily due to
the opening of Tao Chicago in September 2018                           $

20,590

Decrease in revenues associated with comparable sales primarily due to New York and Los Angeles venues inclusive of the impact of Fiscal Year 2019 containing 52 weeks of operations as compared to 53 weeks during Fiscal Year 2018 due to the timing of the retail calendar

                  (7,437 )
Decrease in revenues associated with the closing of Stanton Social in
New York                                                                   (2,419 )
Other net increases                                                           103
                                                                       $   10,837


Direct operating expenses
Direct operating expenses for the year ended June 30, 2019 increased $16,246, or
12%, to $153,969 as compared to the prior year. The net increase was
attributable to the following:
Increase in direct operating expenses associated with employee
compensation and related benefits                                      $

8,278

Increase in direct operating expenses associated with performer costs 4,554 Increase in direct operating expenses associated with costs of food and beverage

2,046

Increase in direct operating expenses associated with leased costs


  992
Other net increases                                                           376
                                                                       $   16,246


Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended June 30, 2019
increased $4,921, or 7%, to $75,529 as compared to Fiscal Year 2018, primarily
due to higher employee compensation and related benefits of $3,200 and venue
pre-opening costs of $3,113 primarily for non-cash deferred rent expense,
slightly offset by other net decreases.
Depreciation and amortization
Depreciation and amortization for the year ended June 30, 2019 decreased $804,
or 11%, to $6,437 as compared to Fiscal Year 2018 primarily due to certain
assets being fully depreciated.
Operating income
Operating income for the year ended June 30, 2019 decreased $9,526, or 35%, to
$17,716 as compared to Fiscal Year 2018 due to higher direct operating expenses
and, to a lesser extent, increase in selling, general and administrative
expenses, partially offset by higher revenues and, to a lesser extent, lower
depreciation and amortization, as discussed above.
Adjusted operating income
Adjusted operating income for the year ended June 30, 2019 decreased $10,361, or
30%, to $24,290, as compared to Fiscal Year 2018. The decrease in adjusted
operating income is higher than the decrease in operating income primarily the
decrease in operating expenses from depreciation and amortization of $804 were
excluded in the calculation of adjusted operating income.
Liquidity and Capital Resources
Overview
Our operations and operating results have been, and continue to be, materially
impacted by the COVID-19 pandemic and actions taken in response by governmental
authorities and certain professional sports leagues. As of the date of this
Annual Report on Form 10-K, virtually all of our business operations have been
suspended and Tao Group Hospitality is operating at significantly reduced
capacity and demand. It is not clear when we will be permitted or able to resume
normal business operations.
As a result of government mandated assembly limitations and closures, no events
are currently permitted to be held at The Garden, Hulu Theater at Madison Square
Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre, and
virtually all events at our venues have been postponed or cancelled through
September and will likely be impacted through the remainder of the year. The
2020 Boston Calling Music Festival, which had been slated for Memorial Day
weekend, has also been cancelled, and Tao Group Hospitality's operations have
been substantially reduced. The NBA and the NHL suspended their

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2019-20 seasons on March 11 and 12, 2020, respectively and, while the leagues
have returned to play in certain select cities, the plan for the 2020-21 season,
including the attendance of fans at home games of the Knicks and Rangers, is
unclear, which may impact the amount of payments we receive under the Arena
License Agreements. The Company cancelled the 2020 production of the Christmas
Spectacular. For more information about the impacts and risks to the Company as
a result of the COVID-19 pandemic, see "- Impact of the COVID-19 Pandemic on Our
Business" and "Part I - Item 1A. Risk Factors - Our Operations and Operating
Results Have Been, and Continue to be, Materially Impacted by the COVID-19
Pandemic and Government Actions Taken in Response."
The COVID-19 pandemic is having and will likely continue to have a significant
and negative impact on our operations and financial performance. As a result, we
have taken several actions to improve our financial flexibility, reduce
operating costs and preserve liquidity:
•      We have revised our processes and construction schedule for MSG Sphere,
       providing for a substantially reduced spend in fiscal year 2021 and a
       lengthened timetable that enables the Company to preserve cash in the
       near-term. We now expect to open MSG Sphere in Las Vegas in calendar year
       2023;

• In connection with our extended construction timeline, we have reduced our

expected near-term spending on technology and content development for MSG

Sphere;

• At the end of May, we ended all financial support that was previously

provided for certain event-level employees at the Company's performance

venues, and as a result virtually all venue employees, approximately 6,000

in total, are effectively furloughed;

• At the end of March, Tao Group Hospitality eliminated essentially all of

its venue line staff and manager positions, with limited numbers of

employees returning as operations slowly resume. In August, Tao Group

Hospitality reduced its corporate workforce;

• In August, we reduced our regular full-time workforce by approximately 350

positions; and

• We have implemented and are continuing to pursue additional comprehensive

cost reduction measures, including terminating certain third-party

services, negotiating reduced rates and/or reduced service levels with

third parties, and pursuing targeted savings and reductions in spending on

marketing and travel and entertainment, and deferring or limiting

non-essential operating or other discretionary expenses.




In addition, we are continuing to explore further opportunities to preserve cash
and financial flexibility, including:
•      The Company is having conversations with landlords and other vendors about
       relief from cash payments, some of which may not be successful; and

• We are actively pursuing potential financing options, including incurring


       up to $500,000 of long-term debt, which is expected to be comprised of
       senior notes or term loan and revolver facilities.


The Company is moving quickly to align its costs with its expectation of having
limited revenue and no events during 2020. Taking into account the workforce
reductions and cost saving initiatives noted above, although this amount will
fluctuate, the Company estimates the monthly operational cash burn rate will
average approximately $25,000 on a go-forward basis for the duration of fiscal
year 2021 compared to an average of approximately $35,000 in the fourth quarter
of Fiscal Year 2020. We define operational cash burn rate as revenue less direct
operating and SG&A expenses (excluding share-based compensation). Excluded from
operational cash burn are (i) severance costs, (ii) capital expenditures, (iii)
capitalized spending on content and technology related to MSG Sphere and (iv)
working capital adjustments.
Our primary sources of liquidity are cash and cash equivalents and cash flows
from the operations of our businesses. Our principal uses of cash include
working capital-related items (including funding our operations), capital
spending (including our construction of large-scale venues in Las Vegas and
London), potential borrowings by MSG Sports under the delayed draw term loan
credit agreements (the "DDTL Facilities") described below, investments and
related loans and advances that we may fund from time to time, repayment of
debt, and mandatory purchases from prior acquisitions. We may also use cash to
repurchase our common stock. Our decisions as to the use of our available
liquidity will be based upon the ongoing review of the funding needs of the
business, the allocation of cash resources, and the timing of cash flow
generation. To the extent we desire to access alternative sources of funding
through the capital and credit markets, challenging U.S. and global economic and
market conditions could adversely impact our ability to do so at that time.
We regularly monitor and assess our ability to meet our net funding and
investing requirements. We believe we have sufficient liquidity, including
approximately $907,000 in cash and cash equivalents and $337,000 of short-term
investments as of June 30, 2020, to, over the next 12 months, fund our
operations, make committed funds available to MSG Sports under the DDTL
Facilities, and pursue the development of the new venues discussed below. See
Note 12 to the consolidated and combined financial statements included in Item 8
of this Annual Report on Form 10-K for a discussion of the Company's short-term

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investments. Our cash and cash equivalents include approximately $200,526 from
deferred revenue and collection due to promoters - primarily related to tickets,
suites and sponsorships - all of which would be addressed, to the extent
necessary, through credits, make-goods, refunds and/or rescheduled dates.
In connection with the Entertainment Distribution and as an additional source of
liquidity for MSG Sports in response to the COVID-19 pandemic, on April 17,
2020, a subsidiary of the Company entered into the DDTL Facilities with
subsidiaries of MSG Sports. Pursuant to the DDTL Facilities, two of MSG Sports'
subsidiaries, MSG NYK Holdings, LLC and MSG NYR Holdings, LLC may draw up to
$110,000 and $90,000, respectively, for general corporate purposes until
October 17, 2021, subject to the terms and conditions of the DDTL Facilities,
including the pre-funding requirement that MSG Sports' liquidity drop below a
certain threshold, and that, with respect to the Knicks, commercially reasonable
efforts are made to raise additional financing. Each DDTL Facility bears
interest at a rate equal to LIBOR plus 2.00%, or at the option of MSG Sports, a
base rate plus 1.00%. If MSG Sports draws down on one or both DDTL Facilities,
the outstanding principal balance of each term loan will be due, together with
any unpaid interest thereon, on October 17, 2021. If MSG Sports were to fully
draw on the DDTL Facilities, the Company's cash balance would decrease by
$200,000. For more information on the DDTL Facilities, see Note 19 to the
consolidated and combined financial statements included in Item 8 of this Annual
Report on Form 10-K.
On March 31, 2020, the Company's Board of Directors authorized, effective
following the Entertainment Distribution, a share repurchase program to
repurchase up to $350,000 of the Company's Class A Common Stock. Under the
authorization, shares of Class A Common Stock may be purchased from time to time
in open market transactions, in accordance with applicable insider trading and
other securities laws and regulations. The timing and amount of purchases will
depend on market conditions and other factors. No shares have been repurchased
to date.
Tao Group Hospitality's principal uses of cash include working capital
related-items (including funding its operations), investments in new venues,
tax-related cash distributions, interest expense payments and repayment of debt.
Tao Group Hospitality plans to continue to grow its business through the opening
of new venues. With the onset of the pandemic, Tao Group Hospitality's business
was also materially impacted by the COVID-19 related restrictions imposed by
state and local officials, which included limiting restaurants and bars to
take-out and delivery service only and requiring the closure of nightlife
establishments. As a result of these restrictions, virtually all of Tao's venues
were closed for approximately three months starting in mid-March. Although
certain Tao Group Hospitality restaurants have re-opened for take-out and
delivery service, as well as limited outdoor dining where permitted, they are
operating at significantly reduced capacity and demand, which, together with the
closures imposed earlier in the year, has materially impacted business. However,
we believe that Tao Group Hospitality has sufficient liquidity from
cash-on-hand, its revolving credit facility and committed capital from the
Company to fund its operations and service its debt obligations over the next 12
months.
MSG Spheres
The Company has made significant progress on MSG Sphere at The Venetian, its
state-of-the-art entertainment venue under construction in Las Vegas.
The Company expects the venue to have a number of significant revenue streams,
including a wide variety of content such as attractions, concert residencies,
corporate and select sporting events, as well as sponsorship and premium
hospitality opportunities. As a result, we anticipate that MSG Sphere at The
Venetian will generate substantial revenue and adjusted operating income on an
annual basis.
Our cost estimate, inclusive of core technology and soft costs, for MSG Sphere
at The Venetian is approximately $1,660,000. This cost estimate is net of
$75,000 that the Las Vegas Sands Corp. has agreed to pay to defray certain
construction costs and also excludes significant capitalized and non-capitalized
costs for items such as content creation, internal labor, and furniture and
equipment. Relative to our cost estimate above, our actual construction costs
for MSG Sphere at The Venetian incurred through June 30, 2020 were approximately
$453,000, which is net of $65,000 received from Las Vegas Sands Corp. during the
year ended June 30, 2020. In addition, the amount of construction costs incurred
as of June 30, 2020 includes approximately $70,000 of accrued expenses that were
not yet paid as of that date. As with any major construction project, the
construction of MSG Sphere is subject to potential unexpected delays, costs or
other complications.
The MSG Sphere at The Venetian is a complex construction project with
cutting-edge technology that relies on subcontractors obtaining components from
a variety of sources around the world. In April, the Company announced that it
was suspending construction of MSG Sphere due to COVID-19 related factors that
were outside of its control, including supply chain issues.  As the ongoing
effects of the pandemic have continued to impact its business operations, the
Company has revised its processes and construction schedule, and has resumed
work with a lengthened timetable that enables the Company to better preserve
cash in the near-term. The Company remains committed to bringing MSG Sphere to
Las Vegas and, based on its new construction schedule, now expects to open the
venue in calendar year 2023.

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See Exhibit 10.23 to this Annual Report on Form 10-K for a copy of the
Construction Agreement, dated May 31, 2019, by and between MSG Las Vegas, LLC
and Hunt Construction Group Inc. (AECOM).
In February 2018, we announced the purchase of land in Stratford, London, which
we expect will become home to a future MSG Sphere, pending necessary approvals.
Cost estimates for MSG Sphere in London are still in development as the Company
continues to refine its design, which it currently expects will be substantially
similar to MSG Sphere in Las Vegas, including having approximately the same
seating capacity. The Company submitted a planning application to the local
planning authority in March 2019 and the planning application process is
ongoing. The Company is using this time to continue building on its design and
construction learnings in Las Vegas, which it will leverage in London, should we
receive such necessary approvals. As we work through this planning application
and design process, we expect our timeline will evolve and, therefore, we do not
have a target opening date at this time.
With regard to MSG Sphere at The Venetian, the Company plans to finance the
construction of the venue from cash-on-hand and cash flows from operations, as
well as additional debt financing. The Company expects to incur up to $500,000
of long-term debt, which is expected to be comprised of senior notes or term
loan and revolver facilities. If the Company's cash flows from operations are
not sufficient to finance the remaining construction costs of MSG Sphere at The
Venetian, the Company would need to complete additional debt financing. There is
no assurance that the Company will be able to obtain such capital.
While the Company plans to self-fund the construction of MSG Sphere at The
Venetian, the Company's intention for any future venues is to explore other
options, including non-recourse debt financing, joint ventures, equity partners
and a managed venue model.
For additional information regarding the Company's capital expenditures related
to the MSG Spheres, see Note 20 to the consolidated and combined financial
statements included in Item 8 of this Annual Report on Form 10-K.
We will continue to explore additional domestic and international markets where
we believe next-generation venues such as the MSG Sphere can be successful.
Financing Agreements
On May 23, 2019, Tao Group Intermediate Holdings LLC ("TAOIH") and Tao Group
Operating LLC ("TAOG"), entered into a credit agreement (the "Tao Senior Credit
Agreement") with JPMorgan Chase Bank, N.A., and the lenders party thereto. The
Tao Senior Credit Agreement provides TAOG with senior secured credit facilities
(the "Tao Senior Secured Credit Facilities") consisting of: (i) an initial
$40,000 term loan facility with a term of five years and (ii) a $25,000
revolving credit facility with a term of five years (the "Tao Revolving Credit
Facility"). The Tao Senior Secured Credit Facilities were obtained without
recourse to the Company or any of its affiliates (other than TAOG, TAOIH and its
subsidiaries and in respect of the reserve account discussed below). There was
no outstanding amount drawn on the Tao Revolving Credit Facility as of June 30,
2020. During the year ended June 30, 2020, Tao Group Hospitality utilized $750
of the Tao Revolving Credit Facility for issuance of letters of credit and the
remaining borrowing available as of June 30, 2020 was $24,250. The Credit
Agreement matures on May 23, 2024.
Although Tao Group Hospitality was in compliance with the financial covenants of
the Tao Senior Credit Agreement as of March 31, 2020, disruptions caused by the
COVID-19 pandemic have had, and are likely to continue to have, a significant
and negative impact on Tao Group Hospitality's operations and financial
performance. On August 6, 2020, TAOIH and TAOG entered into an amendment to the
Tao Senior Credit Agreement, which suspended the application of the financial
maintenance covenants thereunder through December 31, 2021, modified certain
restrictive covenants therein, modified the applicable interest rates and
increased the minimum liquidity requirement. In addition, in connection with the
amendment, the Company, through its direct subsidiary, MSG Entertainment Group,
LLC, entered into a guarantee and reserve account agreement to guarantee the
obligations of TAOG under the Tao Senior Credit Agreement, establish and grant a
security interest in a reserve account that will initially hold a deposit of
approximately $9,800 and maintain a minimum liquidity requirement of no less
than $75,000 at all times.
If recovery from the pandemic takes longer than currently estimated, Tao Group
Hospitality may need to seek covenant waivers in the future. Tao Group
Hospitality's failure to obtain covenant waivers could trigger a violation of
these covenants and lead to default and acceleration of all of its outstanding
debt, which could have a material adverse effect on liquidity.
On May 23, 2019, MSG Entertainment Holdings LLC, a subsidiary of the Company,
and Tao Group Sub Holdings LLC, a subsidiary of Tao Group Hospitality, entered
into a Credit Agreement providing for a credit facility of $49,000 that matures
on August 22, 2024 (the "Tao Subordinated Credit Agreement"). On June 15, 2020,
the Tao Subordinated Credit Agreement was amended to provide an additional
$22,000 of borrowing capacity. The balances and interest-related activities
pertaining to the Tao Subordinated Credit Agreement have been eliminated in the
consolidated and combined financial statements in accordance with ASC Topic 810,
Consolidation.

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See Note 13 to the consolidated and combined financial statements included in
Item 8 of this Annual Report on Form 10-K for additional information on the Tao
Senior Secured Credit Facilities.
Letters of Credit
The Company uses letters of credit to support its business operations. As of
June 30, 2020, the Company had a total of $9,664 of letters of credit
outstanding, which included two outstanding letters of credit for an aggregate
of $750 issued under the Tao Revolving Credit Facility.
Cash Flow Discussion
As of June 30, 2020, cash, cash equivalents and restricted cash totaled
$924,304, as compared to $1,092,065 as of June 30, 2019 and $1,232,000 as of
June 30, 2018. The following table summarizes the Company's cash flow activities
for the years ended June 30, 2020, 2019 and 2018:
                                                               Years Ended June 30,
                                                         2020           2019          2018
Net income (loss)                                    $  (14,687 )   $  (30,138 )   $   1,887
Adjustments to reconcile net income (loss) to net
cash provided by operating activities                   126,815        149,192       114,454
Subtotal                                             $  112,128     $  119,054     $ 116,341
Changes in working capital assets and liabilities       (16,097 )      (27,330 )      28,044
Net cash provided by operating activities            $   96,031     $   91,724     $ 144,385
Net cash used in investing activities                  (389,657 )     (228,063 )    (169,624 )
Net cash provided by (used in) financing
activities                                              122,938

(8,621 ) 15,356 Effect of exchange rates on cash, cash equivalents and restricted cash

                                       2,927          4,669           331
Net decrease in cash, cash equivalents and
restricted cash                                      $ (167,761 )   $ (140,291 )   $  (9,552 )


Operating Activities
Net cash provided by operating activities for the year ended June 30, 2020
improved by $4,307 to $96,031 as compared to the prior year primarily due to the
proceeds attributable to the Forum associated settlement and, to a lesser
extent, a net decrease in working capital driven by lower accounts receivables,
net and higher accrued liabilities, partially offset by (i) higher related party
receivables, net, (ii) lower deferred revenue, (iii) higher prepaid expenses,
and (iv) lower accounts payable. These inflows were substantially offset by
lower operating income excluding (i) depreciation and amortization, (ii)
impairment for intangibles, long-lived assets, and goodwill, and (iii) gain on
disposal of assets held for sale and associated settlements.
Net cash provided by operating activities for the year ended June 30, 2019
decreased by $52,661 to $91,724 as compared to the prior year primarily due to a
net decrease in working capital assets and liabilities which include lower (i)
collections due to promoters, (ii) prepaid expenses and other assets, and (iii)
deferred revenue, partially offset by higher accrued liabilities, all due to
timing. The net decrease was slightly offset by cash operating results which
include the change from net income to a net loss in Fiscal Year 2019 as compared
to Fiscal Year 2018 adjusted for non-cash items.
Investing Activities
Net cash used in investing activities for the year ended June 30, 2020 increased
by $161,594 to $389,657 as compared to the prior year primarily due to an
increased purchase of short-term investments and capital expenditures. These
outflows were partially offset by current year proceeds from the sale of the
Forum, excluding the associated settlement, and the maturity of short-term
investments.
Net cash used in investing activities for the year ended June 30, 2019 increased
by $58,439 to $228,063 as compared to the prior year primarily due to the
Company's investment in a British pound-denominated time deposit, an investment
in SACO and repayments received from loans to nonconsolidated affiliates in
Fiscal Year 2018. The increase in cash used was partially offset by proceeds
received from the sale of the Company's 50% interest in AMSGE and other net
investing activities.
Financing Activities
Net cash provided by financing activities for the year ended June 30, 2020
increased by $131,559 to $122,938 as compared to the prior year due to increased
net transfers from MSG Sports and its subsidiaries and less repayments on
long-term debt, partially offset by the proceeds from a loan facility received
in the prior year that did not similarly occur in the current year.

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Net cash used in financing activities for the year ended June 30, 2019 increased
by $23,977 to $8,621 as compared to Fiscal Year 2018 largely due to the
repayment of all obligations under the 2017 Tao Credit Agreement partially
offset by proceeds received from borrowings under the Tao Senior Credit
Agreement, net transfers from MSG Sports and its subsidiaries, and other net
financing activities.
Contractual Obligations and Off Balance Sheet Arrangements
Future cash payments required under contracts entered into by the Company in the
normal course of business and outstanding letters of credit as of June 30, 2020
are summarized in the following table:
                                                            Payments Due by Period
                                                     Year          Years         Years         More Than
                                       Total            1            2-3           4-5          5 Years
Off-Balance Sheet Commitments: (a)
Contractual obligations              $   3,116     $   2,926     $     190     $       -     $         -
Letters of credit (b)                    9,664         9,664             -             -               -
                                        12,780        12,590           190             -               -
On-Balance Sheet Commitments:
Leases (c)                             319,476        56,829       110,935        60,560          91,152
Debt repayments (d)                     34,387         5,637        16,250        12,500               -
Other (e)                               89,563        89,149           236           178               -
                                       443,426       151,615       127,421        73,238          91,152
Total (f) (g)                        $ 456,206     $ 164,205     $ 127,611     $  73,238     $    91,152


_________________

(a) Off balance sheet arrangements disclosed in the table above do not include


     MSG Sphere related commitments of approximately $1,220,000 that are not
     reflected on the balance sheet. Such arrangements are associated with the
     development and construction of MSG Sphere in Las Vegas. The timing of the
     future cash payments disclosed is uncertain and may change as the
     development and construction of MSG Sphere in Las Vegas progresses.


(b)  Consists of letters of credit obtained by the Company as collateral for

development of MSG Sphere in Las Vegas and lease agreements of the Company

and Tao Group Hospitality.

having an initial noncancelable term in excess of one year for the Company's

venues, including the Tao Group Hospitality venues and various corporate

offices. These commitments are presented exclusive of the imputed interest

used to reflect the payment's present value. See Note 9 to the consolidated

and combined financial statements included in Item 8 of this Annual Report

on Form 10-K for more information.

(d) See Note 13 to the consolidated and combined financial statements included

in Item 8 of this Annual Report on Form 10-K for more information

surrounding the principal repayments required under the Tao Senior Secured

Credit Facilities and a note with respect to a loan received by BCE from its

noncontrolling interest holder that is due in April 2021.

(e) Includes MSG Sphere related commitments of approximately $74,955 associated


     with the development and construction of MSG Sphere in Las Vegas, all due
     within fiscal year 2021.

(f) Pension obligations have been excluded from the table above as the timing of


     the future cash payments is uncertain. See Note 14 to the consolidated and
     combined financial statements included in Item 8 of this Annual Report on

Form 10-K for more information on the future funding requirements under our

pension obligations.

(g) In connection with the Entertainment Distribution, the Company entered into

the DDTL Facilities. Pursuant to the DDTL Facilities, two of MSG Sports'

subsidiaries, MSG NYK Holdings, LLC and MSG NYR Holdings, LLC may draw up to

$110,000 and $90,000, respectively, until October 17, 2021 subject to

certain conditions. The lending requirements under DDTL Facilities have been

excluded from the table above as the timing of the future cash payments is

uncertain.




The Company and a subsidiary of the Las Vegas Sands Corp. entered into a 50-year
ground lease in Las Vegas pursuant to which the Company has agreed to construct
a large-scale venue. The Company has announced plans to construct an MSG Sphere
on that site. See "Part I - Item 1. Business - Our Business - Our Performance
Venues - MSG Sphere."
Tao Group Hospitality equityholders have the right to put their equity interests
in Tao Group Hospitality to a subsidiary of the

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Company. The purchase price is at fair market value subject to a floor.
Consideration paid upon exercise of such put right shall be, at the Company's
option, in cash, debt, or our Class A Common Stock, subject to certain
limitations.
Seasonality of Our Business
The dependence on revenues from the Christmas Spectacular generally means the
Company's Entertainment segment earns a disproportionate share of its revenues
and operating income in the second quarter of the Company's fiscal year.
Recently Issued Accounting Pronouncements and Critical Accounting Policies
Recently Issued Accounting Pronouncements
See Note 2 to the consolidated and combined financial statements included in
Item 8 of this Annual Report on Form 10-K for discussion of recently issued
accounting pronouncements.
Critical Accounting Policies
The preparation of the Company's consolidated and combined financial statements
in conformity with GAAP requires management to make estimates and assumptions
about future events. These estimates and the underlying assumptions affect the
amounts of assets and liabilities reported, disclosures about contingent assets
and liabilities, and reported amounts of revenues and expenses. Management
believes its use of estimates in the consolidated and combined financial
statements to be reasonable. The significant accounting policies which we
believe are the most critical to aid in fully understanding and evaluating our
reported financial results include the following:
Arrangements with Multiple Performance Obligations
See Note 4 to the consolidated and combined financial statements included in
Item 8 of this Annual Report on Form 10-K for discussion of the Company's
arrangements with multiple performance obligations, primarily multi-year
sponsorship agreements.
Impairment of Long-Lived and Indefinite-Lived Assets
The Company elected to adopt ASU No. 2017-04, Intangibles - Goodwill and Other
(Topic 350): Simplifying the Accounting for Goodwill Impairment in the third
quarter of fiscal year 2020 in connection with its interim goodwill impairment
test performed as of March 31, 2020, as discussed further below. ASU No. 2017-04
removes Step 2 of the goodwill impairment test, which requires a hypothetical
purchase price allocation. A goodwill impairment is now the amount by which a
reporting unit's carrying value exceeds its fair value, not to exceed the
carrying amount of goodwill.
The Company's long-lived and indefinite-lived assets accounted for approximately
58% of the Company's consolidated total assets as of June 30, 2020 and consisted
of the following:
Goodwill                                                       $    74,309
Indefinite-lived intangible assets                                  63,801
Amortizable intangible assets, net of accumulated amortization     150,426
Property and equipment, net                                      1,646,115
Right-of-use lease assets                                          220,328
                                                               $ 2,154,979


In assessing the recoverability of the Company's long-lived and indefinite-lived
assets, the Company must make estimates and assumptions regarding future cash
flows and other factors to determine the fair value of the respective assets.
These estimates and assumptions could have a significant impact on whether an
impairment charge is recognized and also the magnitude of any such charge. Fair
value estimates are made at a specific point in time, based on relevant
information. These estimates are subjective in nature and involve significant
uncertainties and judgments and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates. If these
estimates or material related assumptions change in the future, the Company may
be required to record impairment charges related to its long-lived and/or
indefinite-lived assets.
Goodwill
Goodwill is tested annually for impairment as of August 31st and at any time
upon the occurrence of certain events or substantive changes in circumstances.
The Company performs its goodwill impairment test at the reporting unit level,
which is one level below the operating segment level. As of June 30, 2020, the
Company has two operating and reportable segments, Entertainment and Tao Group
Hospitality, consistent with the way management makes decisions and allocates
resources to the business.

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The goodwill balance reported on the Company's consolidated balance sheet as of
June 30, 2020 by reporting unit was as follows:
Entertainment         $ 74,309
Tao Group Hospitality        -
                      $ 74,309


The Company has the option to perform a qualitative assessment to determine if
an impairment is more likely than not to have occurred. If the Company can
support the conclusion that it is not more likely than not that the fair value
of a reporting unit is less than its carrying amount, the Company would not need
to perform a quantitative impairment test for that reporting unit. If the
Company cannot support such a conclusion or the Company does not elect to
perform the qualitative assessment, the first step of the goodwill impairment
test is used to identify potential impairment by comparing the fair value of a
reporting unit with its carrying amount, including goodwill. The estimates of
the fair value of the Company's reporting units are primarily determined using
discounted cash flows and comparable market transactions. These valuations are
based on estimates and assumptions including projected future cash flows,
discount rates, determination of appropriate market comparables and the
determination of whether a premium or discount should be applied to comparables.
Significant judgments inherent in a discounted cash flow analysis include the
selection of the appropriate discount rate, the estimate of the amount and
timing of projected future cash flows and identification of appropriate
continuing growth rate assumptions. The discount rates used in the analysis are
intended to reflect the risk inherent in the projected future cash flows.
Subsequent to the adoption of ASU No. 2017-04 in the third quarter of fiscal
year 2020, the amount of an impairment loss is measured as the amount by which a
reporting unit's carrying value exceeds its fair value determined in step one,
not to exceed the carrying amount of goodwill. Prior to the adoption of ASU No.
2017-04, if the carrying amount of a reporting unit exceeded its fair value, the
second step of the goodwill impairment test was performed to measure the amount
of impairment loss, if any. The second step of the goodwill impairment test
compared the implied fair value of the reporting unit's goodwill with the
carrying amount of that goodwill. If the carrying amount of the reporting unit's
goodwill exceeded the implied fair value of that goodwill, an impairment loss
was recognized in an amount equal to that excess. The implied fair value of
goodwill was determined in the same manner as the amount of goodwill that would
be recognized in a business combination.
The Company elected to perform the qualitative assessment of impairment for all
of the Company's reporting units for the Fiscal Year 2020 impairment test. These
assessments considered factors such as:
• macroeconomic conditions;

• industry and market considerations;

• cost factors;

• overall financial performance of the reporting unit;

• other relevant company-specific factors such as changes in management,

strategy or customers; and

• relevant reporting unit specific events such as changes in the carrying

amount of net assets.




During the first quarter of Fiscal Year 2020, the Company performed its most
recent annual impairment test of goodwill and determined that there were no
impairments of goodwill identified for any of its reporting units as of the
impairment test date. Based on these impairment tests, the Company's
Entertainment and Tao Group Hospitality reporting units had sufficient safety
margins, representing the excess of the estimated fair value of each reporting
unit, derived from the most recent quantitative assessments, less its respective
carrying value (including goodwill allocated to each respective reporting unit).
The most recent quantitative assessments were used in making this determination
and due to the proximity of the acquisition date for Tao Group Hospitality to
the goodwill impairment test date, the initial purchase price was assumed to be
the fair value of the Tao Group Hospitality reporting unit for purposes of the
annual goodwill impairment test. The Company believes that if the fair value of
the reporting unit exceeds its carrying value by greater than 10%, a sufficient
safety margin has been realized.
During the third quarter of Fiscal Year 2020, the Company's operating results
were, and continue to be, materially impacted by the COVID-19 pandemic and
actions taken in response by governmental authorities and certain professional
sports leagues, including government mandated assembly limitations and venue,
restaurant, bar and nightclub closures impacting both of the Company's reporting
units. While the Company concluded that the effects of the COVID-19 pandemic
would not more likely than not reduce the fair value of its Entertainment
reporting unit below its carrying amount, the Company concluded a triggering
event had occurred for its Tao Group Hospitality reporting unit as of March 31,
2020 as a result of the COVID-19 pandemic. Accordingly, the Company performed an
interim quantitative impairment test as of March 31, 2020 ("interim testing
date") for the Tao Group Hospitality reporting unit, which required the Company
to assess the carrying value of its long-lived assets, amortizable intangible
assets and goodwill as of the interim testing date.

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Amortizable intangible assets and other long-lived assets are grouped and
evaluated for impairment at the lowest level for which there are identifiable
cash flows that are independent from cash flows from other assets and
liabilities. In determining whether an impairment of long-lived assets has
occurred, the Company considers both qualitative and quantitative factors. The
quantitative analysis involves estimating the undiscounted future cash flows
directly related to that asset group and comparing the resulting value against
the carrying value of the asset group. If the carrying value of the asset group
is greater than the sum of the undiscounted future cash flows, an impairment
loss is recognized for the difference between the carrying value of the asset
group and its estimated fair value.
For the interim impairment test, the Company estimated the fair value of the Tao
Group Hospitality reporting unit based on a discounted cash flow model (income
approach). This approach relied on numerous assumptions and judgments that were
subject to various risks and uncertainties. Principal assumptions utilized, all
of which are considered Level III inputs under the fair value hierarchy (see
Note 10 to the consolidated and combined financial statements included in Item 8
of this Annual Report on Form 10-K), include the Company's estimates of future
revenue and terminal growth rates, margin assumptions and the discount rate
applied to estimate future cash flows. The assumptions utilized were subject to
a high degree of judgment and complexity, particularly in light of economic and
operational uncertainty that existed as a result of the COVID-19 pandemic.
Based upon the results of the Company's interim quantitative impairment test,
the Company concluded that the carrying value of the Tao Group Hospitality
reporting unit exceeded its estimated fair value as of the interim testing date.
Based on the evaluation of amortizable intangible assets and other long-lived
assets performed as of the interim testing date, as well as evaluation of
subsequent activity in the fourth quarter of Fiscal Year 2020, the Company
recorded non-cash impairment charges of $8,047 $5,646, and $3,541, for property
and equipment assets, right-of-use assets net of related lease liabilities, and
a tradename, respectively, which were associated with two venues within the Tao
Group Hospitality reportable segment. In addition, the Company recorded a
non-cash goodwill impairment charge of $88,583 for the Tao Group Hospitality
reportable segment. The goodwill impairment charge was calculated as the amount
that the adjusted carrying value of the reporting unit, including any goodwill,
exceeded its fair value as of the interim testing date. See "Part I - Item 1A.
Risk Factors - Our Operations and Operating Results Have Been, and Continue to
be, Materially Impacted by the COVID-19 Pandemic and Government Actions Taken in
Response" for more information about the risks to the Company's business
operations as a result of the COVID-19 pandemic.
Identifiable Indefinite-Lived Intangible Assets
Identifiable indefinite-lived intangible assets are tested annually for
impairment as of August 31st and at any time upon the occurrence of certain
events or substantive changes in circumstances. The following table sets forth
the amount of identifiable indefinite-lived intangible assets reported in the
Company's consolidated balance sheet as of June 30, 2020:
Trademarks                  $ 61,881

Photographic related rights 1,920

$ 63,801


The Company has the option to perform a qualitative assessment to determine if
an impairment is more likely than not to have occurred. In the qualitative
assessment, the Company must evaluate the totality of qualitative factors,
including any recent fair value measurements, that impact whether an
indefinite-lived intangible asset other than goodwill has a carrying amount that
more likely than not exceeds its fair value. The Company must proceed to
conducting a quantitative analysis, if the Company (i) determines that such an
impairment is more likely than not to exist, or (ii) forgoes the qualitative
assessment entirely. Under the quantitative assessment, the impairment test for
identifiable indefinite-lived intangible assets consists of a comparison of the
estimated fair value of the intangible asset with its carrying value. If the
carrying value of the intangible asset exceeds its fair value, an impairment
loss is recognized in an amount equal to that excess. For all periods presented,
the Company elected to perform the qualitative assessment of impairment for the
photographic related rights and the trademarks. These assessments considered the
events and circumstances that could affect the significant inputs used to
determine the fair value of the intangible asset. Examples of such events and
circumstances include:
• cost factors;


• financial performance;

• legal, regulatory, contractual, business or other factors;

• other relevant company-specific factors such as changes in management,

strategy or customers;

• industry and market considerations; and




• macroeconomic conditions.



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The Company performed its most recent annual impairment test of identifiable
indefinite-lived intangible assets during the first quarter of Fiscal Year 2020,
and there were no impairments identified. Based on these impairment tests, the
Company's indefinite-lived intangible assets had sufficient safety margins,
representing the excess of each identifiable indefinite-lived intangible asset's
estimated fair value over its respective carrying value. The Company believes
that if the fair value of an indefinite-lived intangible asset exceeds its
carrying value by greater than 10%, a sufficient safety margin has been
realized.
Other Long-Lived Assets
For other long-lived assets, including right-of-use lease assets and intangible
assets that are amortized, the Company evaluates assets for recoverability when
there is an indication of potential impairment. If the undiscounted cash flows
from a group of assets being evaluated is less than the carrying value of that
group of assets, the fair value of the asset group is determined and the
carrying value of the asset group is written down to fair value.
The estimated useful lives and net carrying values of the Company's intangible
assets subject to amortization as of June 30, 2020 are as follows:
                              Estimated        Net Carrying
                             Useful Lives          Value
Trade names                10 to 25 years     $       76,756
Venue management contracts 12 to 25 years             63,410
Non-compete agreements           5.75 years            3,652
Festival rights                  15 years              5,924
Other intangibles                15 years                684
                                              $      150,426


The Company has recognized intangible assets for trade names, venue management
contracts, favorable lease assets, non-compete agreements, festival rights and
other intangibles as a result of purchase accounting. The Company has determined
that these intangible assets have finite lives.
The useful lives of the Company's long-lived assets are based on estimates of
the period over which the Company expects the assets to be of economic benefit
to the Company. In estimating the useful lives, the Company considers factors
such as, but not limited to, risk of obsolescence, anticipated use, plans of the
Company, and applicable laws and permit requirements. In light of these facts
and circumstances, the Company has determined that its estimated useful lives
are appropriate.
Leases
See Note 2 and 9 to the consolidated and combined financial statements included
in Item 8 of this Annual Report on Form 10-K for discussion of leases and the
impact of adopting ASC Topic 842, Leases in the first quarter of Fiscal Year
2020.
Defined Benefit Pension Plans and Other Postretirement Benefit Plan
The Company utilizes actuarial methods to calculate pension and other
postretirement benefit obligations and the related net periodic benefit cost
which are based on actuarial assumptions. Key assumptions, the discount rates
and the expected long-term rate of return on plan assets, are important elements
of the plans' expense and liability measurement and we evaluate these key
assumptions annually. Other assumptions include demographic factors, such as
mortality, retirement age and turnover. The actuarial assumptions used by the
Company may differ materially from actual results due to various factors,
including, but not limited to, changing economic and market conditions.
Differences between actual and expected occurrences could significantly impact
the actual amount of net periodic benefit cost and the benefit obligation
recorded by the Company. Material changes in the costs of the plans may occur in
the future due to changes in these assumptions, changes in the number of the
plan participants, changes in the level of benefits provided, changes in asset
levels and changes in legislation. Our assumptions reflect our historical
experience and our best estimate regarding future expectations.
Accumulated and projected benefit obligations reflect the present value of
future cash payments for benefits. We use the Willis Towers Watson U.S. Rate
Link: 40-90 Discount Rate Model (which is developed by examining the yields on
selected highly rated corporate bonds) to discount these benefit payments on a
plan by plan basis, to select a rate at which we believe each plan's benefits
could be effectively settled. Additionally, the Company measures service and
interest costs by applying the specific spot rates along that yield curve to the
plans' liability cash flows ("Spot Rate Approach"). The Company believes the
Spot Rate Approach provides a more accurate measurement of service and interest
costs by improving the correlation between projected benefit cash flows and
their corresponding spot rates on the yield curve.
Lower discount rates increase the present value of benefit obligations and will
usually increase the subsequent year's net periodic benefit cost. The
weighted-average discount rates used to determine benefit obligations as of
June 30, 2020 for the Company's Pension Plans and Postretirement Plan were 3.21%
and 2.09%, respectively. A 25 basis point decrease in each of these assumed

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discount rates would increase the projected benefit obligations for the
Company's Pension Plans and Postretirement Plan at June 30, 2020 by $5,560 and
$60, respectively. The weighted-average discount rates used to determine service
cost, interest cost and the projected benefit obligation components of net
periodic benefit cost were 3.78%, 3.21% and 3.58%, respectively, for the year
ended June 30, 2020 for the Company's Pension Plans. The weighted-average
discount rates used to determine service cost, interest cost and the projected
benefit obligation components of net periodic benefit cost were 3.45%, 2.84% and
3.18%, respectively, for the year ended June 30, 2020 for the Company's
Postretirement Plan. A 25 basis point decrease in these assumed discount rates
would increase the total net periodic benefit cost for the Company's Pension
Plans by $70 and decrease net periodic benefit cost for Postretirement Plan by
$6 for the year ended June 30, 2020.
The expected long-term return on plan assets is based on a periodic review and
modeling of the plans' asset allocation structures over a long-term horizon.
Expectations of returns for each asset class are the most important of the
assumptions used in the review and modeling, and are based on comprehensive
reviews of historical data, forward-looking economic outlook, and
economic/financial market theory. The expected long-term rate of return was
selected from within the reasonable range of rates determined by (a) historical
real returns, net of inflation, for the asset classes covered by the investment
policy, and (b) projections of inflation over the long-term period during which
benefits are payable to plan participants. The expected long-term rate of return
on plan assets for the Company's funded pension plans was 5.28% for the year
ended June 30, 2020.
Performance of the capital markets affects the value of assets that are held in
trust to satisfy future obligations under the Company's funded plans. Adverse
market performance in the future could result in lower rates of return for these
assets than projected by the Company which could increase the Company's funding
requirements related to these plans, as well as negatively affect the Company's
operating results by increasing the net periodic benefit cost. A 25 basis point
decrease in the long-term return on pension plan assets assumption would
increase net periodic pension benefit cost by $330 for the year ended June 30,
2020.
Another important assumption for our Postretirement Plan is healthcare cost
trend rates. We developed our estimate of the healthcare cost trend rates
through examination of the Company's claims experience and the results of recent
healthcare trend surveys.
Assumptions for healthcare cost trend rates used to determine the net periodic
benefit cost and benefit obligation for our Postretirement Plan as of and for
the year ended June 30, 2020 are as follows:
                                                        Net Periodic

Benefit


                                                         Benefit Cost

Obligation


Healthcare cost trend rate assumed for next year            6.75%

6.50%

Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)

                                   5.00%

5.00%


Year that the rate reaches the ultimate trend rate          2027

2027




A one percentage point change in assumed healthcare cost trend rates would have
the following effects on the net periodic postretirement benefit cost and
benefit obligation for our postretirement plan as of and for the year ended
June 30, 2020:
                                    Increase
                                  (Decrease) on
                                Total of Service            Increase
                                and Interest Cost         (Decrease) on
                                   Components          Benefit Obligation
One percentage point increase $            15         $            268
One percentage point decrease             (13 )                   (245 )


GAAP includes mechanisms that serve to limit the volatility in the Company's
earnings that otherwise would result from recording changes in the value of plan
assets and benefit obligations in our consolidated and combined financial
statements in the periods in which those changes occur. For example, while the
expected long-term rate of return on the plans' assets should, over time,
approximate the actual long-term returns, differences between the expected and
actual returns could occur in any given year. These differences contribute to
the deferred actuarial gains or losses, which are then amortized over time.
See Note 14 to the consolidated and combined financial statements included in
Item 8 of this Annual Report on Form 10-K for more information on our pension
plans and other postretirement benefit plan.

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Latest news about Sphere Entertainment Co.

Seaport Downgrades Sphere Entertainment to Neutral From Buy, Expects Stock to 'Take a Breather' After Topping Prior $45 Price Target; Price Target Removed	Apr. 08	MT
Sphere Entertainment Insider Bought Shares Worth $2,441,017, According to a Recent SEC Filing	Feb. 29	MT
Tranche Update on Madison Square Garden Entertainment Corp.'s Equity Buyback Plan announced on March 30, 2023.	Feb. 07	CI
Madison Square Garden Entertainment Fiscal Q2 Results Top Analyst Expectations; 2024 Revenue Guidance Lifted	Feb. 07	MT
JPMorgan Adjusts Sphere Entertainment Price Target to $37 From $33, Maintains Neutral Rating	Feb. 06	MT
Morgan Stanley Raises PT on Sphere Entertainment to $42 From $30, Says Returns Look Promising; Keeps Equalweight Rating	Feb. 06	MT
Transcript : Sphere Entertainment Co., Q2 2024 Earnings Call, Feb 05, 2024	Feb. 05
Sphere Entertainment Swings to Loss in Fiscal Q2, Revenue Rises; Shares Gain Pre-Bell	Feb. 05	MT
Earnings Flash (SPHR) SPHERE ENTERTAINMENT CO. Reports Q2 Revenue $314.2M, vs. Street Est of $306.8M	Feb. 05	MT
Sphere Entertainment Co. Reports Earnings Results for the Second Quarter and Six Months Ended December 31, 2023	Feb. 05	CI
North American Morning Briefing : Hopes of March -2-	Feb. 05	DJ
Sphere Entertainment Collaborates with NFL on Custom Super Bowl LVIII Content	Feb. 05	MT
Madison Square Garden Entertainment Corp. and Sphere Entertainment Co. Appoint Laura Franco as Executive Vice President and General Counsel, Effective February 20, 2024	Feb. 01	CI
Sphere Entertainment Names Jennifer Koester as President of Business Operations	Jan. 23	MT
Sphere Entertainment Co. Appoints Jennifer Koester as President, Sphere Business Operations, Effective February 5, 2024	Jan. 22	CI
Sphere Studios and Stmicroelectronics Reveal New Details on the World's Large Cinema Image Sensor	Jan. 11	CI
Morgan Stanley Lifts Price Target on Sphere Entertainment to $30 From $26, Keeps Equalweight Rating	Dec. 18	MT
Sphere Entertainment Co. Appoints David F. Byrnes as Executive Vice President and Treasurer	Dec. 08	CI
Sphere Entertainment Co. Appoints David F. Byrnes as Chief Financial Officer	Dec. 08	CI
North American Morning Briefing : Futures Pause -2-	Dec. 08	DJ
Seaport Upgrades Sphere Entertainment to Buy From Neutral, Sets $38 Price Target, Cites 'Better' Unit Economics, Expenses	Dec. 07	MT
Guggenheim Upgrades Sphere Entertainment to Buy From Neutral, Raises Price Target to $40 From $38	Dec. 06	MT
Sphere Entertainment Plans $225 Million Private Offering of Convertible Senior Notes; Shares Down Pre-Bell	Dec. 05	MT
Sphere Entertainment Co. Announces New Partnership with PATH	Nov. 29	CI
Sphere Entertainment Receives Formal Rejection for London Venue Application	Nov. 21	MT

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Company Profile

Sphere Entertainment Co. is a live entertainment and media company. The Companyâs portfolio includes Sphere, which is a live entertainment medium. In addition, the Company includes MSG Networks, which operates two regional sports and entertainment networks, MSG Network and MSG Sportsnet, as well as a companion streaming service, MSG GO, which delivers a range of live sports content and other programming. MSG Networks serves a media market, the New York DMA, as well as other portions of New York, New Jersey, Connecticut, and Pennsylvania. MSG Networks features live local games from five professional sports franchises along with a compelling lineup of original programming.

Sector

Entertainment Production

Calendar

2024-05-19 - Q3 2024 Earnings Release (Projected)

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Income Statement Evolution

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Ratings for Sphere Entertainment Co.

Trading Rating

Investor Rating

ESG Refinitiv

C-

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Analysts' Consensus

Sell

Buy

Mean consensus

OUTPERFORM

Number of Analysts

Last Close Price

40.45 USD

Average target price

42.5 USD

Spread / Average Target

+5.07%

Consensus

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Sphere Entertainment Co.

Equities

SPHR

US55826T1025

Entertainment Production

MADISON SQUARE GARDEN ENTERTAINMENT : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

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